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Ineffectiveness of De-risking and Decoupling Strategies

Updated: Jul 17, 2023

There are significant ramifications for both countries and the entire world from the ongoing economic conflict between the United States and China. The effects of this confrontation go beyond simple trade figures, notwithstanding the US's use of the terms "decoupling" or "de-risking" from China. This protracted conflict has harmed international cooperation, global stability, economic effectiveness, and strategic communication.

The lack of communication between the two military is one of the biggest issues resulting from the US-China economic conflict. According to experts, the likelihood of unforeseen wars and misunderstandings in the Western Pacific grows in the lack of good military communication. The likelihood of an unwelcome war represents a serious danger to both regional and global stability. To avoid the tragic effects of any military escalation, both nations must prioritise communication and understanding.

The US-China economic conflict has real and significant economic and financial repercussions. According to a survey by the Official Monetary and Financial Institutions Forum, the main factor impacting the management of currency reserves is thought to be geopolitical concerns caused by the conflict.

For the managers of trillions of dollars' worth of foreign exchange reserves, the fragmentation of trade and money flows as a result of tense ties between the US and China adds a degree of uncertainty. Concerns regarding the stability of the dollar and the yuan are raised by the potential disruption of the global economic system, showing how interdependent the world's economies are.

Trade conflicts have consistently failed to correct payment imbalances, as demonstrated by the widening trade gap between the US and China. The trade gap has increased despite the US starting a trade war with China in 2017. The idea that the US is only de-risking its economic relationship with China while preserving some vital imports is challenged by this.

Decoupling or de-risking strategies ignore the concept of comparative advantage, which reduces economic efficiency and raises expenses for both countries. The multilateralism and international collaboration they promote are undermined, as are the protectionist and isolationist tendencies that threaten real global leadership.

The US-led de-risking initiatives are seen as attempts by China to slow its expansion, particularly in important sectors like high technology. Beijing sees the offensive nature of these policies as a barrier to its development and an effort to reinforce US dominance since they are targeted at limiting the supply of high-tech goods, expertise, and potential outbound investments.

De-risking and decoupling are similar in the eyes of the Chinese government, which regards both as intentional attempts to impede its development and constrict its military options. This impression exacerbates tensions already present between the two nations and makes it more difficult to engage in productive dialogue and collaboration.


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