Tensions between the US and China have reached such a high level that the G7, led by the US, recently changed its objective in its relations with China from "decoupling" to "de-risking". But the reality is that de-risking, like decoupling, requires the participation of both sides and a common agenda.
The first step towards productive dialogue is to recognise that the interaction among three types of competition -- trade, technology, and geostrategy -- is driving the spike in US-China tensions. To stop this vicious cycle, these three types of competition must be decoupled, and, to the extent possible, the policy instruments applied to each segment must be kept distinct.
Weaponising trade policy to address national security matters, for example, has only reduced mutual benefits from the economic relationship without easing geostrategic tensions. China banned rare-earth exports to Japan in 2010 over a territorial dispute and restricted a range of imports from Australia in 2020 after the country called for an independent investigation into the origins of Covid-19. Yet such retaliation was ultimately ineffective.
