China the target of new G-7 push against 'economic coercion'
Bloomberg May 11, 2023
Group of Seven nations aim to send a signal to China this month by announcing a joint effort to counter "economic coercion," even as they struggle to agree on more than a broad statement of intent.
While member states want to better coordinate their responses to China's economic practices, signing off on tangible measures is proving more complicated, according to people familiar with the discussions. Officials are still wrangling over how tough to be in their messaging to China, particularly on specific tools that could be deployed against it.
The U.S. has advocated for other G-7 nations to take stronger positions on Beijing when leaders meet next week in Hiroshima, the people added, but European countries would prefer to focus on coordination and general warnings against coercive behavior. A White House spokesperson declined to comment.
The debate reflects the dilemma facing the U.S., Europe and China's neighbors like Japan on how to deal with China's growing economic clout when their supply chains remain so interlinked with the world's second-biggest economy. G-7 nations are all dependent in some fashion on Chinese goods in key areas and there is a consensus on the need to test the resilience of supply chains, the people said.
Leaders are likely to hold a private discussion about China in Hiroshima and it will be central to a stand-alone document on economic security as well as talks on trade and foreign policy.
The proposed "platform on economic coercion" would allow G-7 countries to coordinate their actions in areas including trade and investment restrictions, boycotts and threats such as cyberattacks, the people said.
But such a mechanism is unlikely to include an automatic response to hostile economic actions, said the people, who spoke on the condition of anonymity to discuss sensitive matters. European members in particular oppose the idea of preordained countermeasures.
What joint action might be possible will depend on individual circumstance, the people said. They added there's a spectrum of measures China has taken, ranging from targeting specific companies to enacting total trade boycotts.
Chinese Foreign Ministry spokesman Wang Wenbin blasted the G-7 as a "small clique that puts the U.S. first," at a briefing in Beijing on Thursday. "The international rules that the G-7 talks about are Western rules," he said. "Such rules serve only the interests of the G-7 and a few others rather than the common interests of the world."
Despite the pre-summit wrinkles, the U.S. and Europe do show signs of moving closer to each other on their China policies. The U.S. language appears to be shifting, as officials start to adopt the phraseology of "de-risking" without "decoupling" that European officials now use. That's in part a nod to the European caution and to show the U.S. recognizes the complexities involved in formulating policy across multiple countries, the people said.
At the same time, the European Union position on China has hardened since the Covid pandemic and Russia's war in Ukraine exposed risky supply chain dependencies, with the bloc looking to mitigate those risks as well as put limits on several exports that could be used for military purposes.
German Chancellor Olaf Scholz this week accused China of increasingly acting as a rival and competitor. He said European nations should not aim for an immediate decoupling from China, but implement a "smart de-risking." And Italy has signaled to the U.S. that it intends to pull out of a controversial investment pact with China before the end of the year.
Chinese Foreign Minister Qin Gang said on Tuesday he was concerned with even the notion of de-risking. Speaking at a briefing with German counterpart Annalena Baerbock, he said it could equate to "de-Sinicization," according to the official Xinhua News Agency.
President Joe Biden plans to limit investment in China's economy by American businesses, and has hoped for an endorsement from other G-7 countries, although they aren't expected to announce similar restrictions at the same time, Bloomberg previously reported.
Some European nations prefer to focus on language about the risks to companies putting money into China, while boosting information exchanges about screening foreign investments, the people familiar with the discussions said.
Speaking in Niigata, Japan, where she is attending a meeting of G-7 finance ministers this week, U.S. Treasury Secretary Janet Yellen said she hoped to discuss a new set of possible restrictions on investment in China.
"Obviously, it would be most effective if there's coordinated action by a group of like-minded countries and agreement that this is a useful approach," Yellen told reporters on Thursday. She said the restrictions would be "narrowly scoped and targeted at technologies where there are clear national security implications."
Ahead of the summit, some G-7 embassies have been instructed to map out China's influence in a number of countries around the world, including their vulnerability to economic coercion. The efforts have focused on countries in Africa and Latin America, alongside central and Southeast Asia that the G-7 is looking to step up engagement with.
There are also exchanges between the U.S. and European allies on countering a push by some governments to require foreign companies to share their technology with the state, another policy area tacitly focused on China.
Concerns about the impact of potential Chinese activity in Taiwan on global supply chains have been a further talking point in pre-summit discussions.
The leaders are expected to reaffirm their opposition to any forced change to the status quo in the Taiwan Strait. The summit comes weeks after French President Emmanuel Macron came under fire for saying Europe shouldn't be dragged into a conflict over Taiwan between the U.S. and China. He and others in his government have since clarified the French position to align with G-7 support for Taiwan.
Bloomberg's Michael Nienaber, Chiara Albanese, Jordan Fabian and Colum Murphy contributed to this report.