China and Russia have long had a common interest in undermining the US-led global order, in our view. Russia’s war against Ukraine has added to the tensions surrounding China’s already fragile relationship with the West. Many investors are wondering how China will manage these strategic relationships as the war continues. Below, I share my views on China’s geopolitical balancing act through the lens of President Xi Jinping’s agenda.
1) Where does China stand on Russia’s war with Ukraine?
Uncomfortably in the middle. So far, Beijing has not condemned the invasion of Ukraine or joined the West in imposing financial sanctions on Russia. At the same time, it has refrained from extending unconditional support for Russian president Vladimir Putin. I believe China has essentially three options here:
- Turn its back on Russia—strategic partner with common interests
- Turn its back on the West and risk economic damage through secondary sanctions and other punitive measures
- Sit on the fence for as long as possible
I think China is likely to stick with the third option. Beijing has insisted that its relationship with Moscow is “rock solid” because it does not want to alienate Russia. I believe that will remain true as long as China can preserve the relationship without risking secondary sanctions that would damage China’s economic rise. The Chinese Communist Party’s legitimacy to rule is largely based on delivering strong economic growth. I believe the party’s economic agenda will be a key priority for President Xi as he seeks a third term later this year. On the other hand, in the event of a chaotic Russian defeat, the possibility of a pro-Western regime change in Russia could pose a major threat to Beijing.