Ukraine war: China quietly distancing itself from Russia’s sanction-hit economy

As the war between Russia and Ukraine continues, China is quietly distancing itself from Moscow as its economy is being slammed with sanctions from the US and its allies.

Last month, both countries proclaimed that their friendship had “no limits.” That was before Russia launched its war in Ukraine.

Beijing has refused to condemn Russia’s attack on Ukraine but wants to avoid being impacted by the sanctions it has repeatedly denounced as an ineffective way of resolving the crisis, CNN reported.

Fears that Chinese companies could face US sanctions over ties with Russia had contributed to an epic sell-off in Chinese stocks in recent days. That slump was reversed on Wednesday when Beijing promised it would pursue policies to boost its sputtering economy and keep financial markets stable.

US officials told CNN that they have information suggesting China has expressed some openness to providing Russia with requested military and financial assistance. China dismissed that as “disinformation.”

Citing analysts, CNN reported that China is attempting to strike “a delicate balance” between supporting Russia rhetorically but without further antagonizing the United States.

Chinese banks cannot afford to lose access to US dollars, and many Chinese industries cannot afford to be deprived of US technology.

The most significant help China could offer Russia is through the USD 90 billion worth of reserves Moscow holds in Chinese yuan, wrote Alicia Garcia-Herrero, chief economist for the Asia Pacific at Natixis, in a research report, according to CNN.

It further reported that Russia’s Finance Minister Anton Siluanov this week said that the country wanted to use yuan reserves after Moscow was blocked from accessing US dollars and euros.

Following the invasion of Ukraine, the World Bank has halted all its programs in Russia and Belarus. It hadn’t approved any new loans or investments to Russia since 2014, and none to Belarus since 2020.

According to CNN, more surprisingly, is the decision by the Beijing-based Asian Infrastructure Investment Bank to do the same. In a statement earlier this month, it said it was suspending all its activities related to Russia and Belarus “as the war in Ukraine unfolds.” The move was “in the best interests” of the bank, it added.

The AIIB’s decision to suspend activities in Russia means USD 1.1 billion of approved or proposed lending aimed at improving the country’s road and rail networks is now on hold, CNN reported.

On Friday (local time), US President Joe Biden held a video call with his Chinese counterpart Xi Jinping and warned China of implications and consequences if Beijing provides material support to Russia.

“President Biden detailed our efforts to prevent and then respond to the invasion, including by imposing costs on Russia. He described the implications and consequences if China provides material support to Russia as it conducts brutal attacks against Ukrainian cities and civilians,” a White House readout informed.

Meanwhile, the two leaders agreed that a diplomatic solution to the present conflict in Ukraine is the most desirable outcome as of now.