China’s stance on Russia’s war in Ukraine unlikely to have major effect on Asia trade ties, analysts say

 
  • China’s refusal to condemn Russia should have minimal impact on its trade in Asia, some analysts in the region say
  • China is the Asean bloc’s largest trading partner, ahead of the United States and Europe, and economic ties are growing
Photo: AP
Photo: AP

While China’s stance on Russia’s invasion of Ukraine remains a lightning rod for debate around the world, analysts in Asia say the region’s economic dependence on the world’s No 2 economy is too huge to crumble amid the geopolitical rifts caused by the war.

The United States and European Union (EU) have called on China to condemn Moscow’s actions and Washington has warned of consequences – including sanctions – for providing material support for Russia. At a China-EU summit last week, European Commission President Ursula von der Leyen said the two economies held “clearly opposing views” on the conflict.

But closer to home, the response of many Asian countries – particularly members of the Association of Southeast Asian Nations (Asean) – towards the conflict has been far more restrained, meaning China’s efforts to cast itself as neutral are unlikely to significantly harm trade or diplomatic ties, analysts said.

Chinese foreign minister Wang Yi told his Indonesian counterpart Retno Marsudi in a March phone call that Southeast Asian nations should cherish regional peace and stability and small and medium-sized countries should not be used as “tools” for big power confrontation.

China’s economic and business links with most of Asia … are too large to be affected by its stance on Russia

Amitendu Palit

 

“China’s economic and business links with most of Asia, particularly the Asia-Pacific, are too large to be affected by its stance on Russia. It can therefore get away by not condemning Russia,” said Amitendu Palit, senior research fellow and research lead for trade and economics at National University of Singapore’s Institute of South Asian Studies.

China has made efforts to bolster economic relations with Asian partners, including via the Regional Comprehensive Economic Partnership (RCEP) that took effect at the beginning of this year.

He Weiwen, senior fellow at Renmin University’s Chongyang Institute for Financial Studies, said the value of trade between China and Asean has continued growing over the past 10 years, despite efforts from Washington to sideline China through regional agreements like the Obama administration’s Trans-Pacific Partnership.
 
Former US president Donald Trump withdrew from the deal as one of his first actions in the White House in 2017 and it has since been renamed as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, without US involvement.
 

“The success of a strategy or policy should be assessed by reality and facts instead of pure arguments,” He said.

 US President Joe Biden has since established the Indo-Pacific Economic Framework to improve economic engagement with Asian nations while excluding China. But He said only when Washington works with Beijing will it see success, given China’s dominant position in global supply chains.
 

China has overtaken the US and Europe to become Asean’s largest trading partner since 2009, according to figures from the Hong Kong Trade Development Council.

Figures from credit insurer Allianz Trade showed that China’s share of Asean’s total trade was 20 per cent in 2021, compared with 11 per cent for the US and 8 per cent for the EU.

Qiu Dongxiao, head of the economics department at Hong Kong’s Lingnan University, said the impact of China’s stance on the Ukraine crisis should be minimal for its trade in Asia.

 

“If China was one of the two countries in the war, that is Ukraine and Russia, then its trade partnerships with other Asian countries may be affected,” he said.

But Hanns Maull, a senior distinguished fellow at the German Institute for International and Security Affairs, said China’s economy could be vulnerable.

“The risks to China’s external trade will probably be confined to the application and impact of US extraterritorial sanctions,” he said. “Depending on how they are applied, that could also have consequences for intraregional trade in East Asia.”

Maull said China’s access to semiconductors could be affected as US leadership in the tech sector is “still important”, citing Huawei’s struggle to convince its Asian suppliers to shift production to China.

 

“China is vulnerable to disruptions on imports of know-how and components,” he said. “The ramifications of secondary sanctions are difficult to predict accurately but the risks of disruptions are very considerable.”

Despite criticism of its failure to speak out against Moscow, Beijing has said it respects Ukraine’s sovereignty and wants to halt the war through negotiations, while disagreeing with Western sanctions.

Qin Gang, Chinese ambassador to the US, wrote in an opinion piece for The Washington Post in March that China would have tried its best to prevent the war in Ukraine if it had known about it.

Washington has said it alerted China late last year of Russia’s impending plan to invade Ukraine, but Beijing passed Washington’s information along to Moscow with assurances that it would not try to stop any action.

 

James Crabtree, executive director at the International Institute for Strategic Studies-Asia, said China was unlikely to back away from supporting Russia.

“Internally, however, [a] big lesson Beijing takes from this conflict is the risks of global commercial and technological dependence on the West, for instance in any future scenario involving Taiwan,” he said. “This will hasten President Xi’s ambition to make his country more self-reliant, and in the process increase China’s room for geopolitical manoeuvring.”

Janka Oertel, director of the Asia programme at the European Council on Foreign Relations, said “everyone is now watching very closely” what China is doing and saying with regard to Ukraine.

From a European perspective, it matters greatly whether China takes a clear stance

Janka Oertel

 

“From a European perspective, it matters greatly whether China takes a clear stance,” she said. “China is a permanent member of the UN Security Council and the second largest global economy. China matters.”

China accounts for 18.7 per cent of global gross domestic product on a purchasing power parity basis, versus 3.1 per cent for Russia, a report from Fidelity International said last month.

The country’s share of world exports stands at 14.2 per cent in value terms versus 2.2 per cent for Russia, it added. For imports, it accounts for 10.5 per cent and 1.2 per cent, respectively.

Wang Huiyao, founder of the Beijing-based think tank Centre for China and Globalisation, said Asian nations will make their own judgment on the Ukraine war.

“But the war itself will affect the overall global economy, including China and Asean, which can cause some political pressures for governments to react,” he said.

Ukraine’s top envoy in Jakarta, Vasyl Hamianin, said in March Russia’s invasion of his country should be part of discussions among the Group of 20 (G20) nations when they meet in Bali later this year.

Beijing has said the grouping is “not the appropriate forum” to discuss the conflict, echoing the position held by Indonesia, which currently holds the G20 presidency.

Liu Zhiqin, senior fellow at Renmin University’s Chongyang Institute for Financial Studies, said whether China condemns Russia or not, the US aims to “tear up the relationship between China, Europe and Asean”.

Sourse: China Macro Economy

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