Foreign PolicyForeign Policy

U.S.-China de-risking will inevitably escalate

By James Crabtree

21 Aug 2023 · 5 min read

informed Summary

  1. Kurt Campbell, President Biden's lead Asia diplomat, indicates the U.S. is close to finalizing rules limiting China's tech access. However, current measures only marginally reduce risks, possibly prompting stricter policies and a de-risking spiral, the author argues.

How much de-risking will ever be enough? Kurt Campbell, U.S. President Joe Biden’s lead Asia diplomat, hinted in a recent interview that the United States was nearly done with new rules limiting Chinese access to technology and investment. “We have tried to make clear that there is a difference between a narrow de-risking and a broad decoupling,” he said. “At the end of this effort, the idea is to begin consequential diplomacy with China.” Yet almost by definition, the narrow measures introduced so far only moderately reduce risks related to China, especially in scenarios involving a military conflict with Beijing. As a result, demands in Washington policy circles for more stringent measures targeting China are likely to grow, creating a downward de-risking spiral that was not originally intended.

The notion that de-risking might have a natural end—a place where risks relating to China come back to manageable levels—is alluring. Biden’s team recently unveiled long-delayed measures limiting U.S. investment in Chinese technology companies. Following intense internal debate, the rules were drawn relatively narrowly, touching only a handful of areas, including artificial intelligence. Elsewhere, there is continued evidence of de-risking in semiconductors. In July, Taiwanese chip maker TSMC announced plans to build a new €10 billion plant in Germany. Part of wider attempts to disperse global production, the move aims in part to curb risks of shortages in the event of a future conflict over Taiwan, where most advanced semiconductors are made.

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