The German government is facing increasing pressure to take the European Union's de-risking strategy from China more seriously. A recent analysis from IP Quarterly argues that Germany needs to accelerate efforts to reduce Europe's economic dependencies on China, particularly in light of the potential economic consequences of another Trump presidency. The analysis highlights several critical risks that must be addressed, including the vulnerability of European intellectual property in China, the potential for critical European technologies to fall under foreign control, Europe's dependency on crucial materials and technology for the green transition, and Germany's vulnerability to regional and sectoral export concentration. The authors argue that a comprehensive plan is needed to effectively de-risk from China and protect European interests [73d75b36].
The German government's current strategy, known as 'de-risking,' aims to caution German businesses about depending too heavily on China. However, many businesses remain reluctant to do so. Some CEOs argue that China is too large to ignore and that Western politicians often misunderstand the country. German industry continues to be hesitant to leave the Chinese market behind, as Chinese imports to Germany grew by 34% in 2022. The three largest German automakers still sell more than a third of their cars to China. While some politicians support de-risking, Chancellor Olaf Scholz does not view China as a potential threat in the same way as Russia. The new political rhetoric on China is attributed to the Green Party, which has a hawkish stance on China. Experts argue that a better understanding of China is necessary to effectively de-risk from the country [5a9f076d].
China has been pursuing a de-risking policy to reduce economic reliance on the West. China's efforts to reduce technological dependence deepened over the past decade with the 'Made in China 2025' blueprint for self-sufficiency in key technology sectors. China has made impressive progress in high-tech fields such as clean tech, artificial intelligence, and biotech. Beijing is playing the long game, hoping that aggressive U.S. export controls will eventually backfire and help China reduce its reliance on Western technology. Finance is another pillar of China's de-risking strategy, with efforts to develop cross-border payments in renminbi and alternative financial channels. China is also diversifying its trade ties away from unfriendly Western states and increasing investment in emerging markets. China's de-risking push is far older and more extensive than U.S. and European efforts in the field. The Western push to decrease reliance on China is accelerating China's plans for self-sufficiency in technology, finance, and trade. China's de-risking strategy has significant consequences and may diminish the deterrence effect of Western sanctions threats [2be44058].
Countries worldwide are seeking ways to 'de-risk' their economic security from geopolitical, environmental, and economic challenges, including China's economic leverage. Major advanced economies like the US, EU countries, and other nations are trying to reduce their exposure to China's untransparent and unpredictable geopolitical practices. This presents an opportunity for emerging economies like India, Vietnam, and Indonesia to benefit from the West's de-risking efforts and align with major powers for a multipolar global order. However, India needs to be cautious due to its economic entanglements with China and the potential geopolitical challenges it may face. De-risking strategies can be leveraged to strengthen partnerships and diversify production bases and supply chains. The year ahead is expected to be competitive and fragmented, with countries safeguarding their economic interests and national security. De-risking alone is not enough; emerging economies need to enhance domestic capabilities and forge international alliances [a46f1852].
In a recent episode of Riskology by Infortal, hosts Dr. Ian Oxnevad and Christopher Mason discuss the concept of 'de-risking' from China and its impact on the global economy and supply chain integrity. They highlight the risks faced by American companies due to China's economic slowdown and emphasize the need for robust resilience measures and an enhanced understanding of the global risk landscape. The episode explores strategies for long-term supply chain stability and mentions Apple's shift of some iPhone manufacturing to India as an example of strategic realignment. The hosts stress the importance of developing contingency plans to mitigate risks and ensure company resiliency. The episode is titled 'China Escape Plan: De-Risking Explained' [39f23ee6].