China’s aim is to shield its financial system by improving its payments system and diversifying its $3.2trn of reserve holdings
Save time by listening to our audio articles as you multitaskvotes condemning Russia for invading Ukraine, its rhetorical support has been more fulsome. On March 7th, as civilian casualties mounted, Wang Yi, the foreign minister, called Russia his country’s “most important strategic partner”. It is just a month since Mr Xi and Mr Putin heralded a new era for their countries.
, its payments network, has a small global footprint and low volumes and relies on sending messages through, a European body from which some Russian banks are now barred. Another difficulty is that Chinese multinationals with a legal presence in Western-allied countries may fall foul of the existing sanctions regime. China’s international banks are wary. Volvo and TikTok have suspended some operations in Russia.
Given all this, China’s help to Russia is likely to be half-hearted. It may stick to its existing Russian trade arrangements, hoping that America will tolerate them. Chief among these is energy. China received 32% of all Russian crude exports in 2020 and 17% of its exports of liquefied natural gas. China may also conduct trade and financial transactions through smaller banks that do not have a legal presence in the West, using roubles and yuan rather than the dollar.
Chinese officials must juggle several priorities. China wants to see Russia survive these sanctions, to teach America and allies that they are not a magic weapon, but is anxious to limit collateral damage to Chinese interests. In the process, it plans to learn from Russia’s mistakes. If it comes to blows with America, China wants its financial system to be shielded. Its aims will include improving its payments system and diversifying its $3.
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