China, at the Centre of the G7

Águeda Parra Pérez

4 mins - 24 de Mayo de 2023, 07:00

Without explicit reference to China, the G7 summit in 2023 will be marked by multiple references to the challenge posed by the Asian giant with respect to the two major issues that have been at the forefront of the strategic agenda of the world’s seven most industrialised countries: economic security and the promotion of a free and open Indo-Pacific.

In relation to economic security, reshaping the global chip supply chain has been the main objective of the United States and its allies in order to reduce dependence on China, and thus advance technological security that also guarantees national security. Hence, the new stage of rapprochement in relations between Japan and South Korea is the result of the diplomatic effort promoted by Washington to align its partners in the region with the objective of boosting their technological capabilities while reducing Taiwan’s dependence on advanced chips. Ahead of the G7 meeting, Hiroshima became a focus of technological interest, bringing together the world’s leading semiconductor manufacturers, seven of which have announced plans to strengthen technology partnerships with Japan. Taiwan’s TSMC, Korea's Samsung Electronics and US-based Intel and Micron will be part of Japan’s transformation into a semiconductor powerhouse over the next decade, reclaiming an important role for Japan in redefining the supply chain.

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On the other hand, the Indo-Pacific has been attracting geopolitical focus over the last decade and is the region where the G7 will focus its efforts to maintain regional stability and the status-quo, rejecting any use of force or coercion. For this, with the focus on the Asian giant, Japan has extended an invitation to the summit to Australia, South Korea, India, Indonesia and Vietnam, countries among which there is growing concern about a more assertive China in the region.

The strong dose of symbolism by virtue of the choice of Hiroshima as the host city for the summit, highlighting Japan’s commitment to peace, also strongly endorsed by the other G7 members in their joint declaration, will also be remembered as the stage on which the terminology used in reference to the challenge posed by China in its rise as a global actor has ended up converging. In contrast to the promotion of decoupling that Washington has promoted among its allies, the nine points outlined in the joint communiqué to dealing exclusively with the challenges posed by China focus on the option of de-risking, promoted until now by the European Union, as the primary strategy that the G7 will ultimately adopt to reduce the risks posed by China. After this summit, risk reduction, not de-risking, will be the common policy of the G7, without it being an approach designed “to harm China”, "nor to frustrate China's economic progress and development", according to the communiqué, which stresses that “a growing China governed by international rules would be in the global interest”.

But prior to this shift in focus, the Biden Administration has for months been promoting a major supply chain transformation, less dependent on China, and encouraging the recovery of advanced manufacturing capacity at home under a clear decoupling promotion scheme. While the planned factories will still take a few years to be fully productive, the ban on US technology exports, which Japan and the Netherlands have also joined, has nevertheless already begun to have its first effects.

Oppo, one of China’s leading smartphone manufacturers, has announced that it will close its semiconductor division, abandoning the development of its own chips. A move they link to growing uncertainty in the global economy, but which is closely linked to the effects of the decoupling policies promoted by Washington to reduce the technological aspirations of the world’s second-largest power. Indeed, China’s chip imports continue to fall amid the reconfiguration of the value chain in the global semiconductor industry, dropping 21.1% between January and April compared to the same period in 2022, according to the General Administration of Customs.

The European position of less confrontation with China, with pragmatism backed by Germany and France taking precedence, has also ended up prevailing among the G7 members. However, while the proliferation of agreements with its partners has been the protagonist of the decoupling phase so far driven by Washington, Brussels is still immersed in achieving economic resilience. Diversification remains the main challenge to reduce dependence on China in supply chains where the Asian giant dominates critical elements in the digital and energy transition. Europe may have imposed common terminology at the G7, but ensuring strategic autonomy and technological self-sufficiency remains a major task ahead for the EU.

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