Asia
Ending Western reliance on China requires $23.6 trillion in investment by 2050, study shows
Western efforts to reduce reliance on China across strategic supply chains could cost the US, the eurozone, and the UK more than $23 trillion over the next quarter-century, according to a study highlighting the immense economic challenge confronting Western policymakers.
Economic analysis indicates that European and US authorities and corporations will need to invest an additional $23.6 trillion over the next 25 years to successfully end their dependence on China in critical sectors such as manufacturing and technology.
The consultancy EY-Parthenon calculated that rebuilding infrastructure, research, software, manufacturing, and supply chains currently reliant on China will cost the US $13.7 trillion, the eurozone $9.1 trillion, and the UK $800 billion by 2050.
For the US, the required annual capital expenditure from the government and private sector to decouple from China is estimated at $550 billion. This sum is roughly equivalent to the $600 billion major US technology companies are projected to invest in data centers in 2025. For the EU, EY-Parthenon estimated that the necessary spending would require nearly doubling the bloc’s annual budget.
The scale of investment required to substitute Chinese resources and materials, on which advanced economies are currently dependent, underscores the formidable challenge Western governments face as they attempt to curb Beijing’s dominance in strategic supply chains.
“Localizing supply chains without creating unbearable costs for taxpayers and consumers will be one of the most difficult challenges confronting both companies and governments in the coming years,” said Mats Persson, a former UK Prime Minister’s adviser who is now a partner at EY-Parthenon.
EY-Parthenon analysts wrote that an average collective additional investment of $940 billion annually over 25 years was, in theory, “not insurmountable.” However, this expenditure would need to be made on top of existing investments in energy, technology, defense, and infrastructure. Persson noted that initial annual outlays would start lower but would escalate as the transition expanded.
The vulnerability of European and US economies to Chinese leverage was exposed last year when Beijing introduced export controls on critical rare earth metals in response to US President Donald Trump’s threat to impose a 145% tariff on Chinese imports.
Automotive production lines in both economies ground to a near-standstill before a truce was reached between Beijing and Washington. The disruption accelerated efforts by the US and Europe to de-risk their relations with China, which included an EU plan to stockpile rare earth elements.
According to assessments by the International Energy Agency, China is projected to supply more than 60% of the world’s refined lithium and cobalt—materials vital to the transition to cleaner energy sources—and approximately 80% of battery-grade graphite and rare earth elements until 2035.
Alicia García-Herrero, chief Asia-Pacific economist at the investment bank Natixis, said that Beijing’s tight grip on many critical industrial materials meant the West could not decouple from China in the short term, even with massive investment.
“It is not just a question of how much it will cost,” García-Herrero said. “It is also China’s capacity to intervene to block such decoupling, given its current control over supply in everything from rare earth processing to active pharmaceutical ingredients.”
According to the EY-Parthenon analysis, Chinese-made goods generally benefit from a factory-gate price advantage of between 20% and 100% compared to Western competitors. Consequently, reducing dependence on Chinese manufacturing is expected to drive up prices and increase inflation.
The EY-Parthenon report noted that Europe cutting its reliance on China could raise prices in critical sectors by 1% to 2.5%. Citing an analysis by the European Central Bank, the report warned this could cause inflation rates to remain permanently above the 2% targets set by the European Central Bank and the Bank of England.
According to the report, Western economies seeking a meaningful reduction in China dependence will need to invest heavily in factory and physical infrastructure, as well as workforce training and the automation of production processes.
Given the scale of the challenges, Persson said that “partial decoupling” was a more probable outcome. Under this scenario, companies would need to be selective about where they allocate resources to build resilience against potential bottlenecks controlled by China.
Asia
China and Russia deploy submarines together in “Joint Sea-2026” drills
The joint deployment and first-ever combined visual capturing of Chinese and Russian submarines during a bilateral military exercise marks a major breakthrough in underwater coordination and signals an unprecedented level of mutual strategic trust between the two powers, according to military analysts.
The maritime phase of the joint naval exercise “Joint Sea-2026,” conducted by China and Russia, concluded on Saturday. According to China Bugle, the official media organ of the People’s Liberation Army (PLA) News and Media Center, submarines from both the Chinese and Russian navies were photographed together in the same frame for the first time during the drills.
Speaking to the Global Times, a military affairs expert said the development demonstrates a high level of mutual trust that goes far beyond ordinary bilateral relations.
During the exercises, Chinese and Russian naval units conducted drills covering submarine rescue, strikes on surface targets, air defense, and anti-missile operations. China Bugle reported that both sides deepened mutual trust and further enhanced their joint operational capabilities through highly effective coordination.
The drills employed a flexible planning approach and applied rigorous standards to operational coordination. The joint maneuvers were conducted without predetermined, fixed scenarios; instead, operations were dynamically adapted to real-time battlefield conditions, hydrometeorological factors, and other variable elements.
Participating forces were organized into mixed formations. By utilizing sea, air, and submarine platforms, the two militaries established a multi-domain, integrated combat system.
According to China Bugle, this integrated structure effectively tested both sides’ capabilities in joint reconnaissance and early warning, command coordination, and firepower strikes within complex electromagnetic environments.
During the air defense and anti-missile drills, Chinese and Russian vessels operated in close coordination with a clear division of tasks. Leveraging the distinct strengths of their respective weapon platforms, the forces successfully intercepted incoming targets in the shortest possible time, demonstrating the combined combat capability of the joint Chinese-Russian naval force.
Held regularly since 2012, the “Joint Sea” exercises have become a cornerstone platform for naval cooperation between China and Russia.
According to official statements, both sides deployed elite forces for this iteration of the drills, encompassing surface, underwater, aerial, and support assets. In particular, the participation of submarines and submarine rescue vessels indicates that bilateral naval cooperation continues to expand from surface operations to integrated surface and underwater combat.
Following reports that Chinese and Russian submarines had been captured in the same frame for the first time, Chinese military expert Wang Yunfei told the Global Times on Sunday that the event represents an extraordinary level of mutual trust.
Wang noted that joint submarine operations are exceptionally rare worldwide. By their very nature, submarines operate on the principle of stealth, and their acoustic signatures are guarded by every country as highly classified intelligence.
Pointing out that such vessels are rarely shown in close proximity to one another, Wang said the joint sighting of the two submarines indicates they were operating in close quarters.
Under these conditions, the expert noted, the acoustic signatures of the submarines—including not only their noise levels but also their frequency characteristics—could mutually expose secrets to one another.
Official footage of the exercise revealed that Russia’s improved Kilo-class conventional submarine, the Ufa, participated in the drills, while the Chinese side deployed an improved Type 039B conventional submarine.
According to Wang, when China previously operated Russian-built Kilo-class submarines alongside identical Russian vessels, the implications were different because the acoustic signatures of those platforms were already known to both parties.
However, Wang emphasized that on this occasion, China showcased its domestically developed Type 039B submarine—widely considered state-of-the-art globally—to Russia, reflecting a level of mutual trust that goes beyond standard military exchanges.
Wang also pointed out that the participation of submarines in joint exercises involves communication and data exchange, which serves as another key indicator of high-level mutual trust.
Communication between submarines is highly complex, Wang said, explaining that one method involves raising an antenna above the water’s surface at communication depth. The other method is underwater acoustic communication, where a connection is maintained using specialized equipment—a method that is technically far more challenging.
Regardless of the method used, Wang noted that both sides must share their technical communication characteristics, methods, and tactics with one another.
This level of sharing enables the parties to achieve a high degree of tactical coordination when facing common adversaries, the expert said.
It remains extremely rare for two submarines to participate in joint exercises, share communication data, and coordinate strikes against targets.
Wang said that the ability of China and Russia to achieve this reflects not only the high level of mutual trust between the two sides but also the strong self-confidence of the Chinese military in its own capabilities.
The expert added that this milestone serves as a positive starting point for increasing the depth and intensity of future joint maneuvers.
Following the conclusion of the drills, China Bugle reported that some of the participating forces will conduct joint naval patrols in relevant areas of the Pacific Ocean to continue contributing to regional and international peace and stability.
According to China’s official state news agency, Xinhua, China and Russia launched the “Joint Sea-2026” exercise on July 6 at a military port in Qingdao, located in eastern China’s Shandong province.
A joint command consisting of task forces from both countries’ navies was established to oversee the drills.
Xinhua reported that the exercise would be carried out in three distinct phases: the assembly of forces, port-based planning, and maritime operations.
With the maritime operations phase of the China-Russia “Joint Sea-2026” exercise now concluded, the Chinese Ministry of Defense issued a statement on Sunday.
The ministry stated that both parties will continue to adhere to the principles of openness, transparency, and mutual trust, while further expanding the scope and depth of their joint training.
The ministry added that both nations will make greater contributions to building a maritime community with a shared future and safeguarding global peace and stability.
Asia
China weighs restricting foreign access to advanced AI models and tightening technology controls
China is considering restricting overseas access to its most advanced artificial intelligence models, including designs that have not yet been publicly released.
According to a Reuters report citing three sources familiar with the matter, the government in Beijing is increasing its control mechanisms to protect the domestic AI sector and its proprietary technologies.
Officials from the Chinese Ministry of Commerce have held a series of meetings over the past month with the country’s leading AI developers and technology giants. Represented at these discussions were major corporations including e-commerce platform Alibaba, TikTok owner ByteDance, and information technology firm Z.ai.
The meetings focused on potential restrictions that could be imposed on the distribution of China’s most modern AI models.
Sources said that Beijing plans to increase criminal liabilities for the leak or theft of AI technologies, treating such actions as equivalent to violations of national security law.
Other topics discussed during the meetings included the introduction of additional limitations on the funding of China-based AI startups.
The final framework of the new measures has not yet been established. Sources indicated that the potential restrictions might only affect models developed in the future. The date on which these regulations would take effect remains unknown.
Following the launch of the Chinese-developed DeepSeek R1 model, the country’s AI solutions strengthened their position in the global market by offering low costs and high performance. Industry analysts note that blocking foreign users from accessing these technologies could impact the global AI market and increase costs for companies that rely on Chinese models.
Beijing continues to expand its oversight of the domestic AI industry. According to Reuters, authorities initiated investigations earlier this year into several Chinese AI companies that had relocated their operations abroad. Controls have also been tightened on commercial transactions involving technology, data, and national security.
According to a report by the Financial Times citing internal sources, Beijing is also discussing plans to reduce the number of publications that Chinese scientists submit to foreign academic journals.
The report emphasized that these discussions are driven by growing concerns over technology leaks and a desire to strengthen state control over the dissemination of scientific research results.
In 2024, Chinese academics authored approximately one-third of all publications indexed in the Science Citation Index (SCI) database, which encompasses leading international scientific journals.
Industry experts state that China is transitioning from its previous goal of expanding its international scientific presence to a new phase focused on controlling the usage of technologies developed within its borders. According to these experts, Beijing aims with these moves to both protect its national security and maintain its leverage in the global scientific community.
Asia
China launches submarine missile into Pacific, triggering alarm in Japan, Australia, and New Zealand
China’s military launched a missile into the Pacific Ocean from a nuclear-powered submarine on Monday, triggering expressions of concern and criticism from regional nations including Japan, Australia, and New Zealand.
The nuclear-powered submarine, belonging to the People’s Liberation Army Navy, launched a missile carrying a dummy warhead into international waters in the Pacific at 12:01 p.m. (0401 GMT), the official Xinhua news agency reported.
The agency stated that the missile landed in “designated waters” but did not provide further details regarding the specific location.
Xinhua characterized the launch as a “routine arrangement” within China’s annual military training program, adding that the test was not directed at any specific country or target.
Australian Foreign Minister Penny Wong said that Beijing had notified the Australian government of the planned test, but she nevertheless described the launch as “destabilizing” for the region.
Speaking at a press conference in Suva, the capital of Fiji, Wong argued that the test took place in a context where “China is rapidly building up its military, yet failing to offer the transparency and reassurance regarding its intentions that the region expects.”
The missile test occurred only hours after Australia and Fiji signed a major defense alliance on Monday. The agreement provides that if either party is attacked, the other will come to its assistance.
Beijing and Western powers, led by the US and Australia, have competed for influence in the strategically located island nations for years, with China seeking to expand its economic and security footprint across the South Pacific.
When asked about the defense pact, Chinese Foreign Ministry Spokesperson Mao Ning said China hoped the relevant countries would respect the independence and autonomy of the island states, and refrain from targeting third parties or harming their interests.
Test conducted hours after notification
New Zealand Foreign Minister Winston Peters declared that his country was deeply concerned by the test.
“Despite our long-standing concerns regarding such activities, it appears China conducted the test only hours after notifying us,” Peters said in a written statement.
“New Zealand views this as an unwelcome and concerning development. Like our neighbors in other Pacific nations, we have no interest in China using the South Pacific as a testing ground for missile capabilities,” he added.
The Japanese government announced that it had been notified of the missile launch and had called on China to reconsider the decision.
“We have expressed our serious concern regarding the increasing activities of the Chinese military,” Tokyo said in a statement. Japanese officials also noted that Chinese authorities had notified the Japan Coast Guard on Sunday regarding space debris that could fall within Japan’s exclusive economic zone.
The missile landed outside Japan’s exclusive economic zone, the Kyodo news agency reported on Monday, citing a Japanese government source.
Japanese Chief Cabinet Secretary Minoru Kihara told a press conference that there had been no reports of damage to Japanese aircraft or vessels resulting from the test.
Responding to the criticism from the region, Mao said the launch was conducted “in a safe, compliant, and professional manner from start to finish.”
“We hope the relevant countries do not overinterpret the matter,” Mao said during a press conference in Beijing.
It is rare for China to launch long-range missiles into the sea. China last conducted an intercontinental ballistic missile test in 2024, a launch that demonstrated the country’s growing military capabilities.
The latest test comes at a time when the US and its allies have been increasing their military activities in the region to counter China. In response to these military exercises, China has also been stepping up its own military activities in the area, including joint exercises with Russia.
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