Ramblings about deglobalisation

Decoupling, derisking, deglobalisation. Ending connections. Maintaining hegemony. Preventing the usurpation of China. Making sure everyone can still buy cheap knick-knacks online.

I recently shared a two-part podcast episode about how it’s impossible to decouple from China. With over 20k views on YouTube, the comments are mixed to say the least. Some are more than confident in the West’s ability to pull out from China and live its best life, while others point out that limiting factors like raw materials, cheap labour, and profit margins may stand in the way of those dreams. Maybe those people just have the wrong mindset.

Either way, the conversation about decoupling (or derisking as we in Europe like to call it) naturally leads us to numerous other questions: how to decouple, how deeply, where to start? What are the potential social, economic, and political consequences? What price, exactly, are we willing to pay to hold high the banner of China-free consumption? Few, I think, are concerned with these latter issues – the consequences can be kicked down the road, we’re only in power for 4 years anyway.

But the bigger question for me is that, given that decoupling is obviously a thinly veiled attempt at deglobalisation, why is the west seeking to delink itself from China at this particular point in time?

Yes, I believe decoupling and deglobalisation are the same thing. In fact, I know it. Isn’t it obvious? Maybe it’s being obfuscated by big egos and back-and-forths over tariffs. But to me it's clear as day that the US and its subsidiaries in Europe are essentially trying to execute a rug pull of global proportions. It goes something like this: now that we’ve used the majority of the world’s resources and labour to enrich ourselves, we must end our reliance on these second order nations before their economic and thus political power grows more than our own.

And of course we have to start with China. The upstart that’s grown too big for its britches. That refuses to know its place in the global order (firmly behind the US, thank you very much). That must be demonised for fear that people realise they’re more similar to us than we might think. It’s just the first step in a grander plan; the west must pull back, rebuild its fortifications and shore up reserves. It must preserve what it has, and prevent China or anyone else from taking it, and the best way to go about it is to employ a hot new synonym for deglobalisation.

But before we get to the ‘how comes’ and ‘why nows’ of deglobalisation, first let us sketch the outline of its younger brother decoupling. What are the historical roots of decoupling? What do people think it is versus what it actually is? And why must the west continue to pursue it at all costs, despite the fact that it's impossible?

Where decoupling came from

The western hegemonic powers have always been a little bit afraid of China’s economic dominance. The Opium Wars (yes, we are literally always talking about the Opium Wars over here) began with a very similar conversation: hey, how come this trade’s so imbalanced? How come we need all these consumables from China like tea, silk and porcelain and all they need is our foreign reserves? How come foreign involvement in the Chinese economy is restricted to literally one port and China gets to make all the rules? This reality is not meshing with my dreams of transforming the world into a modern capitalist superstate under my leadership. The main characters here are the British, French, Dutch, and sort of the US.

Fast forward to today, and the main characters are basically the same (except the US are now the leaders, the European countries have been absorbed into the EU writ large, and the British are still there but very confused). The main issues also remain the same. In 2020, President Donald Trump gave a speech in front of the White House in which he stated:

“there’s been no country anywhere, at any time, that’s ripped us off like China has. We lose billions and billions of dollars for years and years, decades. We’ve lost billions and billions and billions of dollars by dealing with China. We get nothing from China.

So when you mention the world “decouple,” it’s an interesting word. So we lose billions of dollars, and if we didn’t do business with them, we wouldn’t lose billions of dollars. It’s called “decoupling.” So you’ll start thinking about it. You’ll start thinking.

Under my administration, we will make America into the manufacturing superpower of the world, and we’ll end our reliance on China once and for all. Whether it’s decoupling or putting in massive tariffs like I’ve been doing already, we’re going to end our reliance on China because we can’t rely on China. And I don’t want them building a military like they’re building right now, and they’re using our money to build it.”

And so began our current obsession with detangling our economies from China’s, despite the fact that we had explicitly endorsed the growth of the Chinese economy throughout the late 20th century in the hopes that it would shed its socialist ways and embraced liberal politics like the rest of us smart people (more on that in a very different newsletter). So begins the time loop – Trump is president again, the Opium wars are about to kick off once more (‘Lithium Wars’?), and the Chinese economy is once again something that needs to be cut down to size.

Except this time the stakes are wildly different. China isn’t an isolated, landlocked nation that barely interacts with the countries around it. China is a behemoth, a deeply embedded, important, strategic nation to which a lot of people owe a lot of money. It’s no longer as simple as flooding the Chinese market with cheap drugs then kicking down the door and demanding they hand over their islands. Never mind getting past the warships. At a fundamental level, there is no getting around just how much of the global economic pie China has its fingers in.

Why decoupling is impossible

As already mentioned, I’ve done a whole podcast on why decoupling from China at the primary, secondary, and tertiary levels is impossible. But for the sake of those who can’t be bothered to listen to all that, here’s just one example.

Let’s say you’re interested in manufacturing something made from cobalt, or copper, or nickel, or lithium, some kind of metal. You may be confident in your ability to circumvent China’s control by going straight to the source, say in Malaysia, or Indonesia, or the DRC. And you’d be right, to an extent. Chinese firms directly own very few overseas mining operations, around 3% according to some estimates, with investment in the industry falling in recent years.

But these figures belie the true nature of China’s involvement in the sector. For example, Indonesia is the world’s largest nickel producer, second largest bauxite producer and also produces significant quantities of copper, cobalt, tin, and gold. After banning the export of these critical metals and minerals to encourage the development of local refineries, they discovered they lacked the critical infrastructure and funds to start building these facilities. So between 2019 and 2022 an investment of $10.96 billion was made into the industry, “a 207% increase, driven overwhelmingly by Chinese financing.” Indonesia is the biggest recipient of Chinese investment as part of the Belt and Road Initiative, most of which have gone into large nickel projects like the Morowali Industrial Park. Chinese companies have also constructed over 90% of Indonesia’s nickel smelters. Exports to China of nickel-iron, nickel sulfide, thermal coal, and liquefied petroleum gas, account for over 60% of Indonesia’s export market.

The story seems to be slightly different in the Democratic Republic of Congo, where Chinese state-owned firms seemed to have exchanged FDI for direct access to copper and cobalt mines. Studies show that as a result, between 2000 and 2016, China increased its ownership of cobalt imports to 29%, China's global production share jumped from 2% to 14%, and China's share of global refinery capacity rose from 3% to 50%.

The picture gets worse if you were actually trying to manufacture something with these raw materials. If you were looking to create a lithium ion battery for example, you would know that 23% of global supply of all battery raw materials is coming from China, and that China is responsible for 80% of battery-grade raw materials, and basically every stage of the manufacturing process. And that China is innovating in the sector to gain even more control – in 2022 China produced 70% of the world’s synthetic graphite, a key component in the fabrication of lithium ion batteries.

It’s not necessarily about ownership, but embeddedness. Ultimately, creating a new supply chain for this industry – which is becoming increasingly important in both consumer electronics and the ‘green’ tech revolution – is hard bordering on impossible (but not totally impossible, remember, mindset). This is a reality that many in the industry have pointed out themselves:

A new graphite facility will open in Malaysia today — with a novel approach to creating the battery material — as the world scrambles to break China’s stranglehold on the industry. “China actually dominates the whole world on graphite materials,” said Aiden Lee, chief executive of Graphjet.

Last October Beijing imposed export controls on the material — as it has done with a host of other battery minerals — in response to US restrictions on technology sales to Chinese companies… the US has imposed new rules to force manufacturers to stop sourcing from China in the coming years just as demand is expected to soar.

But creating new supply chains, almost from scratch, is not easy. The chief executive of Albemarle, the world’s largest lithium producer, warned last week that it was not economically viable to build a western supply chain that could wrest control of critical minerals from China. The new facility in Malaysia will produce 3,000 tonnes of graphite per year, just a fraction of China’s vast 1.5mn tonne capacity.

Now extrapolate this example to fish-derived products, or forestry-derived products, or almost all the food we consume, the packaging we use, the pens we write with, the keyboards we tap on. I daren’t write a word about steel or shipping. Kyle Chan a really good breakdown of how even attempts by western tech giants like Apple to decouple their supply chains from China are thwarted by other Asian partners who are simply not on the same wavelength. And this is without even mentioning whether or not the majority of western corporations actually agree with their respective governments’ plans to disconnect from China (see: Tesla’s new megafactory in Shanghai).

But despite the impracticalities of decoupling (not impossible, just difficult, you just don’t have the right mindset!), the west has no choice but to pursue it anyway. Not only is it part of the west’s manifest destiny, but it is the only way to preserve the one thing more important than just economic dominance – global hegemony.

Why the west must pursue decoupling

Global hegemony does include an economic component, but this is just one part of a puzzle that includes military and political pieces, as well as a kind of tenuous mental-emotional state of mind that can continually produce the imaginary of being part of one of the greatest nations to ever have existed. The broader economic consequences of decoupling pale in comparison to the importance of deglobalisation vis-a-vis the stability of western governments and western ways of governing.

Basically, the west needs to maintain power at whatever cost, because that’s more important than being rich. It has to be perceived as being bigger, better and more important. Also more reliable and secure, stronger and safer. More established, more knowledgeable, more amenable. Less prone to human rights violations or corruption or shady deals. It doesn’t matter whether or not any of these things are true, what matters is that it is believed to be true, on a global scale.

Why is it more important? I’m honestly not sure, I’m not a power-hungry megalomaniac that thinks of nothing but world domination and the subjugation of my enemies. But there are some political scientists that think they have the answer.

“The dominant paradigm in political science is realism… realism sees the world in terms of a struggle for survival by sovereign nation-states in a context of global anarchy. To increase their chances of survival in the face of potential aggression from other states, countries must maximize their military and economic power relative to other states. Globalization endures where a global superpower has the ability to coerce all other states to play by its rules in the world economy…

In the present context, the US is a declining hegemon that led the creation of the institutional infrastructure of the world economy that is now being challenged by a rising China. The main prescription offered by realism is that, for the sake of its own sovereignty and survival, the US must do whatever it can to prevent China from gaining global hegemony. Short of a preemptive war, it can do so in three ways: (1) weaken China, (2) strengthen the US (Trump emphasized this), (3) seek and strengthen allies against China.

Decoupling and attendant de-globalization imply an economic cost for the US. Under realism, however, what counts is relative power, not absolute power. As long as these measures hurt China more than the US, under realist logic, they make perfect sense. Ultimately, what is at stake is the right to self-determination and possibly even survival. The US does not want to see China emerge as its overlord. Indeed, the trade wars at least seem to affect Chinese GDP more than US GDP (The Economist, 2019). Analogously, it would be logical for US allies to accept the economic losses needed to contain China. It is true that the US has not shied from using its power, economic and military, and not always legally. But it has been more rules bound and predictable than China. It seems unlikely that Western countries would fare better with China than with the US.”

That part about US allies having to eat shit in order for this plan to work out is why it kind of sucks to live in most developed countries right now I feel. Everything’s really expensive, our infrastructure is crumbling, and national conversations seem to revolve around comparatively trivial issues. But we also need to be kept in docile compliance, hold on to that belief that all our pain, and flooding, and expensive train tickets, and lack of childcare, and out-of-reach housing is all worth it because we’re intrinsically better than China. And living under a China-led world would suck even more.

The end of the global/rise of the local

So now we’re back to the original question: why now?

This is kind of answered by the previous paragraph. The hegemony that we’ve just spent so long talking about is beginning to fade away, and the west knows it, and certain parties in the west know it to the point that their minds are breaking over it.

We can start with the obvious as a warm up. Cries from certain sectors of the US populace to build walls to and bring back manufacturing is a direct response to propaganda stating that America’s problems are not caused by any sort of internal rot or fundamental issues with laissez-faire capitalism and the monopolies and corruption it engenders, but rather a foreign menace. Never mind that the average American consumer couldn’t survive a week without Chinese-made goods dropshipped through an Amazon storefront (do not make me add a link to the Stanley Cup craze of 2023). We must become more self-reliant, and stop letting these foreigners in to steal our jobs and our tech and our military secrets. Diversity is bad, we must all subscribe to a fictionalised 1950-60s suburban ideal in order to revitalise the core family unit and rebuild the American dream. Oh, did I mention that this was the exact moment in time that the US realised its place as the foremost global superpower and defender of western values? Just a coincidence I’m sure.

Or for another example, take the newest kid on the UK political party bloc, Reform UK, whose goal is to reform literally everything about the country (it really is bothering them that much). They’re not the only right populist party to shoot to prominence in Europe and, notably, their rise can be attributed in large part to Brexit, an active example of a form of de-coupling. The whole point of Brexit was to untether the UK from the regulations and whims of the European Union, take control of things like borders, pricing, and money. It’s a perfect example of the aims of decoupling and, by extension, deglobalisation. Recentralise control back to the nation state and put one’s own people first, instead of thinking of global prosperity or whatever.

A snippet from Reform UK’s pledge to voters

Self-reliance and localism is also something China is pursuing, though not as dramatically as once thought a few years ago. But China is not as reliant on the west as the west is on China. China’s economy is not intrinsically linked to western supply, it’s weaning itself off western consumption, and its political and social stability is not reliant on connections with Western powers or any form of western governance.

China’s society is self-contained, something elucidated in a recent conversation I had with

Grace Shao

, during which she pointed out that while the west is fixated on the 100-200 million or so highly educated, internationally savvy Chinese, the government is always focused on the 1 billion+ people who make up the base. They don’t care about democracy, VPNs, or whether or not their kids get into a foreign university. They care that they can get decent jobs that allow them to keep buying shelter and food and little luxuries here and there. Who cares about travelling abroad? We’ve got Paris at home.

It is the west that has forged its rise on global economics, an extension of the imperial project that saw Europe carve up the world into colonies between the 15th and 20th centuries, and saw the US transform most of the world into tributary states from the end of WWII till today. Where China lacked access it improvised a solution – it took advantage of the west’s rich consumer base to grow its economy, while marketing its developing, non-imperial status as a sign of trustworthiness to other poorer nations when dolling out loans and buying up forests.

Ironically, China’s early reliance on western consumption is what makes it better placed to go ‘ghost mode’. As China’s per capita GDP rose and people became richer, they were able to turn their focus towards internal consumption. Who cares if foreigners won’t buy Chinese phones, cars, or coffee? We’ve got enough people here to do the job. Brands like Xiaomi and Huawei frequently appear on lists of top global consumer electronics brands, and Chinese coffee chains have already eclipsed Starbucks with their appeal to the local and rapid domestic expansion. “But they don’t hold a candle to Apple or Starbucks!” I hear you cry. And they don’t have to. These numbers are mainly based on domestic consumption, with a little overseas boost here and there. Just as the west is trying to decouple from China, so too is China attempting to end its reliance on the west.

But there are problems with China’s plan, and this is where the west – the US in particular – hopes to kneecap the Chinese economy before it grows too tall. China is still partly reliant on overseas consumption in developed nations, and the move to domestic consumption is slow and difficult, as interest rates remain low and youth unemployment rises. The tactics are laid out in plain language in the media: strangle exports before China has figured out its domestic consumption problems, play up fears around an aging population and the social problems this will cause, and restrict technology transfers as much as possible to stifle innovation that may counteract the first two problems. Be sure to play up fears around the housing market (that would never happen here) and bad infrastructure (we don’t have any of that) and bad loans to poor countries (we would never).

But these measures are only skin deep and fail to recognise that China’s economy isn’t just domestic, but globally fragmented. They don’t tackle the main problem China poses, which is the fact that it has managed to both offshore much of its own supply chain, while deepening global reliance on China’s manufacturing capacity. Want to move your production to a Cambodian factory to delink your business from Chinese clothing production? Too bad, China already bought that factory, or it invests so much into the economy that it may as well.

I wonder if our hegemonic overlords are aware of how perfunctory their calls for decoupling are. Does the incoming president know how much of the paper industry is dependent on artisanal loggers in Gabon funded by Chinese state-owned banks? Or how many of Apple’s South Korean suppliers get their parts made in Chinese factories? Or how many goddamned Stanley cups were made in China in 2024? Does he care?

Is decoupling performative, then? Or is it just getting started? It’s difficult to tell to what extent it’s a political stunt, especially as the EU seems to be actively defying US orders by deepening trade and political ties with China. But I think this confusion suits the purposes of the hegemon quite well. Perhaps this way we can all be kept in eternal suspense, ferreting away at our work to boost the ‘economy’ lest the ‘enemy’ get inside the gates. Perhaps this way the hegemonic ruling class can continue to collect their profits, becoming ever more powerful, battering us with misinformation to keep us complicit and hateful.

Perhaps the reward is in the journey, not the destination.