How will Russia's war affect China?
I foresee an era of caution and stasis.
There are basically two pieces to this: Diplomacy/geopolitics, and economics. On the diplomacy side the two main questions now seem to be:
Will China back away from its de facto alliance with Russia?
Will the war affect the chances of a Chinese invasion of Taiwan?
As the military campaign has proven tougher than predicted for Putin’s army, China has begun backing away from Russia, displaying an instinctive caution that will hopefully also apply to its Taiwan plans.
On economics, there are a bunch of questions, most of which are about what kind of trade, investment, and financial relations China and Russia will have going forward. The general consensus seems to be that in the wake of massive sanctions by the West, Russia will move closer to China economically. But it’s not at all clear that this will do much to save Russia in the short term, or that the two economies can be successfully integrated in the long term. And there’s also the question of whether economic dependence will essentially make Russia a vassal state of China, and whether that’s something China feels it would benefit from.
Overall, my thesis here is that we’re going to see caution and stability here, and that this will generally be a good thing for everyone involved — except for Vladimir Putin.
Can China bail out Russia’s economy, in the short term or the long term?
Russia’s economy is getting absolutely crushed by the unprecedented blitz of sanctions from the U.S. and Europe. With the SWIFT cutoff and full blocking sanctions against the Russian central bank (meaning it basically can’t do any transactions with the West at all), Russia is now effectively cut off from most trade with the U.S. and Europe. Biden has not yet issued a ban on Russian oil, but even so, all the financial restrictions mean it’ll just be very difficult for Russians to sell into that market. And for the same reason, and also because the ruble has collapsed in value, Russia is mostly cut off from importing manufactured goods from Europe. Nor is there yet any foreseeable off-ramp from this situation; even if Putin pulls his tanks back, there’s no clear path for exiting the current sanctions regime.
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