The Platform

Ministry of Defense of Ukraine

The longer the war in Ukraine drags on, the longer China struggles with its fallout.

As Russia’s war with Ukraine grinds on into its eighteenth month, a spectacle bereft of clear winners or endgames, China finds itself ensnared in a complex web of economic and diplomatic risks. It’s a quagmire that compels Beijing to consider pushing Moscow and Kyiv towards the negotiation table.

China’s ongoing commerce with Russia hasn’t just strained its diplomatic bonds with Western powers; it’s thrust Beijing into the crucible of heightened European scrutiny. With the military stalemate in Ukraine providing no clear victor, China faces inevitable diplomatic fallout and potentially severe economic ramifications.

When China took the floor at the UN General Assembly, the trepidation was palpable. Its envoy voiced grave concerns over a conflict that shows no signs of waning. Yet the stakes are high: a protracted war threatens not only China’s global ambitions but also casts its 12-point peace proposal into the limbo of European rejection. Fears abound that any ceasefire may cede 20% of Ukrainian territory, including the controversially annexed Crimea, back to Russia.

At the most recent peace talks in Saudi Arabia, Beijing’s presence was more than just ceremonial. The international summit, representing an array of global powers rallying behind Ukraine, pointed to a notable shift in China’s stance. A rising tide of skepticism within China, catalyzed by the Wagner Group’s insubordination, is now questioning the very stability of Putin’s regime and Russia’s future trajectory.

This isn’t merely a matter of international posturing; China also grapples with potential escalation and fallout. Beijing argues that the United States leverages the Ukrainian conflict to stoke more global confrontations, exemplified by NATO’s increased presence in Asia. The insinuation? That Washington aims to sever Europe’s economic ties with China under the guise of its Indo-Pacific strategy.

As the West mulls further crushing economic sanctions against Russia, China’s economic alliances come under a microscope. According to the U.S. Director of National Intelligence, state-owned Chinese firms are exporting everything from navigation systems to jamming technology, even body armor, to Russia. In return, they’re importing critical energy supplies and offering insurance for Russian vessels. The implications for China’s economy, already reeling from multiple challenges, are profound.

Reliance on Russian natural gas leaves China vulnerable to spiraling international energy costs, putting considerable strain on its balance of payments and stoking deflation. Add to that the diminished European appetite for Chinese exports, corroborated by a 12% decline in 2022 and a further 14% slump in the first half of 2023 as per World Trade Organization data, and you have a recipe for an economic downturn.

But the conflict also imperils China’s food security, striking at the heart of its agricultural supply chain. With Russia and Ukraine as primary suppliers, the war disrupts existing networks and sends commodity prices soaring. Meanwhile, China’s domestic agriculture battles its own demons—severe floods and droughts—that exacerbate the nation’s food import costs.

Against this backdrop, China navigates an economic landscape riddled with challenges: a fitful recovery from the pandemic-induced recession, cyclical outbreaks, heightened trade tensions with the U.S., and a growing list of financial vulnerabilities, notably in the real estate sector. Throw in China’s demographic challenges, and what you have is the lowest GDP growth forecast since 1990— a paltry 3.5%.

So, China finds itself in a precarious position, displaying allegiance to Russia even as it aspires to be a neutral peacemaker for the U.S. and the West. It’s a high-wire act with little room for error, one that weighs heavily on its economic vitality. Thus, Beijing’s most pragmatic route may well be to exert its influence over Moscow while engaging in constructive dialogue with Western powers. The path to peace isn’t just a moral imperative—it’s an economic one for China.

Aishwarya Sanjukta Roy Proma is a Research Associate at the BRAC Institute of Governance and Development (BIGD). She is a research analyst in security studies. She holds undergraduate and graduate degrees in International Relations from the University of Dhaka, Bangladesh.