Decoupling

Heritage Foundation researcher Min-Hua Chiang observes that China is fast losing its grip on its economic coercion strategy vis-à-vis Taiwan. With supply chains regrouping after a period of US-China trade war and geopolitical tensions, Taiwan has found greater support in its efforts to delink cross-strait issues with its economic survival.

Amid ongoing tensions, a high-level visit by US Secretary of State Antony Blinken to China in the coming week shows hope for improved relations between the two economic powerhouses. Zaobao correspondent Yu Zeyuan notes that while the meeting may not produce practical results, it is a much needed exchange to manage and control China-US relations from worsening.

While investments by Taiwanese enterprises in mainland China have declined due to geopolitical factors and Covid-19, many still have one foot in the massive domestic market. As a result, a number of Taiwanese enterprises have turned into “new mainland enterprises” as they integrate into the mainland’s domestic market. Zaobao journalist Miao Zong-Han looks into where Taiwanese enterprises are moving towards.

Analyst John Lee assesses the impact of US chip controls on China, pointing out the little likelihood of complete decoupling, especially in areas out of high-end chips. Despite the restrictions, China has options of its own but the tides could change at any minute in this “competition to win the 21st century”.

Academics Guanie Lim and Chengwei Xu examine the close interdependence of Japanese and Chinese firms through the case study of Toyota. Amid the talk of geopolitical tensions accelerating the risk of decoupling, some hard facts may put things into perspective.

China’s 20th Party Congress signalled that the government is focused on dual circulation, in particular domestic circulation. However, that does not mean that China has the intention for implementing a closed-door policy. In fact, a healthy domestic circulation will boost China's ecosystem for innovation and growth and help China further open up.

This year’s dramatic geopolitical changes have significantly altered the calculus for foreign investment in China as large European enterprises are increasingly taking the lead and Japanese businesses are retreating in manufacturing and advancing in services. American companies, on the other hand, are frozen as the US government imposes tough sanctions on China’s tech sector and as manufacturers weigh strategic moves back to the US.

Thorsten Benner of the Global Public Policy Institute (GPPi) in Berlin points out that unlike former Chancellor Merkel, current German Chancellor Olaf Scholz has invested a lot of time into building closer connections with Asian partners. This fits in with his worldview of multiple emerging global powers, and the need to foster resilience, diversification and “de-risking” in achieving economic security vis-a-vis China.

Retired economist Zeng Yongchang shares his views on China’s land finance policies — while quick and efficient, land finance is unsustainable, as evidenced by the widening inequality, intensifying social conflicts and dire economic situation.