China and the war in Ukraine: much to lose and little to gain
Jorge Costa Oliveira
The war spurred by the invasion of Ukraine translates to a flagrant violation of international law, which is the foundation of one of the pillars of China’s foreign policy – the Five Principles of Peaceful Coexistence, which include mutual respect for sovereignty and territorial integrity, non-aggression, and non-interference in other countries’ internal affairs. At the UN, the vast majority of countries condemned Russia and underlined the risk that the war in Ukraine poses to world peace. China abstained. Expressing concerns about the expansion of NATO and Russia’s border security, China claims to be neutral. The main reason is rooted in a desire to catalyze change, leading to a world where the US is no longer the preeminent superpower. And the more the U.S. focuses on Europe, the less time it will devote to the Far East, thus reducing the pressure to halt China’s rise. There is also the temptation to take advantage of the fragile economic situation affecting its “main strategic partner” by bringing Chinese capital into relevant Russian oil, gas, copper, nickel, aluminum and other companies.
The war in Ukraine is hampering China economically. China imports more oil than any other country, and the conflict in Ukraine has pushed prices to the highest levels seen since 2008. And it needs energy, metals and minerals, as well as agricultural products for its economy. Both Russia and Ukraine are major suppliers of wheat and other food products; the UN has warned that, depending on its duration, the war could raise food prices between 8% and 20% this year. All these commodities have become more expensive with the war.
In terms of international trade, in 2021, China’s trade reached $756 billion with the US and $828 billion with the EU, and only $147 billion with Russia. Globalization has been beneficial to China’s economic development. Notwithstanding the growth of its domestic market, the Chinese economy remains heavily dependent upon export markets. In addition, American and European companies continue to be important sources of investment, while also providing China access to innovation and technology, which are of vital importance. The disruption of this war on the functioning of the Eurasian BRI land corridor will not be small. Furthermore, if European public opinion perceives China as an ally or protector of Russia, the consequences for Chinese companies and Chinese products in European markets could be severe.
This war has confirmed that the EU is one of the essential hubs of the world. Its economic and financial relevance is clear. Its soft power is massive, its attractiveness as a model of society is enormous. Increased military spending in the coming years will turn it into a military superpower. The sanctions now imposed on Russia show that, on a financial level, the world is far from being multipolar, and some Chinese banks and state-owned companies have well understood the underlying risks.
