By Michael Cottakis, 89 Initiative Director
China’s looming choice
As Putin’s war in Ukraine gets increasingly bogged down, it is now widely assumed that Russia has requested Chinese military aid. Should Xi Jinping agree to this, China may soon be entering a proxy war against the western alliance. Under such circumstances, the allies would be faced with a worrisome dilemma: whether to impose sanctions on China. But it is Xi who faces, perhaps, the even harder choice.
Sanctions on Chinese goods and services would be painful for the west – more painful than those it has imposed on Russia. China is a considerably larger entity and one more integrated in global supply chains. Sanctioning China would lead, quite possibly, to a ‘negative supply shock’ in which western economies experience major shortages in goods, followed by rampant inflation.
For China, the impact would be similarly profound. For decades economic growth has been fuelled by integration with the US and Europe. Western consumers, paying higher prices for Chinese products, have helped to sustain the stellar expansion of Chinese commerce and capital. Constraints on trade could swiftly knock China out of its stride, while the exposure of China’s sovereign wealth, a high proportion of which is held in foreign reserves, poses significant concerns. If these were frozen, Chinese investment and industrial development would be constrained.
But China’s conundrum runs deeper. Alignment with Russia could lead to increasing isolation and an end to the globalised system on which it has grown fat. Should this transpire, it could pivot to friendlier, more proximate markets, finding new ‘equilibrium’ as a regional trading power. India and Russia are natural allies, providing large markets for Chinese exporters to tap.
Yet there remain formidable regional opponents. Japan, South Korea and other the advanced Asian economies, long aligned with the US, have deep-seated concerns about Chinese expansion. In any economic standoff, these would likely join the western bloc, leaving China isolated in a sea of Euro-Pacific antagonists. Isolation would naturally force a rethink of any global ambitions. The One Belt One Road Initiative would be threatened, its real estate frenzy slowed, and attempts to supersede US technology put on indefinite hold.
For years, Beijing assumed that time was on its side. The goal of a Chinese world order underpinned by global economic dominance required no jagged interventionism, or resort to military force. Instead it could be achieved by a strategy of creeping commercial expansion, controlling infrastructure, energy, technology, and human capital around the world. China had not anticipated being drawn, so early, into a military conflict.
In Ukraine, its best case scenario was a quick Russian victory. This outcome would have validated the type of authoritarian expansionism China privately favours and laid the precedent for a future attack on Taiwan. Importantly, it would not have required Xi to back Putin openly, thus protecting China’s numerous western ties.
With Russia bogged down and the prospects increasing for a long European conflict, the pressure on China from the Kremlin is growing. Eventually, Xi will have to make a choice between support for a Putinist ideology with which he sympathises, and the preservation of his western relationships, ones which will be indispensible in allowing China to achieve economic dominance and impose its own authoritarian world view.
Three weeks into Putin’s war, China faces an existential choice. Will it back Putin with military aid and enter the global field of belligerents? Or will it decide that doing so weakens its own long-term objectives? For Xi, the prospect of isolation will doubtless be concerning. History teaches us that an isolated China is a weaker China, and Xi will know that well. Supplying military aid to Putin will leave him with few friends around the world, and a smaller economic orbit. Having witnessed the strength of sanctions against his Russian ally, it is a prospect he will not view flippantly.