Preface: Reshaping Economic Interdependence in the Indo-Pacific

Preface: Reshaping Economic Interdependence in the Indo-Pacific

by Alison Szalwinski and Michael Wills
November 9, 2023

This is the preface to Strategic Asia: Reshaping Economic Interdependence in the Indo-Pacific.


In April 2023, the United States adopted European Commission president Ursula von der Leyen’s framing for its declared economic strategy toward China. In the aftermath of speeches by National Security Advisor Jake Sullivan and Treasury Secretary Janet Yellen outlining the U.S. approach, popular attention was focused on perceived divergences in levels of hawkishness between the two.[1] However, these differences obscured a notable rhetorical agreement: both speeches roundly rejected the idea of U.S.-China “decoupling,” instead preferring von der Leyen’s “de-risking” approach. During her August 2023 trip to Beijing, Commerce Secretary Gina Raimondo noted that “the vast majority of [the U.S.-China] trade and investment relationship” is not connected to national security, and she committed the United States to “promoting trade and investment” in these areas—a pledge that aligns with a strategy of targeted de-risking rather than broad decoupling.[2]

The rhetorical alignment behind de-risking was the culmination of a process that began in the summer of 2018, when the Trump administration began implementing a series of policies that pointed in the direction of broad-based decoupling. While the concept of full decoupling was only ever overtly supported by the most ardent hawks,[3] measures such as imposing tariffs on the majority of Chinese exports to the United States were squarely aimed at restricting the bilateral economic relationship. Furthermore, the Trump administration’s approach toward technology—which included an initial effort to choke out Chinese telecommunications provider ZTE, followed by the longer-lasting campaign against Huawei—culminated in an attempt to completely excise Chinese companies and supply chains from the full scope of U.S. and allied telecom networks.[4]

Despite these initial steps in the direction of decoupling, as the economic costs became clear, a consensus solidified around a limited form of decoupling—a partial disengagement between the U.S. and Chinese economies in critical sectors.[5] While partial disengagement is more realistic than full decoupling, it poses the policy challenge of defining the boundaries of “partial.” Under the “Sullivan doctrine,” for instance, U.S. export controls should be used to cut off China from semiconductor manufacturing equipment to maintain “as large of a lead as possible,”[6] but simultaneously should be confined to a “small yard, high fence” approach.[7] Suffice it to say that many U.S. allies and partners—especially in Europe—were concerned with the scope of U.S. partial disengagement policies. Therefore, when President von der Leyen ascribed the moniker of “de-risking” to the European approach,[8]identifying “China’s economic and security ambitions” as one such risk, U.S. policymakers seized on this opportunity to rebrand their expansive view of partial disengagement as proportional to their perception of the risks posed by China.

The policy parameters of the U.S. de-risking approach, however, do not seem fundamentally different from the earlier partial disengagement era. The trade relationship has not fundamentally changed in scale or intensity, despite the persistence of many of the Trump administration’s tariffs. The Biden administration’s lack of interest in reopening the trade war reflects a rejection of decoupling, but its lack of interest in removing the tariffs, even though most cover nonstrategic goods, suggests that the shift toward de-risking is principally about branding. U.S. investment screening and export control policies—while expansive relative to a pre-Trump baseline—remain targeted toward a small number of cutting-edge technologies, including next-generation information and communications technology infrastructure, leading-edge semiconductors, and artificial intelligence (AI). The only new initiative thus far is the Biden administration’s executive order on outbound investment screening. However, this measure is narrowly scoped and was already in the works prior to the adoption of de-risking as a descriptor of U.S. policy.

As the United States seeks to clarify where it stands on de-risking, so too do U.S. allies and partners. As seen throughout this Strategic Asia volume, the scale and nature of these measures are largely dependent on each country’s experiences with the risks of economic engagement with China. Despite the different sources of risk, one common thread emerges: each country’s efforts at de-risking are caveated by a cold statistical reality—bilateral trade with China has not significantly decreased, and in many cases has even increased. Much like the United States, U.S. allies and partners acknowledge the unfeasibility of broad decoupling and have crafted their policies accordingly.

The debate regarding the risks of integration between China and liberal democracies has followed quite a different trajectory in China itself. First, it began significantly earlier. Indeed, fears of overdependence on a technologically superior foreign rival are ingrained in the DNA of the Chinese Communist Party (CCP)—dating back to the era of the Sino-Soviet split.[9] Despite the wishful thinking of some foreign observers, the intention of the CCP’s reform and opening was not to integrate China’s economy with global supply chains but rather to enhance the country’s capacity to be economically self-reliant.[10] While these strains of thought were not dominant in the Deng Xiaoping and Jiang Zemin eras, they became increasingly prevalent as early as the Hu Jintao era—well before the emergence of similar views in the West—through the concept of “indigenous innovation” introduced in the National Medium- and Long-Term Program for Science and Technology Development (2006–2020). These efforts have only escalated under Xi Jinping, with the 2015 rollout of the Made in China 2025 plan and his efforts to place the “commanding heights” of advanced technology and security-critical economic sectors under tighter party-state control.[11]

A second critical difference between the Chinese and Western views on de-risking is that Chinese leaders—especially recently—have adopted a significantly more expansive view of risk than that of the United States, let alone the United States’ Asian or European partners. The “dual circulation” strategy reflects an effort to expand self-reliance beyond high-tech or strategic sectors to the economy as a whole—that is, to insulate the Chinese economy against the perceived risk of shocks emerging from foreign efforts at decoupling, no matter how implausible those fears may actually be.[12]

Based on the nominally straightforward principles of de-risking—namely, identify where external dependencies pose risks and then implement trade restrictions, industrial policies, or other measures to mitigate those risks—countries are now striking out on the path toward de-risking in practice. However, unwinding or reshaping the trillions of decisions made over the course of decades by individual companies and consumers—the ultimate building blocks of globalization—poses complications on a scale that is difficult to comprehend. These complications have even bedeviled China’s efforts. Stubbornly anemic domestic consumer spending has undermined the shift toward dual circulation,[13] while attempts to transition government and state-owned enterprises away from reliance on Western technology demonstrate that large-scale decoupling is beyond even the immense domestic power of the CCP to enforce.[14] The challenge is still greater in countries that must attempt to balance government intervention to shift incentives in support of de-risking with an ideological commitment to the principles of a free-market economic system. Coupled with atrophied state capacity to implement industrial policy after nearly three post–Cold War decades of unchecked economic liberalism, meaningfully shifting economic dependencies will be a long, arduous process.

These challenges reflect the fact that a strategy of de-risking, though warranted given the realities of long-term, high-intensity, peer-to-peer strategic competition, is a departure from an idealized vision of an integrated global economy. As Ashley Tellis notes in his introduction to this volume, this strategy requires a shift from a focus on absolute gains to one in which states seek to maximize their relative economic power (p. 5). This has led to the emergence of heterodox views challenging the elite consensus around the merits of partial economic and technological disengagement from China. From some there are calls to abandon the de-risking approach as unfeasible or escalatory.[15] But as long as great-power competition persists—and as long as the parties to that competition recognize the numerous times in which economic and technological dependencies have been leveraged toward grand strategic ends—such a reversal is strategically and politically unviable. Another group of voices calls for the establishment of a new set of organizing principles for globalization. Some advocates of this view are countries that desire to play a greater role in economic rulemaking.[16] Others wish to see a new form of globalization emerge to meet challenges relating to climate change, the post-pandemic environment, and other transnational threats.[17]

As the chapters in this volume show, the long process of de-risking is beginning across the Indo-Pacific. Governments are embracing gradualism, reluctant to make large-scale, perhaps irreversible, changes to the prevailing strategic trade policy. For instance, Sullivan doctrine–era U.S. export controls remain narrowly targeted at aspects of China’s semiconductor and AI ecosystems and have maintained exemptions for South Korean and Taiwanese companies, thus precluding tough decisions about the disposition of their risky existing investments in China.[18] While governments may welcome the flexibility that these approaches provide, policy uncertainty and unpredictability are anathema to global businesses. Many have begun pursuing their own approaches to de-risking—not just from the strategic and macro risks that governments would recognize in their own de-risking framework, but also from the risk that their operations get caught up in the fallout from geopolitical de-risking.

The key question for businesses, therefore, is how the growing push toward de-risking shapes the environment in which they operate. For decades, businesses have benefited from a consistent and increasingly frictionless global landscape. They have based their investment, supply chain, and market decisions on the presumption that these trends would persist. These assumptions underpinned the rise of multinational companies largely untethered to their nominal headquarters—a phenomenon that may struggle to survive in an era of intensifying strategic competition where the economic domain is an arena for contestation. Companies will therefore have to examine whether their multinational nature can be maintained or leveraged against these trends, or whether steps such as fragmentation or more firmly aligning with one great power and becoming, if not a “national champion,” at least a national actor are necessary.

While governments may welcome the opportunity to shift the broad trajectory of the private sector with de-risking signals, this also raises questions for policymakers regarding the scope of de-risking and the potential for self-reinforcing trends and cycles of escalatory disengagement. The interaction between incipient consensus around the need for de-risking and political positioning on China in the 2024 U.S. election cycle increases the possibility of such trends affecting U.S. policy. These cycles—especially if they emerge from the United States—could potentially lead to the establishment of Cold War–style economic blocs, within which trade and investment are broadly open but between which economic interactions are limited. The fact that this outcome is closer to the full decoupling that we have previously identified as unfeasible suggests that governments must clearly delineate the bounds of the risks that they seek to contain, or face the possibility of businesses being incentivized to make decisions that impose what are generally agreed to be unacceptably high economic costs. The logic of escalatory disengagement, however, poses an even greater risk: that eventually perceptions of risk spiral to such a point that countries feel the need to—either collectively or individually—pursue policies that resemble 1930s-era autarky. For instance, recent CCP statements and activities, including targeted raids on and security investigations into economic consultants and researchers, appear designed to crack down on the gathering of even basic economic information by foreigners.[19] This would represent a step toward cutting off or regarding as inherently suspicious full classes of economic transactions in a manner that points toward a broad decoupling.

These concerns remain hypothetical, as de-risking—at least outside of China—is still in its infancy. There are many uncertainties about how this process will evolve. For the United States, the fact that both the Biden and Trump administrations committed to a similar strategy of partial disengagement, despite adopting wildly different tactics in pursuit of their objectives, suggests that it will remain in the mainstream of both U.S. political parties’ thinking for the foreseeable future.

Likewise, the fact that U.S. allies and partners—while often resistant to specific U.S. policies that harm their or their companies’ interests—have adopted a similar approach suggests that the move toward de-risking represents a global trend. De-risking will also not be one-sided. Chinese policy has—for far longer than U.S. or like-minded governments—identified greater risks in international economic engagement and erected stronger, broader barriers to this engagement. The connection of this policy to long-standing ideological predilections surrounding self-sufficiency, as well as the fundamental imperative of the CCP toward retaining control over any force—economic and foreign ones particularly—that could challenge its hold on power, means that the de-risking within Chinese strategy is far more assured than in any other country. While the degree to which policies aimed at disengagement on both sides of strategic competition will mutually reinforce each other is uncertain, the findings of this Strategic Asia volume clearly show that de-risking is now sufficiently embedded into the political logic of key Indo-Pacific actors to ensure that it will continue to shape the global economic order through this decade and beyond.

Alison Szalwinski
Vice President of Research, NBR

Michael Wills
Executive Vice President, NBR


[1] “The Fault Lines in America’s China Policy,” Economist, May 16, 2023.

[2] Gina M. Raimondo, “U.S. Secretary of Commerce Gina Raimondo Delivers Remarks Ahead of Bilateral Meeting with PRC Minister of Commerce Wang Wentao,” U.S. Department of Commerce, August 28, 2023,

[3] “Economic Security as National Security: A Discussion with Dr. Peter Navarro,” Center for Strategic and International Studies, November 13, 2018,

[4] “Building a Clean Network: Key Milestones,” U.S. Department of State,

[5] See Charles W. Boustany and Aaron L. Friedberg, “Partial Disengagement: A New U.S. Strategy for Economic Competition with China,” National Bureau of Asian Research, NBR Special Report, no. 82, November 2019,

[6] Jake Sullivan, “Remarks by National Security Advisor Jake Sullivan at the Special Competitive Studies Project Global Emerging Technologies Summit,” White House, September 16, 2022,

[7] Jake Sullivan, “Remarks by National Security Advisor Jake Sullivan on the Biden-Harris Administration’s National Security Strategy,” White House, October 12, 2022,

[8] Christina Lu, “Washington Doesn’t Want You to Call It Decoupling,” Foreign Policy, April 27, 2023,

[9] David Kerr, “Has China Abandoned Self-Reliance?” Review of International Political Economy 14, no. 1 (2007): 77–104.

[10] Ibid.

[11] Nadège Rolland, China’s Eurasian Century? Political and Strategic Implications of the Belt and Road Initiative (Seattle: NBR, 2017), 102.

[12] Alicia Garcia Herrero, “What Is Behind China’s Dual Circulation Strategy,” China Leadership Monitor, September 1, 2021,

[13] Damien Ma and Houze Song, “China’s Consumption Conundrum: Can Xi Get Chinese Citizens to Stop Saving and Start Spending?” Foreign Affairs, March 16, 2023.

[14] Tobias Mann, “China Rallies Support for Kylin Linux in War on Windows,” Register, July 3, 2022,

[15] James Crabtree, “U.S.-China De-Risking Will Inevitably Escalate,” Foreign Policy, August 20, 2023,; Elliot Smith, “Dimon Calls for Washington-Beijing Engagement in First China Visit since 2021 Controversy,” CNBC, May 31, 2023,; and Michael D. Swaine and Andrew Bacevich, “A Restraint Approach to U.S.-China Relations: Reversing the Slide Toward Crisis and Conflict,” Quincy Institute, Quincy Paper, no. 11, April 18, 2023,

[16] Sanjana Joshi and Samridhi Bimal, “India’s Engagement with the Global Economic Order,” UNISCI Journal, no. 49 (2019): 63–78,; and “Homeland Economics,” Economist, October 7, 2023,

[17] Ngozi Okonjo-Iweala, “Why the World Still Needs Trade,” Foreign Affairs, June 8, 2023.

[18] John Liu, “South Korean Chip Makers Get U.S. Waivers from China Export Rules,” New York Times, October 9, 2023,

[19] David Pierson and Daisuke Wakabayashi, “China’s Raids of Foreign Firms Have Roots in National Security,” New York Times, May 10, 2023.

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