China is watching what is happening to Putin and is quick to build an economic wall

Like his predecessors, who built the Great Wall to thwart foreign threats, Chinese leader Xi Jinping is building fortress walls to make his nation more independent, a mission that has made Russia’s war in Ukraine more urgent.

China has invested billions of dollars in semiconductor production, accumulated cereals and oil, and established international ties with its financial system. At the heart of the push is the fear of blocking Western economies through tough sanctions of the kind imposed on Russia by the United States and the European Union, according to The Wall Street Journal.

Aware of the damage from US sanctions, China could face more significant ones in the event of a military confrontation with the United States, perhaps because of Taiwan, or if Beijing offers decisive aid to Moscow during the war in Ukraine.

In Beijing, it was not overlooked that when they faced Moscow, “Western forces were activated with great speed and as a united front,” said Eswar Prasad, a former head of China’s International Monetary Fund’s department in China and now a professor of trade policy at the university. Cornell.

China’s much larger economy is harder to break away from than Russia’s. However, Prasad said: “One lesson that China is likely to learn from the consequences is that it remains vulnerable to financial, economic, and technological sanctions.”

During Xi’s rule, three successive US administrations imposed sanctions on China, including Huawei Technologies Co. and companies with alleged military connections, as well as officials and organizations that Washington holds responsible for human rights abuses. It seems that every move deepens the desire of his country to rely only on itself.

A day after Russia launched its invasion of Ukraine, which quickly provoked Western sanctions, an editorial in the Communist Party’s People’s Daily said: “Independence and self-reliance ensure that the cause of the party and the people will continue to move from victory to victory. ”

Better protections

Unlike Russia’s weak manufacturing sector and its export base, which is dominated by commodities such as oil and gas, China has a large scale and a wide range of production. “This is China’s advantage,” the nationalist tabloid Global Times wrote in a March comment.

China supplies a third of the world’s textiles, more than 27 percent of its electronics, and nearly 20 percent of its machinery, according to the Harvard Center for International Development. It is practically the only exporter of rare earth metals needed to produce items from night vision goggles to batteries for electric vehicles such as Tesla.

Withdrawing from Russia in the Russian style would not be easy for the American economy. A report by the American Chamber of Commerce-Rhodium Group last year estimated that if half of US investment in China is abandoned, it will cost US companies $ 25 billion a year in lost profits, with the aviation, chemical, and medical sectors being particularly affected. and there will be an additional $ 500 billion blow to US gross domestic product.

Wang Wen, executive dean of the Chongyang Institute for Financial Research at Renmin University in Beijing, said multilateral coordination would be too cumbersome against an economy ten times the size of Russia’s, and that Beijing would meet the challenge. as he did during the Trump administration’s trade war.

There is a growing awareness in Washington that the strength of US sanctions is also being undermined by the possibility that they may be overused. More than 1,000 Chinese-related entities are on the sanctions list maintained by US government agencies.

The Treasury alone manages 37 separate sanctions programs, and said last year that the system was overhauled in the face of “technological innovations such as digital currencies, alternative payment platforms and new ways to hide cross-border transactions, all potentially reducing the effectiveness of US sanctions.”. ”

Ray Dalio, the founder of the hedge fund Bridgewater Associates, which claims China is growing at the expense of the United States, says sanctions against Russia will help end the war in Ukraine, which will increase US influence. However, Dalio wrote in April:

“If they are not effective, we run the risk of seeing America lose its most unique and greatest power – its control over the world’s reserve currency and capital market system – as others increasingly shy away from it.”

To make its currency more attractive, Beijing has lowered barriers to investing in China’s stocks and bonds, while taking steps to develop money networks around the world in ways that could avoid the dollar.

The People’s Bank of China’s cross-border interbank payment system is designed to compete with the dollar-based money transfer system known as Swift. China is also working with other central banks to make the digital version of its yuan acceptable in other countries.

China’s UnionPay credit card, which boasts more Visa customers, has become the preferred network for Russian banks. However, analysts say China’s parallel financial systems are not being used enough by other countries to provide a viable alternative to escaping US sanctions.

Prasad said Beijing is at a dangerous point in the liberalization of financial markets, where foreign institutional investors have invested enough money to inflict pain if the loss of confidence pushes them to flee, but the state does not have much leverage to influence them and their governments.

What do the ten days that Putin gave to the West mean? Previous post What do the ten days that Putin gave to the West mean?
Russia is learning from its mistakes in Ukraine Next post Russia is learning from its mistakes in Ukraine