Has decoupling from China already begun?

Betting against a U.S.-China decoupling requires increasingly long-shot optimism. Looking at the relationship from the U.S. side, such optimism is hard to justify. Looking at the relationship from the Chinese side, there is only marginally more room for it. And even as pessimism mounts bilaterally, China’s economic prospects are dimming.  

The relationship between the U.S. and China has changed rapidly over the last half-century. For most of this period, the prevailing interpretation was constructive engagement: America benefitted from this relationship geopolitically and economically by bringing China into the Western system. No more.

More recently a reappraisal questioning America’s benefits from its relationship with China has been underway. This reappraisal’s two schools of thought — decoupling and derisking — agree retrenchment is needed. Their chief disagreement is not over “if?” but “how much?”

Derisking focuses on denying China strategic assets and reducing America’s dependence on China for our strategic assets. Decoupling argues that America and the West must go further still, to virtually withdraw from meaningful economic cooperation across the board. 

While sharing the principle of reduction, both schools may also share the misapprehension that control over the relationship is possible. Succinctly, has decoupling already begun on both sides of the U.S.-China relationship? 

Betting against decoupling is difficult from the U.S. perspective. The American people have a strongly negative view of China’s government. As a result, there is strong bipartisan opposition to China, the only contention being over which party can take a tougher stance against the Chinese Communist Party’s policies.  

Reasons for America’s across-the-board disapproval of the Chinese government are broad and deep, ranging from human rights abuses, environmental damage, intellectual property theft, espionage, military aggression, trade abuses abroad and bad business practices at home, an increasingly communist ideological bent to its government and threats to U.S. and Western military security. 

If anything, China has stoked these issues recently so that the list continues to grow. Its growth and severity make it almost impossible to see Americans’ perception of China improving over the next few years.  

Betting against decoupling has only marginally better odds from the Chinese perspective.  

Chinese President Xi Jinping and the Chinese Communist Party have become unmistakably more authoritarian in recent years. This increased personal and state control has made China more belligerent at home and abroad. At any crossroads of world opinion and Xi’s, there is no longer any question of which way prevails.  

With the course apparently now set under Xi, the question becomes one of a post-Xi China.  There are three basic outcomes: China continues Xi’s harder line, takes an even tougher stance or moves away from today’s Xi position. Only the first two seem currently possible because Xi’s control allows him to stack the bureaucracy that will continue in power after him. 

For those in the West looking for someone to play the conciliatory role Deng Xiaoping played decades ago, the question is not simply who could do so, but how long the wait for such a person will be?  It is also worth remembering that Deng was an exceptional leader who masterfully (and miraculously) navigated China’s dangerous internal politics. Just because such a figure is again needed is no guarantee such a person can again emerge. 

Not long ago, China’s mammoth and seemingly invincible economy provided ample reason for many to sweep concerns about the one-sided relationship between China and the West under the rug. No longer.  

No more the juggernaut, China’s economy looks increasingly vulnerable and its vulnerability is increasingly visible. And, in what appears to be a vicious cycle, economic weaknesses prompt the CCP to respond with political strength — not the needed economic reforms that would aid the economy over the long term. Such actions undermine the economy and increase the price of future fixes; they also enhance friction with the West and diminish China as a desirable place to do business. 

Not surprisingly, U.S. and Western investments are shifting from China because as China’s risk rises, its return is dropping. Added to this cavalcade of caveats is the unknown; a chance event that could plunge relations decidedly deeper at a moment’s notice: one of China’s many shows of strength going awry, another spy balloon miscue, a revelation that China’s role in the COVID pandemic was worse than already known or a blatant act of aggression. 

China has been known as a bad actor for some time. Now the company it keeps internationally underscores it — North Korea, Iran, Russia, Cuba — and signals its deliberate separation from the West.  Simultaneously, it is becoming an increasingly bad return and a worse risk.

If not already underway, will decoupling occur — regardless of any U.S. political debate to determine it?

J.T. Young was a professional staffer in the House and Senate from 1987-2000. He served in the Department of Treasury and Office of Management and Budget from 2001-2004, and was director of government relations for a Fortune 20 company from 2004-2023.