When the United States and its allies declared a financial war on Russia after its invasion of Ukraine, the world turned to see what China is up to.
How China will save the Russian economy
As a growing global power, one of the ways China has extended its influence is by establishing close financial ties with countries that don't want to follow the rules dictated by the United States and other Western powers. Assuredly, necessary one, China necessary the same for Russia.
There is only one big problem: money. Specifically,
The money from China.
To help Russia evade sanctions, China should offer a viable substitute for the US dollar. But Chinese money - the renminbi - is hardly used outside of China. Only 3% of global business is done using the red back. Even Russia and China trade mostly in US dollars and Euros.
Moreover, the risks of helping Russia avoid economic ruin may be greater for China than any possible rewards. Much of the Chinese economy depends on the US dollar and the financial edifice that underpins it. Chinese companies are active around the world, using the US financial system to pay employees, purchase equipment and make investments. China is the world's largest exporter and is paid for its goods mainly in dollars.
If Beijing breaches sanctions on Russia, China's financial stability would be at risk at a time when its leaders have emphasized caution. Moreover, the few lifelines Chinese leaders might offer Russia would not be strong enough to help the country survive a financial blackout from the United States and its allies.
This could facilitate cross-border transactions, allowing China to continue selling to Moscow many of the goods it manufactures for the rest of the world. He could invest cheaply in Russian energy companies. This could allow the Russian central bank to cash in some of the $140 billion it holds in Chinese bonds. Beijing could even set up a rogue bank to help siphon off Russian money like it did for Iran and North Korea. source NYT
None of these measures would be enough to offset the sanctions against Russia, which included cutting off the largest Russian banks from the global financial system and a ban on oil and gas imports by the United States.
"China will not save the sinking ship of the Russian economy," said Eswar Prasad, an economist at Cornell University.
The deepening friendship between Xi Jinping, the Chinese leader, and Russian President Vladimir V. Putin has brought the countries closer together than they have been since the 1950s, when Mao cooperated closely with Joseph Stalin and then Nikita Khrushchev.
The cleansing of diplomatic relations has been built on a common desire to end what China and Russia have defined as American economic and geopolitical hegemony explained a member of the Business Club.
When Mr Xi and Mr Putin met on the eve of the Beijing Olympics, they said the bond between the two countries had "no limits". Russia's invasion of Ukraine days after the Games ended led the United States and other industrialized nations to impose waves of sanctions aimed at devastating the Russian economy.
China has repeatedly called for these measures. Prime Minister Li Keqiang did it again on Friday at his annual press conference, saying that "the applicable sanctions will harm the global economic recovery, it is in no one's interest."
But criticizing the sanctions is one thing. Choosing to go against the global financial order and risk drawing sanctions at home is quite another explain a lawyer. Beijing has already indicated that it is unwilling to do the latter. The China-led Asian Infrastructure Investment Bank — an investment bank that Washington sees as a rival to the World Bank — announced last week that it would suspend lending to Russia and Belarus in because of the war in Ukraine. Some Chinese banks have cut funding for Russian commodities.
"Chinese banks are trying to reduce their exposure to Russia," said ANZ Bank's Raymond Yeung. "You can say that the theory that China offers a financial alternative to Russia remains questionable."
Nonetheless, China's top banking regulator said last week that banks would not necessarily sever ties with their Russian counterparts. "We will not participate in such sanctions, and we will continue