The United States has taken steps towards prohibiting certain investments in China, which analysts told CNBC suggests Western allies may have drawn lessons from the issues regarding national security in Russia. On Wednesday, the White House declared a ban on some American investments in China related to sensitive technologies, signifying the latest intensification of the growing separation between the US and China. Olena Yurchenko, advisor at the Economic Security Council of Ukraine, claimed the moves towards decoupling are being taken with regard to escalating tensions in Taiwan.
Analyses suggest that the U.S. has taken a cue from previous security failings in Russia when moving to sever links with China through a new investment ban. On Wednesday, the White House imposed a ban on some investments of U.S. funds in China for certain tech sectors, such as computer chips, noting that doing so would help to ensure China's military does not receive American technology or money. It is thought that this decision was made in light of mounting tensions concerning Taiwan, since the consequences of a potential conflict between the two would be "unimaginable". This has led to the phrase "decoupling" being used to describe the actions of Washington and Beijing, although the U.S. maintains that "de-risking" is a more accurate term. In response, the Chinese Foreign Ministry expressed strong opposition to what it termed the U.S.' "blatant economic coercion and technological bullying", noting that there will be a retaliatory response.
Olena Yurchenko, an advisor at the Economic Security Council of Ukraine, spoke to CNBC before Wednesday's announcement about ideas of decoupling production and factories from China to India. Yurchenko deemed the scope of risks concerning Taiwan as "unimaginable." Since the conclusion of a civil war in 1949, Taiwan has been independent of China, despite Beijing's position that the island is part of their nation. The West recognizes Taiwan as self-governing, while China has issued a white paper regarding "reunification" with Taiwan. On Tuesday, Kyle Bass, an enthusiastic China hawk, told CNBC that he had consulted experts in the military who are of the opinion that Chinese President Xi Jinping will initiate an attack on Taiwan in 2021. CNBC was unable to confirm these allegations. The Chinese authorities did not immediately respond to CNBC's request for comment, but they have previously said that the matter with Taiwan is an internal affair and their military activities are in response to meetings between Taiwan's president and U.S. representatives - a contentious point for Beijing.
The U.S. has been unambiguous in its desire to sever economic ties with China, with the Biden administration intensifying its efforts in recent months in light of the escalating tensions worldwide caused by Russia's full-scale incursion in Ukraine. Yurchenko, an advisor with Ukraine's Economic Security Council who focuses closely on geopolitics and international affairs, said the coincidence was more than likely intentional. "This is one of the long-term lessons that Western governments should take away from Russia," Yurchenko said. In reaction to the prolonged conflict, Western allies have launched the most severe sanctions ever against Russia. Nevertheless, an analysis by CNBC revealed that Moscow is able to extinguish the effects of the sanctions by utilizing third-party countries to bring in Western products, including advanced military technology.
Elina Ribakova, a senior fellow at the Peterson Institute for International Economics, commented that due to the West's approach to Russia, China has taken notice. China is known for providing Russia with Western technology, a fact that Ribakova noted when she said, "If we're not effective with Russia, if China is the one playing the key role in helping Russia circumvent these export controls, then how can we possibly think that we'll be effective against China if something were to happen with Taiwan?" The Chinese government declined to answer a request for comment on Ribakova's and Yurchenko's statements.
Since Russian troops crossed into Ukraine's borders approximately 1½ years ago, the West has continuously implemented sanctions against Moscow. The U.K. recently revealed sanctions against foreign businesses associated with supplying Russian forces with weapons, along with the European Union's launching of an anti-circumvention tool which prohibits the transfer of specified goods or technology to countries viewed as intermediaries for Russian. When questioned about the sanctions' impact as a warning to China should there be any confrontation with Taiwan, European Commission spokesperson Daniel Ferrie refused to comment or speculate.
China's huge influence on international relations and global markets compared to Russia is acknowledged across the world, leading to heightened vigilance from the West. The European Union's attitude towards China has been more inconsistent than the U.S., with the British government expressing that it is studying potential security threats linked to some investments.
Bass remarked that Western allies' current practice of a "slow decoupling" from China might be wrong, leaving states to "improvise" hastily if a dispute connected with Taiwan took place. He further commented that "we need to be more firm" and that this could involve a full severing of ties; notwithstanding he did not say it should take place straight away. In a conversation with CNBC's "Street Signs" before Biden signed the executive order, the Hayman Capital Management founder and chief investment officer expressed his approval for the upcoming guidelines regarding U.S. investment in Chinese technology. He affirmed that there should be stringent regulations on surveillance firms, genetics businesses, and any organisations that associate with China's armaments such as planes, battleships, tanks, and so on.
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