Breakingviews: G7 says “de-risking”, China hears “containment”
HONG KONG, May 22 (Reuters Breakingviews) - At the just-concluded conclave of the Group of Seven in Hiroshima, the world’s wealthiest democracies said they want to de-risk, not decouple, from China. Yet Beijing sees them hobbling its strategic industries and ramping up their defence budgets.
The West may want to bottle up President Xi Jinping’s ambitions without endangering their supply chains or market access; Germany’s Chancellor Olaf Scholz said the group will continue to invest in the $18 trillion economy. Yet polite synonyms for what is, on balance, an escalatory move are unlikely to prove soothing. “De-risk” is a reasonable-sounding word, but in plain English it means forcibly reducing demand for Chinese exports at an economically vulnerable moment.
The G7 also wants to isolate Beijing diplomatically. Ukraine’s embattled President Volodymyr Zelenskiy, in town at Tokyo’s invitation, tried on the sidelines to woo leaders like India’s Narendra Modi away from Russia. Any adjustment towards Kyiv by New Delhi or Brasilia would make Xi’s support for Prime Minister Vladmir Putin look more extreme. Additionally, the G7 intends to boost infrastructure investment and increase debt relief in poorer countries, which could water down China’s financial influence in Africa, Latin America and elsewhere.
In hard-power terms, the U.S.-led allies are flexing on Taiwan. Australia, Japan and the United Kingdom have all unveiled big hikes to defence budgets recently. Prime Minister Fumio Kishida is going to push up military spending to over 2% of gross domestic output by 2027, and wants to adjust the country’s once-pacifist legal framework so its armed forces can more easily fight alongside the Americans.
Irked by the G7 statements, Xi’s government has already called Japan’s ambassador on the carpet. And on Sunday, China’s cybersecurity regulator banned certain purchases of U.S. memory chip specialist Micron Technology’s (MU.O) products, after a national security probe into the $75 billion company launched in March. The timing was not subtle; it came just days after Chief Executive Sanjay Mehrotra unveiled a $3.7 billion investment with the Japanese government, part of the G7's initiatives to strengthen tech supply chains with one another. While the financial impact looks manageable for Micron, it's the first time Beijing's powerful cybersecurity watchdog has acted against a foreign company and is unlikely to be the last.
To be sure, China, with a $90 billion monthly trade surplus hovering near record highs, cannot easily retaliate against its opponents. Its influence in the Global South is softening as Chinese banks pull back from high-risk development loans in the face of widespread defaults. But it is not in Xi’s, or Chinese companies’, interests to sit back and let the G7 “de-risk”, and that makes the euphemism more threatening than it sounds.
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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)
The Group of Seven rich countries are not seeking a policy designed to harm China or hinder its economic progress, the communique from the leaders' summit in Hiroshima stated on May 20. "We are not decoupling or turning inwards. At the same time, we recognise that economic resilience requires de-risking and diversifying," the statement said.
China firmly opposes the G7 joint statement and has complained to summit organiser Japan, the Chinese foreign ministry said on the same day. The ministry said that the G7, disregarding China's concerns, had attacked it and interfered in its internal affairs, including Taiwan.
China's cyberspace regulator said on May 21 that products made by U.S. memory chipmaker Micron Technology had failed its network security review and that consequently it would bar operators of key infrastructure from buying the company’s products.
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