China has too much at stake to stand with Russia against the West

  • China has a huge vested interest in global stability which ensures its people’s prosperity. While Beijing clearly needs to keep relations with Moscow on an even keel, it will not risk attracting economic warfare from the West

Here’s the doomsday scenario: first, Russian President Vladimir Putin “reclaims” Ukraine and installs a puppet regime that forces a rebalancing of military power in Europe. Second, Europe’s economies flounder as energy supplies dry up and military budgets rocket.

Third, China backstops Russia with promises to buy its exports to save it from crippling sanctions, then gets sanctions slapped on itself by an increasingly bellicose United States. Fourth, China launches a short, sharp assault on Taiwan, confident that the US will be too tied up elsewhere to intervene.

Lastly, an Armageddon-like world war erupts – even if it doesn’t, the globally integrated economy disintegrates, along with the free and open trade that has built wealth, peace and stability over six decades.

This is all a ridiculous nightmare, I hope. But it is alarming that so many governments have had to take such a scenario seriously. If ever there was a moment in the past half a century when we need cool, calm, considered thought among leaders, this is surely it.

Nowhere is this more true than for China. Some hotheads seem to be willing China on to align with Russia, fully aware of the disaster that could follow. Mischievous rumours that Putin gave Chinese President Xi Jinping warning of the invasion plan and asked for military support have added fuel to the fire.

Mercifully, I think these hotheads are wrong. While the depth of China’s diplomatic dilemma has been made clear by its fence-sitting over the past weeks, and while it is clear that China is too large and too critical to the global economy to sit on the fence for long, it seems clear it is not about to become Putin’s stooge.

Qin Gang, China’s ambassador to the US, provided encouraging clarity in a recent Washington Post article. “Assertions that China knew about, acquiesced to or tacitly supported this war are purely disinformation,” he wrote. “Conflict between Russia and Ukraine does no good for China. Had China known about the imminent crisis, we would have tried our best to prevent it. China is committed to an independent foreign policy of peace.”

Nicolas Veron and Alan Wolff, writing this week for the Brussels-based think tank Bruegel, also poured cold water on hotheads by providing six reasons China has no rational interest in alignment with Russia. Perhaps the most important is China’s huge vested interest in global stability.

Xi’s “social contract” with the Chinese people is firmly based on the delivery of competent government and economic progress. This prioritisation of economic progress has lifted millions of Chinese people out of poverty and transformed China into one of the world’s most prosperous and technologically advanced economies, its largest trading power and biggest manufacturer.

While most of the world struggled through the Covid-19 pandemic, China’s exports have continued to soar. Nick Lardy, China expert at the Washington-based Peterson Institute for International Economics, estimates that China’s trade jumped from around US$4.6 trillion in 2020 to US$6.05 trillion last year – accounting for about 17 per cent of trade worldwide. Up to last September, China also accounted for 19 per cent of global investment, he estimates.

Aligning with a reckless and isolated Putin would jeopardise all this amid rising anxiety over the recessionary and inflationary effects of the pandemic. As Lardy noted, “having a significant portion of the Chinese economy subjected to Western sanctions is a risk that President Xi [ …] is not likely to take”.

Put bluntly, China’s sheer importance gives it a much bigger stake in the status quo, and much more to lose in a global conflict. In contrast, Russia is a much smaller trading power with a total merchandise trade in 2020 of around US$570 billion, according to the World Trade Organization – barely 12 per cent of China’s.

Some hotheads argue that China’s massive energy, commodity and food import needs give it reason to forge a Faustian deal with Putin. What they ignore is that the colossal scale of China’s needs prompts it to prefer stable and diverse sourcing, rather than reliance on a single erratic source.

In focusing on the synergies and long-standing Sino-Russian “friendship”, they ignore the intense historic rivalries. China has long been willing to invest heavily in the development of Russia’s Siberian far east, to get access to timber, coal, iron ore and numerous commodities plentiful in the region.

But this has always been blocked by Moscow, fearful of rising Chinese power in Siberia. Russia is also deeply paranoid that China’s belt and road investments have forged strong relationships with central Asian countries such as Kazakhstan, Tajikistan and Uzbekistan, which Russia regards as within its “imperial” reach.

Sharing a 4,100km border with Russia, China clearly needs to keep relations on an even keel, but have the hotheads no appreciation of how insignificant Russia’s economic relationship with China is, compared with those of others aligned powerfully with Ukraine and appalled by Putin’s invasion?

Apart from this list of strong reasons, there is evidence of Chinese companies withdrawing from Russia. Both the Beijing-led Asian Infrastructure Investment Bank and Shanghai-headquartered New Development Bank have suspended new lending to Russia while Huawei Technologies Co, Oppo and Xiaomi have drastically cut their exports to Russia.

Lardy noted that Geely, which owns Volvo, and Lenovo had done the same. Tik Tok, owned by ByteDance, has suspended Russian services. Fuyao Glass has pulled Russia production back to China.

Xi may have many reasons not to like US President Joe Biden and the economic warfare waged against China over the past six years. But he is unlikely to make things worse.

Author: David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view, SCMP

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