China’s regime is stepping into the economic breach for Moscow. While the rest of the world sacrifices by rapidly increasing sanctions on Russia for its bloody invasion of Ukraine, Beijing works quietly behind the scenes to ensure that Russia increases exports to China, and that Chinese companies keep doing business in Moscow’s empire.
This profits the Chinese Communist Party (CCP) with the blood of Ukrainian patriots. Xi Jinping is at least partially at fault as he apparently refused to discourage Vladimir Putin from the invasion in advance. And given the lack of Western action against China and Russia’s depredations, why would he?
A military conflict between Russia and the West only weakens China’s adversaries in America and Europe. Xi’s promise of a “no limits” friendship with Russia just before the invasion enabled Putin’s disastrous military conflict, which will open a power vacuum globally for Beijing.
Perhaps in exchange, during the Winter Olympics, Xi agreed to a 30-year contract for Russian export of gas to China, denominated in euros to mitigate the risk of dollar sanctions.
The South China Morning Post reported on Feb. 28 that China’s Didi Global tried to close its ride-hailing business in Russia after the invasion, most likely because it already operated at a loss. But apparently, the CCP pressured the company and Didi reversed its decision.
As Putin puts his nuclear forces on alert, Beijing continues to refuse to denounce him for the invasion, despite numerous public demands, including one on Feb. 28 from the White House, that it get off the sidelines.
Actually, Beijing is the quarterback.
While the Bank of China and Industrial and Commercial Bank of China reportedly restricted financing for Russian commodities after the invasion, analysts believe that China’s participation in the West’s financial sanctions only abide by the letter of the law, not its spirit.
SWIFT Sanctions Should Be Extended to China
Beijing knows the risk of secondary sanctions, which it wants to avoid given the West’s current dominance of international financial flows through the SWIFT and CHIPS systems, which communicate and clear fund transfers. SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. CHIPS stands for the Clearing House Interbank Payments System.
These systems give the United States and allies unprecedented power to surveil and limit transborder financial flows. China knows this and is working to sanction-proof its economy by creating its own similar global systems based on the e-CNY, or digital yuan, and CIPS, or Cross-Border Interbank Payment System. CIPS actually uses the SWIFT system for communications.
If China succeeds in getting its alternative system into widespread use, and protects its physical and cyber functions, it will be hard to deter Beijing from a Taiwan invasion through the threat of economic sanctions.
While some argue that SWIFT and CHIPS sanctions should not be used against Russia and China because it will quicken the growth of the e-CNY and CIPS, this is false. China and Russia already know the risk of SWIFT and CHIPS to their unmitigated authoritarianism, and are working to proliferate their digital alternatives, which are ready and waiting in their embryonic forms. The more time they have to grow, the harder it will be to stop them.
Using SWIFT sanctions against both China and Russia now will nip e-CNY and CIPS in the bud.
China’s Burgeoning Trade With Russia and the World Enables Aggression
The Ukraine conflict is further strengthening Beijing’s economic centrality, as Russia is forced to utilize China for its international payments, giving Chinese bankers a chance to charge a commission—of perhaps as much as 10 percent if past China-Russia energy contracts, when Russia came under sanction for Crimea, are any guide. Furthermore, Beijing is likely to be in an excellent position as a near-monopsonist of Russian energy and grains, to push prices down through hard bargaining.
China holds $3.2 trillion in foreign exchange, more than any other country in the world. The dollar dominates its holdings. In January, it sold off $28 billion of this, perhaps in part foreseeing Russia’s invasion and the inflationary effect it might have on the world’s hard currencies.
To further promote its own currency as a replacement for the dollar, Beijing is proliferating hundreds of billions of dollars worth of yuan currency swaps around the world, which by empowering China, empowers Russia and decreases the ability of the West to sanction either country economically for future territorial aggression.
In November, for example, Britain renewed its sterling-renminbi currency swap of ¥350 billion for five years. Such swaps put U.S. and allied economies at long-term risk, and could further enable Russian and Chinese aggression against Sweden, Finland, and Taiwan, for example, all of which have been threatened in one way or another by the China-Russia axis.
As noted by economist Gary Ng in a comment to Al Jazeera, “With China’s support, the pressure on Russia will definitely be less, especially for financial linkages. This is especially true as Russia is isolated and China is the only country with meaningful economic size that can offer help.”
Ng said that “The real tricky moment will come if the US expands the scope and enforces secondary sanctions, which will become a tug-of-war between China’s support for Russia versus whether the West is willing to pressure or put secondary sanctions on China given its large role in global trade.”
Expand Sanctions on China If It Refuses to Sanction Russia
The focus of the West’s economic sanctions solely on Russia is forcing Moscow to cleave ever closer to Beijing. It is a win for China, and it shouldn’t be, as Beijing likely encouraged the invasion in the first place, and certainly abetted it by sharing U.S. intelligence with Putin in advance.
Economic sanctions for the Ukraine invasion should be against both China and Russia, which would incentivize Beijing to influence Moscow to pull out of its occupation.
Secondary sanctions are absolutely necessary to force China, as the dominant partner in the China-Russia axis, to immediately terminate the Ukraine invasion. Beijing has the power to stop the bloodshed. America and allies have the power to force China to do so.
Last week, President Joe Biden said “Putin will be a pariah on the international stage. Any nation that countenances Russia’s naked aggression against Ukraine will be stained by association.”
The same should be true for China. Any nation that countenances the CCP’s support for naked aggression against Ukraine will be stained by association.
The Biden administration must put its money where its mouth is. Unless Beijing imposes economic sanctions on Moscow equal to those from the West, let’s impose the same sanctions on China.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.