China Can’t Afford to Decouple from the West
While Chinese leaders have reason to worry about exposure to the U.S., the costs of achieving true self-sufficiency would be unsustainably high.
Chinese leaders are underestimating the challenge of building a sanctions-proof chipmaking industry.
Photographer: STR/AFP/Getty Images
Since former U.S. President Donald Trump launched his trade war against China in 2018, Chinese leaders have gone from mocking the idea that the world’s two biggest economies might decouple, to worrying about losing access to American technology, capital and markets, to thinking that China might be better off disengaging from its main rival on its own terms. They shouldn’t be too eager to sever economic ties to the West, however. The costs of decoupling are likely to be far greater than any possible benefit.
China’s fears about its dependence on the U.S. aren’t unwarranted. Indeed, the U.S. and its allies are also taking costly steps to lessen their reliance on mainland-based supply chains. For their part, Chinese authorities have undertaken an extensive security review of supply chains and launched initiatives to bolster food and energy security. Regulators are seeking better control over the vast troves of data held by Chinese technology companies, forcing one of the biggest, Didi Global Inc., to delist in the U.S. and transfer to Hong Kong, while effectively blocking others from listing on U.S. exchanges. China has launched a massive effort to build up its chipmaking capabilities and wean itself off Western suppliers.