Any crisis in the world affects China.  The Chinese response to the Ukraine crisis has great significance.

China’s position and economic power in the international system have seen a meteoric rise in recent years. China is the largest economy in the world at purchasing power parity (PPP) and the second largest at market exchange rates. China’s gross domestic product (GDP) has risen from US$1.2 trillion to $17.7 trillion since 2000. If these trends continue, China has the potential to overtake the United States within a decade. China became the manufacturing workshop of the world and has established essential links in the world’s critical global supply chains. In 2020, Fortune Global 500 listed China as home to the largest number of the most valuable global companies.

The Russia-China relationship had significantly improved since 2014, when Russia faced sanctions from the West due to the annexation of Crimea. At the same time, however, Ukraine is an essential partner of China’s ambitious Belt and Road Initiative (BRI) and provides Beijing with a gateway to Europe. China also has longstanding military, space, and technological cooperation with Ukraine. China’s response and handling of the current Ukraine crisis have significant implications not only for Russia-China relations but also for global politics and economics.

China’s Response

China is watching the level and the intensity of sanctions from the Western world towards Russia. Beijing is now trying to analyse the situation so it can address vulnerabilities in the Chinese economy in order to protect it from future Western sanctions. For example, China tried to promote CIPS (Cross-Broder Interbank Payment System) for cross-border Renminbi transfers when the United States and its allies, including the EU and UK, decided to disconnect Russian banks from the SWIFT (Society for Worldwide Interbank Financial Telecommunications) global financial system.

The internationalisation of the Renminbi is a long-standing goal of China, and the Russia-Ukraine crisis helps China achieve this. CIPS offers settlement and other banking services in Renminbi, but it also relies on SWIFT for international communication. China would be able to promote CIPS and transactions in Renminbi further to the next level, and it would remain an alternative to Western controlled channels. For example, Saudi Arabia is considering Renminbi-based oil sales to China and trying to bypass the US dollar’s supremacy. The backlash to the internationalisation of Renminbi is that international acceptance of Renminbi is less compared to the dollar and euro.

In the weeks since the invasion, China has been diplomatically active with those countries who abstained from the United Nation’s resolutions regarding Russia’s invasion of Ukraine. For instance, Chinese Foreign Minister Wang Yi visited India to strengthen the economic and political relations between both countries. The post-Cold War relationship between China and Russia is based on the principle of opposition to the Western hegemony of the United States. China is also using the situation to strengthen anti-Western sentiments in other countries.

Multilateral Alliances and Institutions

The upcoming BRICS (Brazil, Russia, India, China, South Africa) summit in China will be significant due to the ongoing conflict. China will attempt to use the BRICS platform to strengthen its relationship with each member state. It should also be noted that New Development Bank (NDB) established by BRICS is the only multilateral development bank that approved Russian projects after the sanctions imposed on Russia in 2014.

The Ukraine-Russian crisis has proved beneficial to China in other ways. For one, the crisis has shifted international attention away from China’s aggressive actions in the Indo-Pacific. For another, it has led to the weakening of the Quad (Quadrilateral Security Dialogue) due to India’s awkward position as a Russian ally and trade partner. India’s independent position is a message to China that India can withstand US pressure.

China’s position regarding the ongoing crisis has also had implications further abroad. The European Union is a significance Chinese trade partner. The business concerns of Chinese companies will affect and face some problems in the EU market. The Ukraine crisis has accelerated the deterioration in the EU-China relationship, which had already faced challenges in the last couple of years. This was visible at the recent EU-China summit conducted on 1 April 2022. The EU tried to convince China that it should not support Russia and even threatened China with sanctions if it provided assistance to Russia. There was no joint statement and joint press conference after the summit.

Taiwan is watching the ongoing crisis and preparing for future aggression by China. Russian aggression proved that any form of invasion of Taiwan would lead to tremendous international sanctions, and Xi Jinping’s vision of Great China rejuvenation and reintegration of China will not be an easy task in the coming decades. China’s foreign policy is based on its core interests, and its approach to Russia denotes that. However, this is a real test for Chinese diplomacy. How China protects its economic interests and argues for peaceful coexistence while dealing with the international pressure will continue to be a puzzle, both in Beijing, and abroad.

Albin Thomas is an M.Phil. research scholar at the Centre for East Asian Studies, Jawaharlal Nehru University (JNU), India. He is doing research on the economic diplomacy of China under Xi Jinping.

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