The term ‘de-risking’ has become popular among officials trying to loosen China’s grip on global supply chains. It reflects an evolution in the discussion over how to deal with a rising, assertive China, and is meant to sound more moderate and surgical than ‘decoupling’. The term caught on after a speech by the European Commission president, Ursula von der Leyen, on March 30. German and French diplomats later pressed for the term in international settings, and it was adopted by the U.S. national security adviser, Jake Sullivan, and India’s foreign minister, S. Jaishankar.
However, de-risking has a vexing history in financial policy, and is associated with overreaching. Human rights groups have condemned how banks de-risk by denying service to aid agencies that work in places like Syria, fearing fines if an organization strays into a gray zone of providing aid to nations under sanction.
De-risking requires tough, in-the-weeds decisions and solutions. The United States and its allies will need to do more thinking and regulation writing for some businesses, while allowing others to stay in China. Ultimately, de-risking is an imperfect, evolving challenge, and the world’s democracies must find a way to disconnect from China enough to reduce the threat of coercion, without encouraging paranoia or rogue behavior that causes unneeded harm.