Lhe G7 summit held May 19-21 in Hiroshima, Japan, confirmed a risk-reduction approach to China rather than true decoupling. The main objective of such a policy is to mitigate, from a national security perspective, the economic risks associated with excessive dependence on authoritarian partners like China and Russia.
However, in a number of critical sectors, such as semiconductors and artificial intelligence, the preferred strategy of democratic countries remains decoupling, that is, the establishment of a chain model. ‘franked supply from China. Trade should, however, continue normally in sectors involving a low risk in terms of national security: household appliances, clothing, food, etc.
Issues such as forced labor and carbon emissions will continue to have a profound impact on the reorganization of the global supply network. For example, a draft European regulation should authorize customs authorities to prohibit products involving forced labor from entering the European Union (EU).
Likewise, the EU and the United States have been negotiating an agreement on steel and aluminum since 2021 providing for obligations to reduce carbon emissions, in order to control the import of steel produced by companies that do not present sufficient environmental standards: China should be the first country concerned. Its car manufacturers are also the first to be targeted by the investigation announced by the European Commission into public subsidies in this sector.
Western consensus
These regulatory reforms in favor of respect for universal values of justice in environmental and labor matters do not directly target China, but the fact that it is “the factory of the world”, where labor conflicts and environmental abuses, means that some supply chains will probably have to reduce their presence there. These are economic risks not linked to national security, which the business community must also be aware of.
Taiwan is in fact at the forefront of economic risk reduction strategies towards China. Taiwanese investment in China began to decline about a decade before the United States and the EU came to view China as a strategic competitor. In 2022, they amounted to around 4.5 billion dollars (4.2 billion euros), only a third of the peak of 14 billion reached in 2010. While 83.3% of Taiwanese foreign investments went to China in 2010, it only welcomed 34.7% in 2022. Taiwanese investments towards other regions have exceeded in volume those made in China.
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