Analysis by Péter Goreczky
US allies in the Indo-Pacific region, India, Japan and Australia are all making considerable efforts to reduce economic dependence on China. In the case of India, border clashes boost the political motivations of the trend, while in the economic sense the country’s trade deficit, the import of the pharmaceutical and automotive industries, and the determinative role of Chinese capital in the tech sector result in a unique dependency. As for Japanese companies, China remains a key manufacturing base and market, and therefore Tokyo is interested in the diversification of supply chains and manufacturing locations instead of downsizing the relationship completely. Regarding Australia, the overwhelming weight of China in the country’s export is considered a major exposure; however, in the case of iron ore, which is a key item in bilateral trade, the dependency also exists on China’s side. Although for all three countries it is a reasonable goal to enhance the resilience of supply chains and diversify economic relations, the “China plus one” strategy seems to be more beneficial for the future than cutting off economic relations with China across the board.
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