World trade: G7 plan new China strategy – pressure should be increased

In the tensions with China, the group of large democratic industrialized countries (G7) has agreed on a tougher approach. In view of the dependence on the second largest economy, the partners want to reduce risks in China business and in the supply chains.

Investments in the People’s Republic should be better checked beforehand to protect sensitive technologies. The key points of this new strategy emerged from the communiqué of the G7 summit in Hiroshima in Japan on Saturday.

G7: China to ‘put pressure on Russia’

Because of its good relations with Moscow, China was urged to “put pressure on Russia” to end the war in Ukraine and withdraw its troops. Since the invasion of Ukraine, however, China has not even condemned the aggression, but rather backed President Vladimir Putin.

The aggressive behavior of China’s head of state and party leader Xi Jinping is also being observed with concern. Tensions are growing: China is threatening to conquer democratic Taiwan and is making disputed claims to power in the East and South China Seas, through which important shipping routes run. There is also criticism of human rights violations. China is still seen as a partner and competitor, but increasingly as a systemic rival.

G7 wants to diversify

“Economic resilience requires risk reduction and diversification,” it says. However, turning away from China is not planned: “We will not detach ourselves or turn inwards.” An EU diplomat saw a new realism in the G7: “There is no such thing as naivety.” In supporting China’s development over the past two decades, there should have been more caution with critical supply chains, he conceded.

The G7 states assure that they do not want to harm China. “A growing China that abides by international rules would be in the interest of the world,” the communiqué said. The G7 group will insist on fair competitive conditions in China. China’s non-market practices, which distorted the global economy, also needed to be addressed. “We will oppose harmful practices such as unlawful technology transfer or data disclosure.”

economy as a weapon

The G7 countries also want to arm themselves against “economic coercive measures”. In disputes with other countries, for example, China has repeatedly used its weight to exert pressure. Prominent examples were Australia and Lithuania. The G7 want to ensure “that attempts to weaponize economic dependency (…) will fail and have consequences”. A coordination platform should be created for this purpose.

Check investments in advance

The G7 countries also want to protect sensitive technology that could be used “to increase military capabilities that endanger international peace and security,” according to a statement. One possibility is to focus more on own foreign investments, which are aimed at China. However, each country should decide for itself how to approach this question. The USA has been working for a long time on a legal basis for such a preliminary examination of foreign investments.

A country’s capital should not flow on a large scale into industrial sectors of rival states that are important for the national security of their own country – for example in the defense or technology sector. The scheme follows a similar mechanism whereby some states pre-screen certain major foreign investments in their own country in sensitive areas.

interest in cooperation

Despite all the differences, the G7 states want to establish “constructive and stable relations” with China. It is important to cooperate with China on global challenges – given its size and role in the global community. The G7 countries want to work with China on issues such as climate change, pandemic preparedness, financial stability and non-proliferation of nuclear weapons.

No differences?

Although in the run-up to the summit there were certainly differences about the right course of action – among the Europeans and also with the USA – the security adviser to US President Joe Biden, Jake Sullivan, saw it. unity of the G7 group. Nevertheless, each country maintains its own relationship with the People’s Republic. He called the statement “not hostile” to China: “It’s just direct and frank.”

Criticism of China’s saber-rattling

Regarding China’s claims to power in Taiwan and in the East and South China Seas, the G7 states state: “We resolutely reject any unilateral attempt to change the status quo through violence and coercion.” Peace and stability in the important Taiwan Strait shipping lane are essential for the security and well-being of the world community. Beijing regards Taiwan as part of the People’s Republic and threatens to conquer it. However, the democratic island republic has been governed independently for more than seven decades.