WHEN the first Trump administration pushed for decoupling from China, it was framed as a geopolitical warning shot. Decoupling was meant to be a chokehold – a way to cut China off from capital, consumers, and core technologies. However, Beijing did not panic, it treated the move as a strategic signal. Rather than resist, China began quietly reconfiguring its global economic footprint.
Washington thought it was cornering China. US President Donald Trump thought he held the cards, controlled the chips and set the rules. But he missed one inconvenient truth: Most of those cards were printed, packed, and shipped from factories in China.
No grand speeches. No drama. Just deliberate moves: Diversifying supply chains, investing abroad, and pushing local tech to close the gap. While American legislators staged hearings, Chinese firms inked deals. While one side debated restrictions, the other redrew its map.
The result? A calibrated diversification of supply chains, not as an act of retreat, but of repositioning.
Supply chains with Chinese characteristics
Over the past five years, Chinese firms have accelerated investments across South-east Asia, particularly in Vietnam, Indonesia, and Malaysia. These moves weren’t just about evading tariffs; they reflected something deeper – the private sector’s instinct to escape the involution of domestic competition.
Rather than grind through China’s crowded and laser-thin margin markets where capital quickly pile into the same trends, many entrepreneurs sought arbitrage abroad. Lower labour costs, less stiff competition and higher margins. In other words: less involution, more unfair advantage (over the local players in the overseas markets).
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But this wasn’t a solo act. Beijing provided the scaffolding – through bilateral free trade agreements, infrastructure lending and sometimes diplomatic cover. It’s market-driven, but state-supported. A relay race between private initiative and public policy.
The numbers are telling. China’s foreign direct investment into Asean nearly tripled, from around US$9 billion in 2016 to over US$25 billion in 2023. Bilateral trade with Asean grew from US$486 billion to nearly US$700 billion over the same period.
And critically, much of this new value chain – from intellectual property (IP) to logistics to upstream components – remains under Chinese control. What’s emerging is not just offshoring, it is a China-centric supply chain, just not physically in China.
Washington turns inward, Beijing looks outward
While China was expanding outward, the US focused inward. Rather than competing through innovation or strengthening ties, Washington’s toolkit leaned heavily on bans and restrictions – cue TikTok, Huawei, WeChat, DJI. Legislative energy went into hearings and symbolic gestures.
Meanwhile, Chinese companies opened factories, expanded exports, and deepened market ties. Firms like Midea acquired global assets such as Germany’s robotics maker KUKA and Spanish appliance manufacturer Teka Group. BYD set up electric vehicle (EV) plants in Hungary and Brazil, while Wuling manufactured their mini EVs in Indonesia.
Consumer names such as Mixue, Luckin Coffee and Chagee have also become household names across South-east Asia in recent years. Industrial giants such as the likes of CATL, Trina Solar, and Sungrow now dominate global energy supply chains.
Technological independence under pressure
Despite export bans and semiconductor restrictions, China has made visible progress in core technologies. Domestic players have achieved 7nanometre (nm) chip production and are pushing into DUV (deep ultraviolet) and potentially EUV (extreme ultraviolet) lithography. AI chips are now a top priority for firms like Huawei and SMIC.
In aviation, Comac’s C919 took flight, further reducing dependency on Airbus and Boeing.
In rare earths, China has not only consolidated upstream and midstream operations but also introduced tighter controls and oversight. This has significantly strengthened Beijing’s ability to enforce export restrictions and wield rare earths as a strategic bargaining chip in ongoing trade negotiations.
Early signs of strategic payoff
Recent trade data shows that China’s preparations since Trump’s first term are bearing fruit. In May 2025, despite a sharp 35 per cent drop in exports to the US, overall exports rose 4.8 per cent year on year. This plunge in exports to the US was somewhat cushioned by strong performance in Asean (15 per cent), the European Union (12 per cent), and Africa (33 per cent). Germany and Vietnam both saw a 22 per cent jump in imports from China.
Over the past month, the US now accounts for just 10 per cent of China’s total exports. From being China’s largest trading partner, it is gradually becoming just one of many customers and, arguably, not a very reliable one.
The decoupling irony
The more ironical part of all this is that by seeking to isolate China, the US may have isolated itself. Supply chains rerouted. Markets matured. Chinese firms globalised. The geopolitical chessboard shifted, without much fanfare, but with deliberate execution.
For foreign investors and policymakers, the lesson is clear. While one side drew lines, the other built bridges. One end of the world conducted a bi-partisan witch-hunt while the other silently reinvent themselves. And in doing so, China has turned decoupling from a defensive stance into a strategic advantage.
The ship hasn’t just sailed – it’s already halfway to its next destination.
The writer, a seasoned economist, adviser and entrepreneur, is an affiliate lecturer at Singapore Management University
