Isolating China will be ‘impossible and dangerous,’ analyst says, as the G-7 gets tough on Beijing

The G-7 issued its strongest ever message to China over the weekend, but an analyst warned that isolating Beijing is “impossible” and “dangerous.”

The world’s largest seven economies agreed at a summit in Hiroshima, Japan, to de-risk and diversify their supply chains away from China, amid concerns of economic coercion. There has been a growing awareness among Western nations that their economies rely heavily on China. The coronavirus pandemic shed light on the intricacies of critical supply chains, but the ongoing war in Ukraine has further exacerbated this reality.

In a joint statement after the summit, the Group of Seven said: “Our policy approaches are not designed to harm China nor do we seek to thwart China’s economic progress and development. … At the same time, we recognize that economic resilience requires de-risking and diversifying.”

In the wake of the G-7 announcement, China summoned the Japanese ambassador and ordered companies to stop buying from American chipmaker Micron.

Giuliano Noci, vice-rector for China for Politecnico di Milano, on Monday told CNBC’s “Squawk Box Europe” that the G-7 showed a “unitarian” perspective against China.

“[President Joe] Biden spoke in terms of de-risking and not in terms of decoupling. Decoupling was the magic word of the United States still a month ago, but it is very clear that, given the role played by the Chinese market for several products, given the level of intertwines among supply chains, it is almost impossible to decouple,” Noci said.

De-risking refers to easing some of the dependencies on China, rather than totally breaking the relationship.

“It should be clear that isolating China will be not only, on the one hand, impossible but also, on the other hand, dangerous,” Noci said.

The shift from the Biden administration perhaps highlights the realization that it would take a great deal of effort and economic pain to separate its economy from that of China.

Figures from the United States Census Bureau showed that the U.S. recorded a trade deficit in goods with China of about $383 billion in 2022. The data from last year showed a record high in trade between the nations and is evidence of the difficulties of separating their economies.

G-7 leaders went further in expressing their concerns about the situation in the East and South China Seas and in supporting a “no change” in the status quo of Taiwan.

“There is no legal basis for China’s expansive maritime claims in the South China Sea, and we oppose China’s militarization activities in the region,” they said.

Speaking to CNBC, Noci said, “we are going beyond a unipolar world” that had the U.S. as its superpower, and entering a bipolar or multipolar world.

British Prime Minister Rishi Sunak said China was the world’s greatest challenge to security and prosperity. The Chinese Embassy in London described this as “malicious slanders in disregard of the facts,” according to Reuters.