De-risking by US raises risk of insecurity

Washington's protectionist strategy causes worry in Asia-Pacific: Analysts

Although "nobody would dispute reducing risk", the "de-risking" strategy adopted by Washington has been bringing insecurity to the Asia-Pacific region due to its nature of protectionism, according to a security and foreign policy expert in the United States.

"De-risking" has emerged as a more preferred international economic strategy for US President Joe Biden's administration, mainly toward China, instead of "decoupling".

"I think in general, really, it doesn't matter for the countries in the region how you call it, you call it decoupling, de-risking or any other term. But I think what matters is the practical effect on their economies," said Huong Le Thu, a nonresident fellow at the Center for Strategic and International Studies.

"So, the more protectionist policies from the US, the more insecure they will feel," she said at an event titled "De-risking the economic relationship with China" held earlier this month. It was hosted by the Center for East Asia Policy Studies at the Brookings Institution and the Research Institute of Economy, Trade and Industry.

Huong said there is still a lot of "unclarity" in the term "de-risking".

It is "relatively poorly defined and poorly explained" to the countries in the region, she said, adding that "de-risking" is continuing the practices of trying to disengage China in a protectionist way.

"The US chooses certain critical sectors to protect. … But countries in the region are very intrinsically interconnected with China and the global trade system. So, it's not going to be a straightforward solution for them."

She also said that "de-risking" in practice means asking to choose. Because if we're still limiting China's access to certain sectors in certain trade aspects, then "for countries in the region, it does mean in a practical sense forcing to choose".

Huong said "the more direct response to de-risking" came from the Straits Times, a Singaporean newspaper, which said "de-risking is actually introducing risk to everyone" and bringing "more opacity to the global financial system".

It said Singapore's Deputy Prime Minister Lawrence Wong talked about how de-risking could lead to a polarized world economy, in a speech during his visit to Tokyo in June. "If de-risking is taken too far, it would prompt reactions and unintended consequences. Over time, we will end up with a more fragmented and decoupled global economy," said Wong.

Digital economy

Huong said when it comes to the digital economy, connectivity, and internet economy, this region is the fastest-growing market with huge potential. To support their digital economy ambitions and broader industrial policies, the countries in the region want support from both the US and China.

Some countries, more than others, have high ambitions in terms of industrial policies. Vietnam is one such example, he said.

What they are afraid of is the potential dangers of the digital "Iron Curtain", Huong said.

Huawei has been vying with Apple and Samsung to be the world's biggest handset maker and promoting its 5G technology and equipment worldwide.

Since 2019, the US has imposed restrictions to cut its access to chipmaking tools essential for producing its most advanced models and pressured some countries to ban 5G equipment provided by Huawei. Some European countries also joined in banning Huawei.

"They are not in a position to be in either camp because, for example, when the US and some of our partners and allies introduced the Huawei ban, a lot of countries in the region have been using Huawei for their 3Gs and earlier generations," said Huong. "So it's very hard to shift."