A country that cannot stand firm in "risk reduction" towards China | economy | risk
In recent times, European leaders have coined a new term for economic cooperation with China, which has been frequently used by the West - risk reduction. "Risk reduction" is a financial term that refers to the need to remove risk factors before investment projects can be implemented. Since European leaders have "grafted" it into the fields of geopolitics and foreign relations, we will follow their approach and analyze from an economic perspective whether the direction of "risk reduction" in Europe is right or not. After all, the ancient Chinese story of "going the other way" has long taught us that choice is greater than effort, and if we go in the wrong direction, we will only get further away from our destination.
Seeking benefits and avoiding harm is the instinct of all actors. To maintain its own economic security interests, a country must stay away from unnecessary risks and create a reasonable margin of security. The safety margin that can effectively prevent risks should include the following key factors: reliable partners, sustained profit expectations, stable and diverse supply chains, etc. Of course, self-reliance and self-improvement, constantly enhancing core competitiveness, are also essential for maintaining national economic security. Cooperating with China can precisely meet all the requirements for building a safety margin.
China has never been a source of risk for the world economy, but a foundation of stability. From the Asian financial crisis in 1997 to the international financial crisis in 2008, China turned the tide and prevented the world economy from falling into a Great Depression. At a time when global risks and challenges are accumulating, China has proposed to build a community with a shared future for mankind, jointly build the "the Belt and Road", implement the global development initiative, implement the global security initiative, implement the global civilization initiative, and continue to send positive energy, and strive to lead mankind out of the fog of changes in the past century.
Economic globalization is the guarantee for building a diversified supply chain, and China plays an indispensable role in it. To achieve global supply chain security and resilience, resource allocation must be based on marketization, diversification, and economic globalization. As the world's second largest economy, the largest manufacturing country, and a major trading partner of over 100 countries, China has long deeply integrated into the global industrial and supply chains. With the most complete manufacturing industry in the world, the most complete industrial system, and a super large market scale of over 1.4 billion people, China has provided strong impetus for the stability of the global industrial and supply chains. Although globalization is currently facing a headwind, Adam Smith's core economic philosophy of "division of labor produces efficiency, cooperation creates prosperity" remains valid. More than 80% of the solar module supply in Europe comes from China, and according to calculations, if these components were produced in Europe, the price would be about 30% higher. A high import share does not equate to dependence, nor does it equate to huge risks. The best strategy to prevent risks may not necessarily be self-sufficiency.
China is a reliable partner in Europe, and this statement has a solid public opinion foundation in Europe. In April this year, the European Commission on Foreign Relations conducted a poll of 16168 respondents from 11 EU countries, and the results showed that many believed that China was a necessary partner rather than a competitor or enemy. Most people believe that the risks and benefits of trade between Europe and China are balanced, and the risks do not outweigh the benefits. The data on China Europe economic and trade cooperation also proves this point. Since the establishment of the comprehensive strategic partnership between China and Europe for 20 years, the two sides have formed a strong economic symbiotic relationship. In 2022, the trade volume between China and Europe reached 856.3 billion euros, a year-on-year increase of 23.1%. In the first five months of this year, the bilateral trade volume reached 2.28 trillion yuan, a year-on-year increase of 3.6%. Enterprises are on the front line of the market and have a more sensitive and persuasive perception of risks. At a time when Western politicians are eager to promote "risk reduction", leaders of internationally renowned companies such as Tesla, Microsoft, BMW, and Apple have visited China intensively and expressed their desire and confidence in the Chinese market on various occasions.
On the other hand, the so-called "four elements of risk reduction" include maintaining European economic resilience and competitiveness, improving or applying existing tools and trade methods to combat economic distortions, providing more defensive tools for key areas, and aligning with partners. Defense, distortion, and confrontation are a series of words filled with a sense of distrust towards the outside world, seemingly always ready to go to war with others. Nietzsche said, when you gaze into the abyss, the abyss is also gazing at you. A pessimistic and hostile worldview will ultimately backfire on oneself.
The progress of a country comes from innovation and cooperation. Excluding and suppressing other countries cannot bring about its own development. Only through equal and mutually beneficial cooperation can it last. The triple positioning of China as a "partner, competitor, and institutional opponent" by Europe is contradictory. It is simply an "impossible triangle" to use vague policies such as "risk reduction" to achieve the goal of cooperation, competition, and confrontation, benefiting unilaterally. Otto Hauser, former State Secretary of the German Federal Chancellor's Office and former spokesperson for the federal government, pointed out that "we cannot work together economically on one hand and confront politically on the other.".
In addition, "risk benefit symmetry" is one of the basic principles of economic operation in a market economy system. Risk cannot be eliminated, and the key is to balance the relationship between cooperation and risk prevention. Refusing to cooperate out of fear of risk is like giving up on food due to choking, pouring out the child along with the bathwater. Former Swedish Prime Minister Carl Bildt once questioned, "Do we have reason not to engage in trade with China from now on just because we are afraid of potential risks in the future?" Risk prevention and cooperation are not in opposition, non cooperation is the biggest risk, and non development is the biggest insecurity.
The real risk that countries need to guard against is to stir up ideological opposition, engage in camp confrontation, create a new Cold War, and push the world to the brink of division and conflict; It is under the pretext of safeguarding national interests, engaging in "decoupling and chain breaking", "small courtyards and high walls", undermining international trade rules, and suppressing the legitimate development rights of other countries; It disregards the basic right to survival of the people of other countries, incites chaos and exacerbates war conflicts; It is a selfish act of shifting crises, harvesting global wealth, and harming the well-being of people around the world.
Establish the right position in the world and follow the great path of the world. Grasping the trend of historical development, finding sincere and reliable partners, identifying real risks, and taking advantage of the situation are the ways to survive in fierce international competition. Otherwise, even the most powerful "martial arts" will eventually be defeated by the times.
