The notion of de-risking is increasingly present in the discourse of Western political leaders. In addition to a legitimate desire to mitigate the impact of new geopolitical disruptions on value chains, the concept is intended as a response to problematic dependencies on Beijing (critical metals, semi-conductors, etc.). It could lead to measures with serious consequences for any company trading with China.
Coined by the President of the European Commission, the concept of ‘de-risking’ was taken up in the United States in April 2023 by Jake Sullivan, Joe Biden’s National Security Adviser. In a speech given to the Brookings Institution, Sullivan justified the need for de-risking by observing the relative failure of happy globalisation as advocated by liberal philosophy: “Economic integration didn’t stop China from expanding its military ambitions in the region, or stop Russia from invading its democratic neighbors. Neither country had become more responsible or cooperative.” In a world where political pressure intensifies on international economic and financial ties, de-risking is less radical than other terms that have come into vogue in Europe in recent years: “Decoupling suggests a radical separation, whereas de-risking […] implies curbing risks while avoiding a clean break”, comments Agathe Demarais, senior policy fellow at the European Council on Foreign Relations. What remains to be done is to define more precisely what is meant by this term, which is sometimes criticised for its ambiguity.
Economic coercion, a Chinese strategy
It all starts with a simple problem: in the event of a conflict — the invasion of Taiwan, for example — China could embark on a strategy of economic coercion (embargoes, boycotts, export restrictions) to bring nations opposed to its interests to heel. In addition to a natural incentive for this type of behaviour — linked to China’s central position in globalised value chains — a long series of precedents support such a prediction. In 2010, for example, restrictions on Norwegian salmon imports followed the award of the Nobel Peace Prize to Chinese dissident Liu Xiaobo.[1]
Norwegian total exports to China, 1993-2014 (in US$ million)
Source: Kolstad Ivar, op. cit.
Recent history suggests that the Chinese response will increase if the strategic interests at stake are greater. In 2016-2017, the installation of the first batteries of the US anti-missile system (THAAD/Terminal High Altitude Area Defense) in South Korea was followed by an intense campaign of economic retaliation: unofficial boycotts and dubious convictions for “violation of the fire prevention code” resulted in the closure in China of nearly 74 shops of the Korean company Lotte Mart.[2]. The impact of coercive measures has been estimated at around US$10 billion for the Korean economy; in October 2018, faced with falling sales — down 76.9% in 2017 — the Lotte Mart conglomerate announced the withdrawal of most of its business from the Chinese market.[3]
But for Western tech companies, the consequences of restricting China’s exports could be lethal, given current levels of dependence on certain critical Chinese materials and components. “The EU depends on China for 98% of its supply of rare earths, 93% of its magnesium and 97% of its lithium”, Ursula von der Leyen reminded us in March 2023, and “80% of the world’s critical minerals are processed by China”, Jake Sullivan added a few weeks later.
It is also in the metals sector that the China-US trade war is at its fiercest. On July 3, Beijing announced the introduction of an export visa for gallium and germanium, two critical metals used in the manufacture of strategic equipment. In response, on 9 August, Washington announced tighter controls on investment in China in the latest generation of processors, quantum computing and artificial intelligence[4] and imposed new limits on technology exports to China, in the hope of dominating the race for cutting-edge...
