Three weeks have passed since the beginning of the war, and Moscow was forced to turn to Beijing with a request to provide military and economic assistance. And although such information is officially refuted, several influential publications confirmed it at once.
On this news, the Chinese stock market experienced one of the largest falls in its history. Experts and found out whether China, despite the threat of Western sanctions, can provide assistance to Russia and under what conditions.
Beijing turns on the back
After the news broke in the press that Beijing could help Russia with military products and economically, China’s stock market experienced a collapse that has not been seen since the 2008 crisis. According to various estimates, the shares of Chinese companies fell by $1.5 trillion.
That is, only the assumption that Beijing would extend a hand of military assistance to Moscow raised fears that the PRC would receive sanctions similar to those that the West applied to the Russian Federation.
And according to Bloomberg, China was quite frightened that they could suffer from Western sanctions and declared that they were neutral.
“China is not a party to the ‘crisis’ and does not want sanctions to affect China,” Foreign Minister Wang Yi said.
In China, they say that they will not interfere in the “Ukrainian conflict” in any way and will not provide military assistance to the Russian Federation. But they can provide economic assistance, since Moscow is a trading partner of Beijing.
Such cautious rhetoric of the PRC against the backdrop of the agony of the Putin regime, which urgently needs help, is easily explained. Beijing fears an even greater fall in the stock market and the stagnation of the economy.
“On the one hand, the fall of the Chinese Hang Sang index began much earlier due to the default of a major developer, even before the start of the Russian war in Ukraine.
On the other hand, the recovery of the Chinese stock market will be closely tied to the growth potential of companies and the political note of the country.
The reason is that if China stumbles politically, then the exit of foreign investors from the shares will increase, and this will lead to a catastrophic fall in the Chinese stock market,” says Esperio analyst Alexander Boltyan.
According to him, many large companies in this region do not express their attitude to the situation in Ukraine and remain neutral.
Also, the Chinese economy is now being pressured by the lockdown due to COVID-19 of a large region where production facilities for the American company Apple are concentrated. So it is not easy for China to run into Western sanctions now.
How can they help
Experts say that China can provide economic assistance to Russia, but it will not be free at all.
“China is interested in expanding its zone of influence. For 20 years, this country has been actively engaged in providing currency swaps to different countries, which gradually increased the share of the yuan in the gold reserves of the whole world.
China will not help the Russian economy if there is no commercial interest in it. The suspension of economic growth due to less demand for goods from Russia is obvious, however, it is not necessary to say that China will start economic activity that is beneficial for Russia in the supply of various goods,” Alexander Boltyan believes.
According to him, China has an interest in the supply of those goods that have become banned due to Western sanctions.
“But China itself will not be able to organize the work of companies and conduct trade activity with Russia. It is more likely that China will enter into contracts to work with subsidiaries of those brands that no longer supply goods to Russia.
Thus, companies and brands will bypass sanctions bans, and China will keep its production capacity utilization,” the expert continues.
According to Alpari’s senior analyst Vadim Iosub , China’s assistance to the Russian Federation and Belarus will not be free at all. If Beijing sees that it is the only supplier of certain goods to the Russian Federation, it will sell them 2-3 times more expensive.
In the case of Russia’s help in the war against Ukraine, China can cut off the branch on which it sits. It’s about food security. According to the Center for Economic Strategy, about half of Chinese grain imports (corn, wheat) in 2020 were supplies from Ukraine.
Therefore, Beijing is unlikely to be ready to risk its own security for the sake of partnership with Russia. Unless Putin will offer some special conditions in return. On the other hand, one must remember that Beijing always pursues its own geopolitical interests.
“Losses in supplies from Ukraine will not become critical for China. Rather, it was an important step in cooperation for us. It must be remembered that China is not interested in lending a helping hand to anyone, the interest of this economic giant is focused only on its own greatness,” sums up Alexander Boltyan.
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