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China Trends #17 - Sailing the Seas of Economic Security

China Trends #17 - Sailing the Seas of Economic Security
 Mathieu Duchâtel
Resident Senior Fellow and Director of International Studies
 Marcin Przychodniak
Analyst at Asia-Pacific program at the Polish Institute of International Affairs (PISM)
 Francesca Ghiretti
Analyst at Mercator Institute for China Studies (MERICS)
 Pierre Pinhas
Project Officer - Asia Program

By Mathieu Duchâtel

In the security State that Xi Jinping is building, economic security matters. But in the "securitization of everything" that is emblematic of his governing style, how crucial is it exactly? Economic security is just one of the 16 areas outlined in Xi’s 2014 "comprehensive national security" (总体国家安全). This concept encompasses a broad range of issues, from culture to "ecological security". When he first introduced the notion at the founding session of the Central National Security Commission, Xi Jinping called economic security the "foundation" of China’s comprehensive approach. As such, it ranked below the "bedrock" (根本) - "political security" -, which centers on preserving China’s regime stability. Among the other elements listed, military and technological security are meant to provide an "assurance" (保障) to that overarching goal. The remaining domains, such as deep sea and space, are areas where the Party-State aims to defend Chinese interests from threats.

Xi Jinping called economic security the "foundation" of China’s comprehensive approach. As such, it ranked below the "bedrock" (根本) - "political security".

China’s "comprehensive national security" concept was first articulated in 2014, during a critical juncture in Xi Jinping’s first term at the top of the Politburo Standing Committee, when his national security prioritization started becoming obvious. Since then, China’s international environment has considerably deteriorated, largely as a pushback against Xi’s policies. A factor behind this deterioration is the rise of economic security agendas in the United States, Japan, Europe and the Republic of Korea, which complicates Chinese national and corporate strategies to expand internationally.

Most countries’ strategies do not explicitly mention China, a fig-leaf approach referred to by the EU as "country-agnostic". The US uses the designation "countries of concern" (China, North Korea, Iran and Russia) to ensure "malign actors do not have access to cutting-edge technology that can be used against America and our allies".

Whether these policies openly state it or hide it behind diplomatic language, they all respond to the same risks: China’s excessive leverage resulting from its investment in critical infrastructure and its importance in many supply chains, which creates options for economic coercion or the restriction of access to critical raw materials; leakage of civilian technology that ends up in military projects; and a list of issues linked to an uneven playing field with China’s state-led economy, and its powerful industrial policies.

Economic security is hotly debated in the European Union. Some argue that by securitizing economic relations with China, the Commission is gaining excessive power at the expense of EU national governments. Others criticize an overly defensive posture, with risks for the European single market, and question the extent to which the European Commission’s agenda is driven by the United States.

By contrast, there is little public debate in China about the notion, except in the area of supply chain resilience. Naturally, no one can contest the absolute priority placed on "political security" and the designation of "economic security" as a tool for achieving it. Framing "economic security" from the outset as it relates to regime stability sidesteps questions raised in the West, especially the central difference between a narrower EU approach prioritizing military technologies, coercion, and excessive leverage versus a broader approach favored by US and Japan, centered on economic competitiveness.

There is little public debate in China about the notion, except in the area of supply chain resilience.

Xi Jinping’s absolute priority on national security reflects the Party’s assessment that the "period of strategic opportunity", previously emphasized by all Chinese leaders since Deng Xiaoping, has now come to an end, replaced by a period of "changes unseen in a century". In Xi Jinping’s "New Era", one might add that the top priority has shifted from the prosperity of the Chinese people to a quest for state power on the global stage.

The space for policy debate lies in how to pragmatically implement efficient policies.

With clearly established strategic priorities, the space for policy debate lies in how to pragmatically implement efficient policies. China undoubtedly faces supply chain challenges, brought to light by US semiconductor restrictions. The solution to this? "Vertical integration", where major market players leverage their size to build a self-reliant supplier network, or at least one with reduced disruption risks. Here, companies are the implementers of a strategy designed by the Party leadership. In addition, Chinese views seem to favor public stockpiling of critical raw materials, an approach often dismissed in Europe as a costly waste of resources.

When it comes to relations with the EU, Chinese commentaries depart from "de-risking is just decoupling in disguise" line, as goes a now famous Xinhua commentary. Since 2022, there has been a flurry of diplomatic activity to numb the European de-risking agenda. It culminated with the Germany visit of Chinese Prime Minister Li Qiang, who in the presence of German top companies executives, rejected "de-risking" and called for all parties to adopt instead a "dialectical approach to view the dependence issue and avoid[ing] making simple equivalences between interdependence and insecurity".

The message here is that the two sides are able to co-manage the dependence risks they pose to each other. What goes unmentioned is the asymmetry in the decision-making process that leads to imposing costs - China under Xi Jinping has a well-established record of economic coercion, while the EU anti-coercion instrument, newly adopted in October 2023, requires the exhaustion of all diplomatic options before the EU can resort to defensive retaliatory measures.

Since 2022, there has been a flurry of diplomatic activity to numb the European de-risking agenda.

Chinese signals are somewhat contradictory. On the one hand, China uses top foreign leaders’ visits to Beijing to secure public statements against decoupling. On the other hand, China welcomes the European rejection of decoupling, and focuses on managing the concrete challenges that the EU’s de-risking policies will continue to pose to EU-China interactions. There seems to be an understanding that European moves are rational and justified. After all, Europe remains incredibly more open to China than the opposite.

There seems to be an understanding that European moves are rational and justified.

In sum, China seeks to minimize the European "de-risking" agenda and promote its own national-security-first approach in EU-China trade and investment relations. This is essentially what the Chinese Ambassador to the EU, Fu Cong, says when he argues that: "in our view, dependency is not dangerous. What is dangerous is to weaponize the dependency. If the EU has the political will to alleviate their concerns, China is ready to talk to them and come to some sort of agreement. We should not weaponize the dependencies that one side may have on the other".

China, however, weaponizes dependencies and rushes to reduce its own reliance on foreign suppliers. While this statement may be insufficient to build trust, it nevertheless has the merit of underlining China’s diplomatic tactic of downplaying the problem.

Image Copyright: STR / AFP

China as a Security State, the Economic Security Dimension

By Marcin Przychodniak

Under Xi Jinping, a political reorientation from a priority on growth to a priority on "national security" is under way. Marcin Przychodniak, a China analyst at the Polish Institute of International Affairs, delves into the official discourse and expert commentaries to clarify China’s definition of economic security. He writes that the concept has an important theoretical dimension, but in practice its implementation is only slowly progressing, and more visibly in terms of instruments to limit external contacts, restrict elemental exports and foreign exchanges.

▶ Read the article

Supply Chain Resilience: China's Search for Vertical Integration

By Francesca Ghiretti

If "political security" is the bedrock of China’s national security, "economic security" is its foundation – that is the official line regarding a notion that attracts a lot of attention worldwide. From the cases of electric vehicles and the pharmaceutical sector, Francesca Ghiretti explores Chinese thinking regarding supply chain resilience, and underlines the emphasis on self-sufficiency and vertical integration. Despite initial success in reducing dependence on foreign suppliers, a pervasive sense of precarity and insecurity is evident from Chinese writings.

▶ Read the article


Europe's Turn to Economic Security: Does It Really Matter?

By Mathieu Duchâtel and Pierre Pinhas

How should China respond to the EU’s Economic Security Strategy? Mathieu Duchâtel, Institut Montaigne’s Director of International Studies, and Pierre Pinhas, Project Officer within the Asia Program, explore Chinese analyses of “challenges that can’t be ignored”, but that nevertheless can be managed since de-risking is not decoupling. Chinese sources are in search of transatlantic and intra-European differences on the scope of economic security, and find some, but also demonstrate an understanding of Europe’s turn to an agenda that protects European interests better.

▶ Read the article

About China Trends

China Trends seeks understanding of China from Chinese language sources. In an era where the international news cycle is often about China, having a reality check on Chinese expressions often provides for more in-depth analysis of the logic at work in policies, and needed information about policy debates where they exist. China Trends is a quarterly publication by Institut Montaigne’s Asia Program, with each issue focusing on a single theme.

The introduction article to this edition of China Trends by Mathieu Duchâtel was also published on The Diplomat.

China Trends #17 - Sailing the Seas of Economic Security (20 pages)Download
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