War in Ukraine | China saves goat and cabbage

The war in Ukraine is forcing China to spare its Russian friend and its Western client, lest it split globalization into two blocks.

Economic sanctions are severing one by one the ties between Russia and the West. The cost is high for Europe, but disastrous for Russia. However, no turning back is possible as long as Vladimir Putin is in power, as long as the regime remains in place.

On the sidelines of the Beijing Olympics, Xi Jinping and Vladimir Putin swore to each other a “boundless friendship”, based on a common vision of a world threatened by the United States. Unfortunately for them, the “special military operation” in Ukraine did not meet with the hoped-for success.

Rather, China observes with horror the proliferation of sanctions, including the freezing of Russian reserves – which has the largest – as well as the rediscovered unity between the United States and Europe. What cool his desire to invade Taiwan.

“Instead of being a net beneficiary of the conflict between Russia and the West, China is dangerously close to being collateral damage,” said Chinese-American political scientist Minxin Pei.

The Americans sank FinancialTimes information that the Russians have asked China to replenish its destroyed arsenal. President Biden has warned his Chinese counterpart of the consequences of such support.

China denies everything. We understand it. China’s trade with Russia was only 19% of its trade with the European Union and 18% of that with the United States last year. If the chief financial officer of Huawei was arrested in Vancouver at the request of the Americans, it is because the latter accused the Chinese equipment manufacturer of having circumvented the sanctions with Iran. The Chinese don’t want to play in this movie again.

That said, China will be happy to buy at a discount the Russian oil that nobody wants and the gas that Europe wants to wean itself off. Although, for gas, it will be necessary to connect the western and eastern parts of the Russian network and to build a gas pipeline through Mongolia.

Even if China officially respects the sanctions imposed on Russia, it could cheat, as it does on the sly with North Korea. But the game is risky, because she herself has often tasted American sanctions.

A troublesome friend

Xi would have done without the embarrassing assault of his pal Putin, as he faces serious domestic issues that tarnish his image ahead of the 20th^and Congress of the Chinese Communist Party, which must sanction its third historic term next fall.

Although the coronavirus originated in Wuhan, China quickly brought the pandemic under control with drastic measures. But two years later, its zero COVID-19 policy is forcing new lockdowns to protect its weakly immune population from Chinese vaccines from variants. In Hong Kong, deaths are on the rise.

Heavy rains herald worst wheat harvests, just as grain prices skyrocket following Ukraine’s export freeze, bad luck for a major food importer.

The government tries to control the huge real estate bubble without causing a financial crisis, by restructuring Evergrande’s debt. He also tightened the screws on his Big Techs, whose shares have fallen so much that he is now promising “market-friendly policies”.

In short, now is not the time to risk a trade war.

According to political scientist Ian Bremmer, “the greatest danger of the past month is that the United States and China will ‘decouple’ – a decisive fragmentation of the world order and the end of the current era of globalization”, a possible scenario, but unlikely. On the other hand, the protagonists “will surely conclude that they must protect themselves from an economic war in the future”.

According to Adam S. Posen, president of the Peterson Institute for International Economics, “it is likely that the economy will separate into blocs – one oriented around China and one around the United States, with the European Union rather but not totally in the second camp – each trying to protect themselves and lessen the influence of the other”.

This scenario would compound the erosion of recent years, where protectionism on both sides has led to the selective decoupling of industries and technologies like telecommunications, microprocessors and social networks.

However, the reduction in trade with China also follows a logic of healthy diversification of supplies to increase their resilience to pandemics and other disasters. Or, to reduce greenhouse gas emissions by bringing production closer to consumption.

Since joining the World Trade Organization 20 years ago, China has contributed to an era of low inflation. The redeployment of production chains within regional free trade areas will cost consumers more by reducing competition to the benefit of often less efficient and innovative industries.

National pride spurred rivalry. The size of the Chinese economy is two-thirds of US GDP (and 10 times that of Russia), when calculated at the current exchange rate. But China slightly outperforms the United States if measured more accurately in purchasing power parity. The Chinese want the respect that the great power they have become deserves, but the Americans are not ready to share their hegemony.

The hardening of the dictatorship and the heavy hand of the Chinese State in the economy amply justify increased caution in our relations with this country, a friend of Russia and which presents itself in Asia and Africa as an alternative model of growth and of stability.

China is deeply embedded in the global economy and we need its collaboration to limit global warming. An all-out trade war would be catastrophic. The standard of living would drop everywhere and the risk of war would simply increase. The Russian example, however, teaches the wisdom to reduce our dependence in sensitive sectors.