The growing tension between economic cooperation and security concerns took center stage at the World Economic Forum yesterday as China’s Premier Li Qiang delivered an unmistakable message to global leaders. Speaking from the snowy Swiss resort of Davos, Li warned against transforming trade relationships into political or security battlegrounds—a thinly veiled reference to escalating U.S.-China tensions.
“Economic and trade issues should not be politicized,” Li told the audience of business executives and policymakers. “Converting economic cooperation into questions of security will only fragment the global economy and undermine the foundations of international trade.“
Li’s comments come at a pivotal moment. The United States and European Union have increasingly restricted technology exports to China, citing national security concerns. Meanwhile, China’s own economic challenges—from a property market downturn to youth unemployment—have raised questions about its growth trajectory.
As I watched the premier’s address, his message seemed calibrated to present China as a defender of globalization against rising protectionist tendencies. The irony wasn’t lost on many attendees I spoke with afterward. China itself maintains significant barriers to foreign companies and has employed economic coercion against countries like Australia when political disputes arise.
The World Bank recently downgraded China’s growth forecast to 4.5% for 2025, down from the government’s target of “around 5%.” This slowdown reflects deeper structural issues within China’s economy, according to Goldman Sachs analyst Patricia Cohen, who told me, “China is facing a fundamental transition away from property-driven growth toward a more consumption-based model.“
Premier Li acknowledged these challenges indirectly, emphasizing China’s commitment to reform. “We will continue opening our markets and creating a level playing field for foreign businesses,” he said. Yet many Western companies operating in China report increasing regulatory hurdles and informal pressures.
Data from the U.S. Chamber of Commerce shows American direct investment in China fell by 29% in 2024 compared to pre-pandemic levels. European investments have seen similar declines, according to Eurostat figures released last month.
The timing of Li’s remarks is particularly significant as the new U.S. administration prepares to review its approach to China. Treasury Secretary Janet Yellen has signaled a desire for “healthy economic competition” while maintaining national security guardrails. The EU, meanwhile, has just completed its own economic security review that identifies critical dependencies on Chinese manufacturing.
“We’re seeing a fundamental reorganization of global supply chains,” notes Martin Wolf, chief economics commentator at the Financial Times. “Companies are pursuing ‘China plus one’ strategies to reduce concentration risk, even as they maintain a presence in the Chinese market.”
Chinese officials have responded by accelerating efforts to achieve self-reliance in key technologies. The country’s latest five-year plan allocates over $1.2 trillion toward developing advanced semiconductors, artificial intelligence, and clean energy technologies.
The fundamental question hanging over Davos is whether the world’s two largest economies can find a sustainable equilibrium. The International Monetary Fund warns that full economic decoupling could reduce global GDP by up to 3% over the next decade.
Former U.S. Treasury Secretary Lawrence Summers, whom I interviewed on the sidelines of the forum, put it bluntly: “We’re navigating between the Scylla of naive economic integration and the Charybdis of destructive confrontation. Finding the middle path is the central economic challenge of our time.“
For businesses, this uncertainty translates into complex strategic decisions. A recent McKinsey survey found that 78% of multinational executives are revising their China strategies, with most pursuing a “selective decoupling” approach—maintaining consumer market presence while diversifying supply chains.
Premier Li’s Davos appearance highlights China’s concern about this shifting landscape. By positioning China as a champion of globalization, Li aims to create distance between Beijing and the fragmentation of the global economy.
Yet as one European diplomat told me after the speech, “The call to separate economics from politics rings hollow when China itself has been one of the most effective practitioners of geoeconomics.”
As snow fell outside the Congress Centre in Davos, the chill in U.S.-China relations was equally palpable. While business leaders continue seeking opportunities in both markets, the era of simple economic integration is clearly over. The challenge now is managing competition without triggering destructive confrontation.
For investors and companies navigating this environment, adaptability will be essential. The global economy isn’t decoupling so much as reconfiguring into a more complex, regionally oriented system. Those who can navigate these shifting currents—understanding both the economic and geopolitical dimensions—will be best positioned for the challenging years ahead.
