China on the Cross Roads

As an authoritarian regime China may feel its place is together with Russia but its prosperity relies upon its cooperation with the West

After eight months, the $60 billion aid to Ukraine, finally passed the US parliament. Its delay could be explained as a show of power by Trump, but the reason behind the sudden resolution is still a wonder. The aid was delayed as if to prove the evaluations of a stalemate on the battlefront had been established. As soon as Russia regained the upper hand and resumed advancing the blockade was lifted.

In the absence of the aid, Russia could support its army with the help of Iran, North Korea and China. Chinese exports have been important in increasing the capacity of the Russian arms industry. China supplies Russia with industrial equipment, finished industrial goods and microchips that are easily convertible to be used in the production of military equipment.

Meanwhile Russia imported $130 billion worth of goods that can be used to produce arms from China and could finance it with $110 billion worth of exports. Even if not all the Chinese imports are used in the military industry, the size of the finished products that can be produced from these imports gives a new perspective to the $60 billion aid. It should be noted that currently Russia uses weapons that were designed in the 1980s and they are much less sophisticated than the Western counterparts. However, Ukraine at the moment is in short supply of equally low tech support equipment like ammunition for its small arms and artillery.

China, despite the pressure from the West, considers it is right to trade with Russia. Moreover, the Chinese economy is in a deep crisis. The debt to GDP ratio of the country is 288% and their assets do not bring enough income to repay the debt. Housing sector is in crashes as many ghost towns with unfinished buildings emerge. In addition, a demographic crisis arising from an ageing population threatens their future. Today 297 million Chinese are above 60 years old and as if it is not enough youth unemployment also is on the rise.

The general decrease in the jobs offered and the unwillingness of the highly educated young people in working low paid jobs are the main reasons behind the youth unemployment. China's industrial activity continued to dwindle for the fifth month on march. Together with the increase of the elderly population, China will soon cease to be the low cost production haven for the Western investors. Since China increasingly stocks gold and oil some economists think that they may consider devaluing yuan to boost its exports by making its goods cheaper and more competitive.

Such a move would destabilise world currency balances and increase the demand for USD. This would undermine the Russian aim to make yuan as its reserve currency to circumvent Western sanctions. The USD based international trade enabled Washington to freeze half of Russia's foreign currency reserves and ban its biggest banks from the SWIFT international payments system. Russia uses yuan for a quarter of its trade with other countries.

China and Russia had periods of cooperation and rivalry during their history. In the past the long shared border and ideological differences on the application of communism had raised tension between the two countries. Since the early 2000s their relations improved and they even began to exercise joint military drills. Western sanctions on Russia, allowed rapid development of economic ties.

However, current warm relations between the countries do not mean that they are allies. First of all they dont have a formal defence treaty, joint drills do not mean that the two militaries can cooperate, the economic relationship is highly asymmetrical favouring China and their vision of world order also do not seem to be similar.

Moreover, strengthening relations between Russia and North Korea threatens the fragile authority of China on the latter. China does not desire a reckless neighbour with the ability to perform a nuclear attack on its territories.

China and Russia relations are much a unison against a common rival that is the US than ideological. The war in Ukraine provides beneficial trade opportunities and enables China to be an important actor in World politics. Moreover, strengthen its position on Taiwan as no other country desires to further complicate international tensions. However, China has many problems to solve before they begin to become too chronic.

Amidst these concerns, after meeting the  U.S. Secretary of State Antony Blinken, Chinese President Xi Jinping has begun his carefully planned tour of Europe to discuss Beijing's relations with Moscow. During this tour he will visit France, Serbia and Hungary. His visit to France is also important for the future for their trade relations. Moreover, French President Emmanuel Macron became prominent with his strong stance against the Russian invasion and hawkish statements. In that respect his visit to two minor European countries but which side themselves together with Russia may be a cryptic message either to snub France or a balancing move even both.

Ukraine retreated to a defensive stance in the shortage of the basic combat supply. The American aid will arrive with a considerable delay and that will very likely delay an Ukrainian offensive for the year 2024. Even if President Joseph Biden re-elected another US aid similar inRussian  size would be unlikely in the coming years.

EU aid is spread over several years and they need to expand their arsenal against the Russian threat. Even though Ukraine is able to pile up sufficient equipment for an assault, they still need to increase their men power with new conscripts. As a result a counter offensive for 2025 also will be rather difficult for Ukraine.

On the other hand Russia improves its tactics and adapts to the warfare of the 21st century. Its industry resists against the Western sanctions thanks to the cooperation of China. Even though Russian casualties are estimated to be in the range of 1200 troopers per day, Russian President Vladimir Putin does not show any signs of being bothered with it. Russian endurance may exceed Ukraine’s.

On the one hand, Russia may risk isolation for ideological reasons but China benefits from globalisation which has boosted its national income, propelled its trade, increased foreign investment and promoted development of its economy. As an authoritarian regime China may feel its place is together with Russia but its prosperity relies upon its cooperation with the West.

China is the only power that may convince President Putin for a cease fire that may decrease the tension in the international relations. Even if such a truce would be temporary, it may give enough time for the West to adjust to a period of American isolationism. Even China to some extent can profit filling the vacuum of the US absence. Xi and Putin always claimed to have a close personal relationship, how that is true time will show.

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