U.S. executive order on China shows it’s learning from Russia mistakes

LONDON — U.S. moves to de-risk from China with a recent investment ban suggest that Western allies could also be learning from national security failings in Russia, in line with analysts.

The White House on Wednesday announced a ban on some U.S. investment in China in sensitive technologies akin to computer chips, in the most recent ratcheting up of Washington’s disassociation from Beijing amid perceived national security risks.

Analysts said the U.S. was making such moves with a watch on rising tensions in Taiwan, on condition that the potential fallout from a conflict between China and Taiwan could be “unimaginable.”

U.S. President Joe Biden said the manager order, which can come into effect next yr, goals to be certain that China’s military doesn’t profit from American technology and funding, particularly in sectors that “counter United States and allied capabilities.”

Such moves have sometimes been known as a “decoupling” of the world’s two largest economies, though the U.S. has preferred the term “de-risking.”

Beijing hit back on the announcement Thursday, with the foreign ministry saying it was “resolutely opposed” to what it dubbed the U.S.’s “blatant economic coercion and technological bullying.” China’s ambassador to Washington has previously warned that Beijing would retaliate against such measures.

“These preemptive ideas about decoupling — taking the manufacturing and the manufacturing facilities from China to India et cetera — that is all done with a view to potential conflicts, in order that when it erupts, as an example in Taiwan, it is not so excruciating to impose some restrictions,” said Olena Yurchenko, advisor on the Economic Security Council of Ukraine. Yurchenko, who spoke to CNBC ahead of the Wednesday announcement, dubbed the size of the risks regarding Taiwan as “unimaginable.”

Taiwan has been governed independently of China because the end of a civil war in 1949, but Beijing views the island as a part of its territory.

The dispute over Taiwan is a world flashpoint, with most within the West considering it a self-governing nation. Beijing, meanwhile, has called for “reunification” with Taiwan, last yr describing its status in a white paper as an “unalterable” a part of China.

Outstanding China hawk Kyle Bass, who said he had consulted military experts, told CNBC Tuesday that he believes Chinese President Xi Jinping could launch an attack on Taiwan as early as next yr. He cited Beijing’s recent ratcheting up its military drills across the Taiwan Strait. CNBC couldn’t independently confirm his assertions.

The Chinese government didn’t immediately reply to CNBC’s request for comment on Bass’ assertions. Nevertheless, it has previously said the difficulty with Taiwan is an internal affair and its military exercises are in response to repeated meetings between Taiwan’s president and U.S. representatives — a red line for Beijing. 

The U.S. has been forthright in its goals to de-risk from China, with the Biden administration ramping up measures over the past several months amid growing global tensions following Russia’s full-scale invasion of Ukraine.

The Economic Security Council of Ukraine’s Yurchenko, whose work closely follows geopolitics and diplomacy, said the timing of the 2 events was no coincidence.

“That is form of a long-term lesson the Western governments attempt to learn from what they’ve seen in Russia,” she said.

Western allies have slapped unprecedented sanctions on Russia in response to its ongoing war. Still, CNBC evaluation shows that Moscow is in a position to circumvent sanctions by counting on intermediary countries to assist it import Western goods, including advanced technologies for its military equipment.

The U.K. on Tuesday announced recent sanctions on a spread of foreign businesses accused of supplying Russian forces with weapons and components to be used against Ukraine.

This follows the European Union’s introduction in June of a recent package of sanctions, which incorporates an anti-circumvention tool to limit the “sale, supply, transfer or export” of specified sanctioned goods and technology to certain third countries acting as intermediaries for Russia.

Asked last month whether the sanctions might send a message of potential repercussions from any possible future conflicts, including between China and Taiwan, European Commission spokesperson Daniel Ferrie told CNBC he couldn’t comment or speculate on the long run.

Because the world’s second-largest economy, China’s contributions to — and its role inside — diplomacy and global markets are well known as far exceeding those of Russia, prompting heightened caution from the West.

The European Union has up to now been more ambivalent than the U.S. in its approach to China. The British government, for its part, said Wednesday that it was considering whether to follow the U.S. because it continues to evaluate “potential national security risks attached to some investments.”

Nevertheless, Bass said that Western allies’ current approach of a “slow decoupling” could possibly be misguided, leaving governments to “improvise” quickly if a conflict involving Taiwan broke out.

“We should be more firm. I’m not saying immediately decouple and walk away, although I feel that is what is going to occur,” he added.

Chatting with CNBC’s “Street Signs” Tuesday, before Biden signed the manager order, Bass, who’s founder and chief investment officer at Hayman Capital Management, supported the prospect of latest guidelines around U.S. investment in Chinese tech.

“We must always have very strict outbound restrictions on surveillance firms, on genomics firms, on any firms that cope with Chinese military constructing their aircraft carriers, their war machines, their ships, their tanks,” he said.