Published 23 May 2023
The Group of Seven Leaders have just concluded their annual summit, held this year in Hiroshima, Japan. China was a key agenda item, though the diplomatic and bureaucratic language in the summit’s lengthy formal communique sometimes obscures what it is really saying. Here are several key China-related passages, along with a plain-language description of what they really mean.
The Group of Seven Leaders have just concluded their annual summit, held this year in Hiroshima, Japan. China was a key agenda item, though the diplomatic and bureaucratic language in the summit’s lengthy formal communique sometimes obscures what it is really saying.
Here are several key China-related passages, along with a plain-language description of what they really mean and an assessment of whether their expressed ambitions can succeed.
What did the communique say?
“We will enhance ongoing collaboration to address non-market policies and practices that exacerbate strategic dependencies and systemic vulnerabilities, harm our workers and businesses, and can undermine international rules and norms. Building on our resolve in Elmau1 to increase vigilance and enhance our cooperation to address risks that undermine global security and stability, we will enhance collaboration by launching the Coordination Platform on Economic Coercion to increase our collective assessment, preparedness, deterrence, and response to economic coercion, and further promote cooperation with partners beyond the G7. We affirm our shared responsibility and determination to coordinate on preventing the cutting-edge technologies we develop from being used to further military capabilities that threaten international peace and security.”
What is the G7 really saying?
- While avoiding any direct references to China, this article is an unambiguous statement that the G7 intends to take unified and coordinated actions to challenge China’s non-market and economic predatory practices.
- From Australia to Lithuania, China has shown a willingness to employ economic coercion against countries that have taken actions or made statements that run contrary to China’s worldview. The G7 is launching a specific mechanism to limit the damage China can inflict in such cases.
- The reference to preventing cutting-edge technologies from being used to further military capabilities is an effort to signal at least rhetorical unity behind US-led measures to restrict China’s access to sophisticated semiconductors and other dual-use technologies.
Can it work?
- The key question is precisely what steps the G7 intends to take to address the various policies which it finds objectionable. To date, there have been no “magic bullets”. The World Trade Organization has not meaningfully remedied these concerns, and the punitive approach taken by successive US administrations likewise have failed to move the needle.
- Evidence suggests that China’s efforts at economic coercion have not been overwhelmingly successful in achieving Beijing’s geopolitical objectives. A concerted G7 effort to deter and respond to future efforts stands a good chance of achieving at least some success.
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- It is easy to affirm an intention to coordinate technology restrictions, but an actual, unified approach is considerably harder to achieve, especially given differing interests and risk assessments across the G7. The US restrictions regime on China will leak. The only question is how much.
What did the communique say?
“Our policy approaches are not designed to harm China nor do we seek to thwart China’s economic progress and development. A growing China that plays by international rules would be of global interest. We are not decoupling or turning inwards. At the same time, we recognize that economic resilience requires de-risking and diversifying. We will take steps, individually and collectively, to invest in our own economic vibrancy. We will reduce excessive dependencies in our critical supply chains.”
What is the G7 really saying?
- The US is officially abandoning use of the term “decoupling”. It suggested a degree of economic disintegration from China that is neither practical nor possible. Even if it were possible, it would not be in the interests of any G7 member. A rhetorical recalibration was needed. European Commission President Ursula von der Leyen’s use of the term “de-risking” has provided a well-designed alternative formulation that all members can align behind. De-risking implies that members will seek to limit their dependence on, or engagement with, China in the most important strategic sectors, while attempting to retain relations with China in areas where it suits their economic or strategic interests.
- The reference to investing “in our own economic vibrancy” is a declaration that industrial policy is back with a vengeance. Expect the trend towards massive state subsidization, as evidenced by the CHIPS and Science Act and the Inflation Reduction Act in the US, as well as similar initiatives under discussion in other G7 members including the EU and Japan, to intensify.
- The pledge to “reduce excessive dependencies in our critical supply chains” means that so-called “friend-shoring” is here to stay. Although China is not specifically referenced, G7 members will be doubling down on efforts to move production in key sectors from China either closer to home or to “like-minded partners”.
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Can it work?
- China will have something to say about whether this approach is feasible . It is not entirely clear why China would accede to a relationship in which the counterparty seeks to engage only or primarily in those areas where it can benefit, while limiting engagement in those areas where China stands to benefit.
- The devil always lies in the details and the de-risking strategy will require agreement on a host of difficult nitty-gritty details. In precisely what areas – and to what extent – should de-risking take place? Although there was G7 consensus on the broad concept, there will be wide divergences among members on the operational specifics.
- Reducing supply chain dependence on China is easier said than done. China maintains compelling comparative advantages that make relocation in at least some critical sectors difficult if not impossible, at least in the short term.
- The opening phrase stipulating that the policy approaches are “not designed to harm China nor do we seek to thwart China’s economic progress and development” will ring hollow in Beijing. Several policies, most prominently the latest round of US semiconductor restrictions, have been interpreted in China as deliberate attempts to block China’s rise.
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What did the communique say?
“We stand prepared to build constructive and stable relations with China, recognizing the importance of engaging candidly with and expressing our concerns directly to China. We act in our national interest. It is necessary to cooperate with China, given its role in the international community and the size of its economy, on global challenges as well as areas of common interest.
We call on China to engage with us, including in international fora, on areas such as the climate and biodiversity crisis and the conservation of natural resources in the framework of the Paris and Kunming-Montreal Agreements, addressing vulnerable countries’ debt sustainability and financing needs, global health and macroeconomic stability.”
What is the G7 really saying?
- The G7 is taking its best shot at compartmentalizing relations with China . The reference to acting in “our national interest” is an explicit forewarning that G7 members, which also includes Canada, France, Germany, Italy, and the UK, will not hesitate to hit hard on trade and economic issues, but want to avoid acrimony from spilling over into other areas.
- The G7 is acknowledging the need to cooperate with China on a host of issues that require global engagement. Climate change and pandemics are at the top of the list, but they are by no means the only issues in which constructive cooperation with China is needed.
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Can it work?
- Maybe. While China will not be inclined to do the G7 any favors, there are broader global issues in which China’s national interests will inevitably coincide with those of the Group.
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[1] Location of previous G7 Summit
© The Hinrich Foundation. See our website Terms and conditions for our copyright and reprint policy. All statements of fact and the views, conclusions and recommendations expressed in this publication are the sole responsibility of the author(s).
From 2014 to January 2024, Mr. Olson was a Senior Research Fellow of the Hinrich Foundation. Mr. Olson began his career in Washington DC as an international trade negotiator and served on the US negotiating team for the NAFTA negotiations.
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