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China’s Response to Decoupling

Despite its comprehensive and adaptable economic system, China cannot disengage fully from global supply chains – at least not without paying a heavy price. But the same is true of the West: just as Chinese industry would suffer massively from the economy’s isolation, so would Western businesses.

BEIJING – Before Deng Xiaoping launched China’s reform and opening up, the People’s Republic was working to establish a self-sufficient economy. But after decades of integration into the global economy, autarky certainly is no longer an option.

While China’s participation in global value chains boosted the economy’s efficiency and technological capabilities, it also caused its industrial system to become more fragmentated and vulnerable to external shocks.

In recent years, the United States has expanded the scope of sanctions on Chinese firms, such as by placing 603 Chinese persons on its so-called Entity List, blacklisting them on national-security grounds. These entities’ suppliers can no longer sell them US technology without a difficult-to-obtain permit.

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