As G7 Blasts China's 'Coercion,' Micron Falls as First Victim

China was a major focus of the final statement by the Group of Seven nations, which took a surprisingly strident tone in their criticism of the country's "economic coercion."

China was mentioned 20 times in the final communiqué coming out of this weekend's G7 Hiroshima Summit in Japan. While the seven developed nations call on China to "engage" with them and say they "stand prepared to build constructive and stable relations" with the world's second-largest economy, most of the points were critical of China's expansionist, high-pressure tactics, particularly in Asia.

"There is no legal basis for China's expansive maritime claims in the South China Sea, and we oppose China's militarization activities in the region," the summit's final statement says of China's island building off its shores. The summit participants also "call on China to press Russia to stop its military aggression, and immediately, completely and unconditionally withdraw its troops from Ukraine."

China's response has been furious. The state-run Global Times newspaper, often used to push Beijing's foreign-policy stance, slams the "harshly toned" communiqué, and insists that the G7 has descended into "an echo chamber of US' talking points."

Although U.S. President Joe Biden left the Japan summit early to attend to domestic party politics, I'm sure he would view the outcome as a general success. Whereas his predecessor Donald Trump alienated other world leaders, who joked about him behind his back, Biden has been reasonably successful in corralling major democracies to form a united front in the face of rising despotic and autocratic behavior in countries such as China and Russia. At this summit, for instance, British Prime Minister Rishi Sunak said that China poses the single biggest challenge to global security and prosperity.

The strategy has side effects. China on Sunday night said that Micron Technology (MU) has failed a national-security review due to what the Cyberspace Administration of China calls "severe cybersecurity problems." The Boise-based company will therefore be blocked from selling its China-made chips to companies involved in critical-information infrastructure, a large part of its market.

Micron's shares are trading lower in early action Monday. They sold off 9.2% when word of the investigation broke. China accounts for around 15% of Micron's sales, mostly from chips produced at its Xian semiconductor factory. It has been looking to shift production to the United States as well as to India.

The European Union participates in the G7 as an affiliate member. And it is European nations that had undercut the tough stance on China taken by the United States, with Germany and France both keen to sustain an important market for high-ticket products such as cars as well as a production center.

To get the G7 countries -- Canada, France, Germany, Italy, Japan, the United Kingdom and the United States -- to sign off alongside the European Union on this statement is therefore quite a success. China undermined a prior E.U. trade deal championed by then-German Chancellor Angela Merkel by leveling sanctions on E.U. politicians, and this weekend's proceedings mean developed democracies now present a surprisingly united front on several key issues.

The new wording championed by the European Union calls for "de-risking" exposure to China rather than any attempt at "decoupling."

I was on the Money Talk podcast with Peter Lewis Monday morning discussing what the difference between the two entails, as well as the broader outcome of the talks. If you're interested in that Hong Kong take on business news, you can find the podcast here and today's edition here.

For the first time, the G7 discussed the rise of Artificial Intelligence, with the grouping agreeing to task ministers with establishing the "Hiroshima AI process" via a working group that will form by the end of the year. The G7 working group will cooperate with the Organisation for Economic Co-operation and Development grouping of 38 nations as well as the Global Partnership on Artificial Intelligence, which now has 29 member states.

These are early days for the talks on AI. But they're starting on a positive footing with an eye on ensuring, from the G7's point of view, that AI develops according to principles surrounding "fairness, accountability, transparency, safety, protection from online harassment, hate and abuse and respect for privacy and human rights, fundamental freedoms and the protection of personal data."

While it's those kind of ground rules that an entity such as the G7 could and should be establishing, the G7 developed nations have so far been supremely unsuccessful in tackling new-tech issues such as cybersecurity and the use of cyberweapons. At least the G7 now has a separate grouping of "Digital and Tech" ministers. Whether they can lay the rules of engagement on topics as tricky and complex as AI and virtual worlds remains to be seen.

The Hiroshima meeting was more specific in outlining a whole host of problems. Besides China, the summit also presented concerns about: North Korea; Myanmar; Afghanistan; Iran; Israel and Palestine; Syria; Yemen; Sudan; and the rise of the Russian mercenary Wagner Group in Africa in particular.

But it was China that came in for the most direct criticism. The G7 leaders agreed to address China's "malign practices" on the business front such as illegal technology transfer and data disclosure. It will push for action on "non-market policies and practices" such as subsidies to state-owned companies that the G7 notes "distort the global economy."

The Biden administration is attempting to build bridges back with Beijing, requesting a series of ministerial meetings to a degree of success. China in return is calling for the rolling back of sanctions on its officials and tariffs on its trade. Meantime, more casualties like Micron are likely, meaning "de-risking" on China couldn't be more vital.