China’s new rules give the West a new headache

When Western firms pull production out of China or buy fewer parts from there in order to be less dependent on the country, this is called decoupling or de-risking. And you would think that China can’t stop the rest of the world from decoupling, right? Chinese authorities blocked Meta’s $2 billion (€1.7 billion) takeover of the artificial intelligence (AI) startup Manus last month, sending a clear signal that even deals structured outside China's borders are no longer safe.

Manus is headquartered in Singapore , but has strong Chinese roots. China viewed the firm as one of its strategic assets in the global AI race and blocked the deal on national security grounds. The move followed Beijing's swift introduction of the Regulations on Industrial and Supply Chain Security, also in April. These measures strengthen its ability to stop US tech giants from buying up high-end Chinese technologies . To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video The new rules, however, have much broader consequences. In practice, Beijing is warning foreign governments and companies against decoupling. Chinese authorities can now retaliate against foreign firms that move factories to countries like Vietnam or India, or reshore production back home. They could also face fines and supply chain blacklisting if they comply with United States and European Union export controls or sanctions targeting Chinese entities. Some firms have moved some China production to countries like Vietnam Image: Hau Dinh/picture alliance "It’s effectively meant to derail de-risking measures such as those the EU and member states, including Germany, have been taking to reduce dependency on China," Rebecca Arcesati, an analyst at the Mercator Institute for China Studies (MERICS), told DW. Since the pandemic, both the EU and the US have stepped up efforts to make supply chains more resilient and less dependent on China. Many foreign companies have scaled back their operations there. Some production has been reshored nearer to home.

Key points

• Manus is headquartered in Singapore , but has strong Chinese roots.
• China viewed the firm as one of its strategic assets in the global AI race and blocked the deal on national security grounds.
• The move followed Beijing's swift introduction of the Regulations on Industrial and Supply Chain Security, also in April.
• These measures strengthen its ability to stop US tech giants from buying up high-end Chinese technologies .
• To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video The new rules, however, have much broader consequences.