China watches warily as Ukraine makes U.S., EU and Japan strengthen their alliance

Chinese President Xi Jinping and Russian President Vladimir Putin attend a meeting during the BRICS (Brazil, Russia, India, China, and South Africa) summit in Brasilia on November 14, 2019.

Pavel Golovkin | Afp | Getty Images

BEIJING — Since taking office last year, President Joe Biden has pursued a strategy of restoring relationships with allies to put pressure on Beijing.

The Russian invasion of Ukraine nearly two weeks ago showed what those allies can do.

For China, the speed and severity with which the U.S. and its allies sanctioned Russia is a warning sign that could guide future economic and foreign policy.

Chinese officials have increased efforts to buttress their country’s self-reliance since President Donald Trump sanctioned telecommunications giant Huawei and slapped tariffs on billions of dollars’ worth of Chinese goods.

But Trump did all that singlehandedly — while simultaneously damaging ties with Europe and provoking uncertainty among U.S. allies in Asia.

The response to Ukraine has been anything but a go-it-alone move by the United States.

“Given the success that the U.S. has had in coordinating the financial sanctions and export controls not just with Europe but also with Japan, a key player in tech value chains — this is extremely alarming for China,” said Reva Goujon, senior manager for the China corporate advisory team at Rhodium Group.

“This is a very multilateral moment,” Goujon said. “At a high level, you would think China would benefit from [the U.S.] having a big distraction in Europe, but actually [this] only accentuates those policy debates over critical exposure and vulnerabilities to Chinese supply chains.”

From Germany to Japan, many countries have joined the U.S. in freezing the assets of Russian oligarchs, restricting access of Russia’s biggest banks to the global financial system, and cutting off Russia from critical technology.

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Because Western trade with China is far greater than it is with Russia, a full trade war with China “would be quite costly [for the West] and in nobody’s interest,” said Alexander-Nikolai Sandkamp, a fellow at the German-based Kiel Institute for the World Economy.

“The West would welcome it if China took a stand against Russia and joined more actively the Western protests,” he said. “Now that China is remaining relatively neutral, that’s probably the best that we can expect.”

The Ukraine war and sanctions will likely lower global gross domestic product by only 0.2% this year, with a bigger impact in Europe, according to Tommy Wu, a lead economist at Oxford Economics.

China, Russia and SWIFT

Global finance provides a clear example of the limits on China’s ability to support Russia. Just days after the war began, the U.S. and EU pledged to remove some Russian banks from SWIFT, the standard interbank messaging system for financial institutions.

“If all Russian institutions are banned from joining the SWIFT network, then I think the level of political pressure is very different from what it is now,” said ­­Zhu Ning, professor of finance and deputy dean at the Shanghai Advanced Institute of Finance.

“Then any attempt to avoid punishment” would be considered “complicit,” he said. “Quite tricky for Chinese financial institutions.”

The Beijing-based Asian Infrastructure Investment Bank announced last week it was suspending activities related to Russia and Belarus.

Short-lasting Western unity?

Regardless, the Biden administration is trying hard to unify the world’s democracies — and since the Ukraine war started, more of them seem to be listening.

Last week, the leaders of the Quad — Australia, India, Japan and the U.S. — held a call about the conflict and to reaffirm their commitment to work together as a group. However, India has yet to condemn Russia’s invasion of Ukraine.

Strengthening the Quad is part of Biden’s strategy “to restore American leadership in the Indo-Pacific,” as announced in a fact sheet published in February. A U.S. official told reporters in a briefing last month there was no intention to engage Beijing on the economic aspects of building up the Indo-Pacific.  

When asked Monday about Biden’s Indo-Pacific strategy, Chinese Foreign Minister Wang claimed the U.S. goal is to create an Indo-Pacific version of NATO. “China wants all parties to join us in doing the right thing,” he said, via an official translator. “Together we will reject attempts to create small, divisive circles within the Pacific.”

Wang said during the annual press briefing that China opposes bloc politics. He portrayed Beijing’s ties with Europe, India, Southeast Asia, Latin America, Africa and other countries and regions as separate from China’s other foreign relations.

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