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Decoupling can never be an option

By John Gong | China Daily | Updated: 2023-02-07 07:11

File photo shows the national flags of China (R) and the United States as well as the flag of Washington DC on the Constitution Avenue in Washington, capital of the United States. [Photo/Xinhua]

The centerpiece of the US' competition policy with China is decoupling, which was initiated by the Donald Trump administration and has been broadened by the Joe Biden administration. This is nothing new when it comes to an incumbent power dealing with the challenges posed by a rising power.

The United States was itself at the receiving end of decoupling which the United Kingdom resorted to during the better part of the 19th century. What were boycotted by the UK during the Industrial Revolution were textile and related technologies. Today when Washington has become the initiating party for decoupling, the scope has become much broader.

The Biden administration's decoupling strategy after it came to power in 2021 was supposed to be what one can call "small yards with high fences". This means only a limited number of technologies need to be safeguarded, but with much more intensity.

What actually has happened, however, is that "small yards with high fences" have turned into "large yards with high fences", particularly pertaining to the US Commerce Department's actions related to the Entity List, which keeps expanding at an unprecedented pace. In the past, some exemptions were allowed to accommodate US companies' commercial interests in China. No more. Recently the US Commerce Department announced that all such exemptions previously granted to US suppliers to Huawei will be withdrawn.

Huawei, for several years, has faced restrictions on 5G and other technologies but the Commerce Department gave licenses to some US companies to sell certain goods and technologies to the company. For example, Qualcomm received permission in 2020 to sell 4G smartphone chips to Huawei. But now the US administration has stopped approving licenses for US companies to export a lot of items to China.

Such frenzied actions coupled with hysterical statements from the US Congress have created a poisonous political climate in Washington, preventing any sensible discourse on the US' China policy from taking place. Many politicians are actually vying with each other to prove their stance on China is tougher than the others.

The poisonous political climate has spilled over into the business world, particularly the US business community operating in China. In other words, businesses operating in China are being pressured by some US politicians to decouple from China.

This sends a clear message that doing business with and in China is not welcome in Washington, though many US businesses are still thriving and making profits in China.

US politicians' moves indicate that decoupling from China is not a matter of if, but when. For example, a few days ago, Dell Inc, a large US-based technology company, may have buckled under pressure. Dell reportedly said it will stop sourcing semiconductor products from China. Dell could also move some of its operations out of China in the future, while Apple has already moved some of its production units to India.

If such reports are true, this is just the tip of the iceberg. And there might be more such plans on the drawing board of many US companies. Unfortunately, this is a challenge that will continue to haunt the business world for quite some time.

China's development over the past more than four decades can be partly attributed to its successful participation in the global value chain and industry chains, foreign direct investments in China, and the contributions of multinationals, including many US companies. To lose them would be a big loss to China's economy. But if these companies lose China's market, they too would suffer colossal losses.

Decoupling has never been, and should never be, an option, and Beijing needs to come up with policies to counter such moves. First, people should never rush to blame the companies that are leaving or thinking about leaving China.

But for those who have not made up their mind yet, we need to convince them to stay back in China. We need to come up with ways to help them stay.

Since the past three years have been tough, largely because of the COVID-19 pandemic, let's focus on the economy this year, and let foreign companies know that China is a better place than North America and Europe in terms of growth potential. Next year should be even better.

But it is important that various government branches communicate with foreign businesses in China, in order to help solve their problems and help them grow. It is also important that competition between the US and China is fair, because one cannot win this race with coercion. One needs to resort to persuasion and cooperation.

The author is a professor at the University of International Business and Economics.

The views don't necessarily reflect those of China Daily.

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