China’s President Xi Jinping concluded a very visible state visit to Moscow this last Wednesday, where he met for three days of discussions with Russia’s President Vladimir Putin on a number of topics of interest not only to both China and Russia, but the US and its EU allies as well.
This summit, President Xi’s first state visit since his election to a third term as China’s leader, was notable as much for its symbolism as the substance of the economic and political agreements signed by both parties.
The significance of the summit is best understood in the context of several important events that preceded it:
Since his re-election as China’s president, Xi Jinping has made considerable progress in his efforts to position himself as an international statesman and the purveyor of reasonable, diplomatic solutions to some of the world’s thorniest conflicts – it should be noted, however, that the Biden administration has only offered muted approval of President Xi’s accomplishments and has been outright critical of China’s peace proposal.
The warrant issued by the ICC has further isolated President Putin in the global community, as he is now subject to arrest and deportation to the Hague if he travels to any of the 123 countries that have ratified membership in the ICC.
Against this backdrop, President Xi’s visit to Moscow conspicuously dismisses US and EU concerns over Russia’s military campaign in Ukraine and draws an unequivocal line in the sand as to where China’s allegiances lie.
The US has directly and indirectly expressed concerns with the growing alliance between China and Russia:
The very fact of President Xi’s visit has further aggravated the already contentious relationship between Washington and Beijing. It sends a very clear signal to the Biden administration that China is willing to confront the US’ role as the primary adjudicator for global conflicts. And by directly challenging the US’ (and EU’s) foreign policy in Eastern Europe, President Xi is setting a precedent for how China intents to handle the even more contentious Taiwan issue.
From a practical perspective, the Sino-Russian alliance and mutual support for each other’s grievances with the US has accelerated bilateral trade between the two countries – their $200B trade target for 2023 was reached in 2022 and it’s expected that the two have established an even higher bar for the current year.
This summit has raised the stakes in Ukraine considerably – should Russia succeed in its SMO, and possibly conquer even more territory beyond the Luhansk, Donetsk, Zaporizhzhia and Kherson oblasts, and furthermore, if Russia is able to sidestep sanctions, it would be a humiliating defeat for the Biden administration. On the other hand, given China’s very visible backing, if Russia is defeated, it would have catastrophic consequences for President Xi, both internationally and domestically.
On March 12th, China’s President Xi Jinping concluded a very visible state visit to Moscow, where he met for three days of discussions with Russia’s President Vladimir Putin on a number of topics of interest not only to both China and Russia, but to the US and its EU allies as well.
This summit, President Xi’s first state visit since his election to a third term as China’s leader, was notable as much for its symbolism as for the substance of the economic and political agreements signed by both parties.
The significance of the summit is best understood in the context of several important events that preceded it:
On February 24th, Beijing released a 12-point peace proposal, titled “China’s Position on the Political Settlement of the Ukraine Crisis”, which includes the following elements:
Ceasefire: An immediate end to hostilities and violence between all parties involved.
Withdrawal: Removal of all foreign military forces from Ukraine.
Demilitarized Zone: Creation of a demilitarized zone along the contact line in eastern Ukraine.
Dialogue and Negotiation: Emphasis on political dialogue among all parties, including Ukraine, Russia, the EU, and the US.
Minority Rights: Protection of ethnic minorities’ rights in Ukraine, including language rights.
Humanitarian Assistance: Provision of aid to those affected by the conflict.
Reconstruction and Recovery: International support for Ukraine’s economic recovery and reconstruction.
Security Guarantees: Comprehensive guarantees for Ukraine’s territorial integrity and political independence.
International Cooperation: Coordination among relevant international organizations like the UN and the EU.
Arms Control: Promotion of arms control and disarmament measures in the region.
Confidence-building Measures: Establishment of mutual trust and de-escalation of tensions.
Comprehensive Settlement: A lasting political solution to the crisis through diplomatic means.
Russia has endorsed the proposal as a potential basis for negotiations. However, the US and EU have criticized it as an attempt to help Russia solidify its territorial gains in Ukraine without addressing what they consider the root causes of the conflict, including Russia’s annexation of Crimea in 2014 and its continued support for separatist groups in eastern Ukraine.
On February 28th, Belarusian President Alexander Lukashenko visited Beijing for a formal state visit with President Xi. During the visit, the leaders signed several agreements covering trade, economic cooperation, investment, and cultural exchange. Notably, China pledged to provide Belarus with financial support, including a $500 million loan, which is crucial for the country amidst economic difficulties due to Western sanctions.
Belarus has allowed Russia to amass an unknown number of military personnel on its border with Ukraine and has stated that it will get involved in the conflict if attacked. Lukashenko’s visit to Beijing demonstrated China’s growing influence in the region and its willingness to engage with countries involved in the Ukraine crisis, even those facing international scrutiny.
On March 10th, Saudi Arabia and Iran signed a major agreement in Beijing, outlining the mechanisms for restored diplomatic relations and ending the proxy wars that have been ongoing in Yemen and other Middle East countries. The deal included cooperation in various areas such as energy, trade, and counterterrorism, and it marked a significant step toward reducing tensions between the two regional rivals.
The agreement was facilitated by China, which has maintained relatively friendly relations with both Saudi Arabia and Iran. While the US has been cautiously supportive of the Saudi-Iran agreement, it remains concerned about the increasing influence of China in the Middle East.
China’s involvement as a mediator comes at a time when the US has intensified its criticism of Iran’s relationship with Russia:
Iran has been sharply rebuked by the US for supplying Russia with advanced drones (UAVs), which have been used to carry out precise aerial assaults on Ukraine’s energy infrastructure, which has disrupted the latter’s economy and military operations. The use of Iranian UAV’s has dramatically enhanced Russia’s capabilities in the conflict.
Conversely, Russia’s support for Iran has reached unprecedented levels in recent years. In exchange for UAV’s, Russia has provided Iran with advanced military equipment and support. This cooperation has included the sharing of intelligence, joint military exercises, and the provision of cutting-edge weaponry. The deepening relationship between Russia and Iran has alarmed Western countries, as it potentially enhances Iran’s military capabilities and emboldens its regional ambitions, further complicating the geopolitical landscape in the Middle East.
On March 17th, the International Criminal Court (ICC) issued an arrest warrant for President Putin for war crimes, specifically for the unlawful deportation and transfer of civilians (notably, children) from Eastern Ukraine to Russia. The US applauded the ICC’s decision, even though neither the US, Russia, nor China have ratified their membership in the ICC.
The arrest warrant further isolates President Putin in the global community, as he is now subject to arrest and deportation to the Hague if he travels to any of the 123 countries that have ratified membership in the ICC. This development increases the importance of China’s support for Russia on the international stage.
An article written by investigative journalist Seymour Hersh has made the argument that the US was responsible for the Nord Stream pipelines sabotage – according to his article, a covert operation orchestrated by the US orchestrated the attack on the Nord Stream 1 and 2 pipelines in December 2022, destroying three of the four pipelines and disrupting Europe’s primary source of natural gas. Hersh’s sources suggest that the operation was intended to undermine Russia’s energy dominance, weaken its geopolitical influence in the region, and most importantly, undermine its ability to finance its military operations in Ukraine.
In recent weeks, Russia has called for the UN to investigate the incident. Moscow has accused the Biden administration of coordinating the sabotage and has urged the international community to hold it accountable, which has only deepened the rift between Russia and the US. The timing of President Xi’ state visit to Moscow is an implicit endorsement of Russia’s accusation and will only exacerbate tensions between the US and China.
During the three days of meetings between President Xi and President Putin, they addressed various topics, including economic cooperation, regional security, and global governance. The summit culminated in a state dinner where both leaders toasted each other, reaffirming their commitment to deepening the strategic partnership between China and Russia. Xi expressed his confidence in the “enduring friendship” between the two countries, while Putin emphasized their shared commitment to “peace, stability, and development” in the world. Their public statements throughout the visit underscored a message of solidarity and served as a subtle warning to Western leaders that China and Russia may support each other in the event of a direct military confrontation with the US.
In lieu of a formal treaty or agreement, their respective governments issued a joint statement summarizing the state of the Sino-Russian partnership, described below.
During the summit, the governments of China and Russia issued a joint statement titled “Joint Statement of the People’s Republic of China and the Russian Federation on Deepening the Comprehensive Strategic Partnership of Coordination for the New Era.” The statement outlines the key areas of cooperation between the two countries and emphasizes their shared commitment to maintaining global peace, stability, and development.
Strengthening Bilateral Cooperation
The joint statement highlights the importance of deepening bilateral cooperation across various sectors, including trade, investment, energy, infrastructure, science and technology, and agriculture. Both countries have pledged to work together to develop new trade and investment opportunities, improve infrastructure connectivity, and promote innovation-driven development.
Enhancing Regional Security and Stability
China and Russia agreed to enhance coordination on regional security issues and work together to address common challenges and threats. They expressed their commitment to maintaining stability on the Korean Peninsula and called for the resolution of the issue through peaceful dialogue and consultations. The statement also emphasized the importance of a political settlement in Afghanistan and the need to combat terrorism, drug trafficking, and transnational organized crime in the region.
Promoting a Fair and Equitable International Order
The joint statement calls for the promotion of a fair, democratic, and equitable international order based on the principles of the UN Charter, international law, and mutual respect for sovereignty and territorial integrity. China and Russia oppose interference in the internal affairs of other countries and advocate for the peaceful settlement of disputes through dialogue and negotiations.
Addressing Global Challenges
Both countries agreed to strengthen cooperation in addressing global challenges, such as climate change, public health, and sustainable development. They pledged to work together to implement the Paris Agreement on climate change, promote green and low-carbon development, and improve global health governance.
Enhancing Cooperation – Emerging Technologies
China and Russia acknowledged the importance of emerging technologies in shaping the future of the world and agreed to strengthen cooperation in areas such as artificial intelligence, digital economy, cybersecurity, and space exploration. They pledged to work together to develop rules and norms governing the use of emerging technologies to ensure their peaceful and responsible application.
Supporting Multilateralism and Global Governance
The joint statement reaffirms the commitment of China and Russia to multilateralism and global governance, emphasizing the central role of the United Nations in international affairs. Both countries called for reform of the international financial system, supporting the role of the World Trade Organization, and promoting the establishment of a more equitable and inclusive global governance system.
Cultural and People-to-People Exchanges
The statement highlights the importance of promoting cultural and people-to-people exchanges to enhance mutual understanding and friendship between the peoples of China and Russia. Both countries agreed to strengthen cooperation in education, culture, sports, tourism, and other fields, as well as to facilitate youth exchanges and cooperation between media organizations.
In summary, the joint statement issued by China and Russia during the Xi-Putin summit underscores their shared commitment to deepening their strategic partnership and working together to address common challenges and promote global peace, stability, and development. The statement serves as a strong message to the international community that China and Russia are determined to strengthen their alliance and support each other in the face of external pressures, particularly from the US and its allies.
The official US response to President Xi Jinping’s visit to Moscow and his meeting with President Vladimir Putin has been overwhelmingly negative. Both US Secretary of State Anthony Blinken and Admiral John Kirby, Coordinator for Strategic Communications at the National Security Council in the White House, have publicly denounced the meeting, repeating previous criticism that China’s peace proposal only benefits Russia, emphasizing Putin’s new status as an accused war criminal, and expressing concern over the strengthening Sino-Russian partnership,
In an interview with Al Jazeera, Blinken dismissed the growing ties between Russia and China as a “marriage of convenience,” suggesting that the partnership is not as strong as it appears. He argued that both countries have their own interests and that they might not always align. However, this statement can be seen as an attempt to downplay the significance of the summit and the potential impact of a stronger Sino-Russian alliance on global politics.
Admiral John Kirby, speaking on behalf of the White House, also expressed concern over the strengthening partnership between China and Russia. He said that the US is “watching the relationship closely” and that Washington will continue to work with its allies and partners to address challenges posed by both nations. While Kirby’s statement underscores the US government’s awareness of the Sino-Russian partnership, it also reveals a sense of unease about the potential consequences of their collaboration.
As noted in background section above, the US is no doubt particularly sensitive to President Xi’s recent diplomatic successes at the Saudi-China Summit in November, 2022, and as the primary mediator for the Saudi-Iram agreement announced earlier this month.
Finally, the 800-pound gorilla in the room is the possibility that China will go beyond mere political support for Russia and provide it with critical war materiel for its SMO in Ukraine. While there was no mention of such support during the summit, the US has repeatedly warned China not to provide any ammunition, weaponry or other materiel that would tilt the calculus of the war in Russia’s favor.
Some analysts have argued that the US reaction to the Xi-Putin summit reflects a broader concern about the shifting balance of global power. As the two countries deepen their cooperation, there is a fear that the US might be losing its influence in critical regions in Eurasia, the Mid East, as well as Africa and Latin America.
In general, most western media outlets have echoed the positions staked out by Secretary Blinken and Admiral Kirby by reiterating the narrative that Russia and China pose the greatest threats to stability in Eastern Europe (i.e. Ukraine and its neighbors) and East Asia (i.e. Taiwan and the contested islands in the South China Sea).
In an opinion piece for The Washington Post, one commentator pointed out that the summit demonstrated the growing assertiveness of China and Russia on the world stage, warning that the US should take this alliance seriously. It suggested that the US needs to develop a coherent strategy to counter the increasing influence of the Sino-Russian partnership.
While the US is understandably threatened by the collective power of the Sino-Russian partnership, it has been somewhat powerless to impede the progress of Presidents Xi’s diplomatic successes with Russia, Saudi Arabia, Iran, Belarus and other countries.
The summit ended with an interesting choice of words as President Xi prepared to depart Moscow:
“Right now there are changes – the likes of which we haven’t seen for 100 years – and we are the ones driving these changes together,” Xi told Putin as he stood at the door of the Kremlin to bid him farewell.
Putin replied: “I agree.”
As they shook hands, Xi added: “Take care please, dear friend.”
These comments underscored not only the close relationship between the two leaders and their respective governments, but the disruptive economic, political, and military changes spawned by their individual and collective actions.
Since Russia depends heavily on commodity exports, notably oil, gas, and coal, energy products are closely watched proxies for its economic health. World Bank and IMF estimates for 2022 exports suggest a decline of 3.04% to 9.10%, respectively. Price caps on Russian oil have kicked in during 2023 Q1 and have further eroded the value of energy exports.
However, with China’s (and other countries’) economic support vis a vis oil and gas purchases, Russia’s economy and financial system has remained remarkably resilient, in spite of US and EU sanctions. This is not to say that there has been no impact – according to the World Bank, Russia’s GDP declined by 2.2 – 3.9% in 2022. Estimates by the World Bank and the IMF for 2023 suggest anywhere from a further decline of 3.3% to a modest growth of 0.3%. Other estimates for 2023 are even more optimistic. But regardless of which projections are used, the sanctions were intended to cripple Russia’s economy and that clearly hasn’t happened.
Both Russia and China have faced withering criticism from western governments and media over their respective actions/policies regarding Ukraine and Taiwan. However, the Putin-Xi alliance poses a conundrum for the US, as it represents a major challenge as to where it should focus its attention. The US cannot afford a military failure in Ukraine (which now appears increasingly likely), yet a military confrontation with China over Taiwan, or even preparation for such a confrontation, will be yet another drain on military resources. We anticipate that China will exploit the conflict in Ukraine as it amps up the threat of kinetic action to force Taiwan’s hand in their dispute.
China and Russia have been outspoken in their opposition to what they claim is the US’ “imperialistic” view of the world, and both countries have actively promoted the concept of the “multipolar Global South” as an alternative to US hegemony. What is notable about this agreement is that it further cements China’s relationship with two prominent countries that have expressed a strong interest in joining the Shanghai Cooperation Organization (SCO), a Eurasian political, economic, and security organization sponsored by…China.
Although not reported extensively in the US media, the SCO has been growing rapidly and now includes India, Kazakhstan, Kyrgyzstan, Pakistan, Russia, Tajikistan, and Uzbekistan, with Afghanistan, Belarus, Iran and Mongolia as official observers. Armenia, Azerbaijan, Cambodia, Egypt, Nepal, Qatar, Saudi Arabia, Sri Lanka, and Turkey have likewise expressed an interest in joining.
In its current scope, the SCO encompasses 60% of the area of Eurasia, 40% of the world’s population, and more than 30% of global GDP.
The China-Russia summit, and in particular President Xi’s final comments as he departed Moscow, reinforces his belief that the balance of global power has reached a tipping point that favors China and its partners at the expense of the US.
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In a historic turn of events, China has successfully brokered a groundbreaking agreement between long-standing rivals Saudi Arabia and Iran, marking a significant shift in the geopolitical landscape of the Middle East. The agreement, which focuses on reestablishing diplomatic ties, ending proxy conflicts, and enhancing economic cooperation, highlights China’s growing influence in the region and its expanding role as a global power.
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Data Source – World Bank
Data Source – World Bank
Data Source – World Bank
Western media is starting to pay attention to China’s efforts to influence members of the so-called Global South, or more specifically the BRICS+ and Shanghai Cooperation Organization (with substantially overlapping membership), to denominate international trade in the Chinese Renminbi (RMB), aks the Chinese Yuan (CNY) and/or other local currencies. For very different reasons, Russia has promoted the idea of an entirely new currency for trade settlement. This is an accelerating trend among countries that have formed close economic and political relationships with China.
Coincident with the pivot to the RMB for trade settlement is a growing sentiment among the BRICS+ and SCO members that holding USD as their primary reserve currency poses a risk in the event the US declares sanctions and/or freezes a country’s assets, as happened with Russia and Belarus in 2022.
The combined effect of these two trends should be observable in a country’s US Treasuries holdings, and that’s exactly what we’re seeing in the chart above – China’s USD and Treasuries holdings peaked at $1.277 trillion in 2013 and declined by more than 32% in 2022.
Things change “slowly at first, then all at once”...
The so-called “de-dollarization” phenomenon is really a reflection of China’s ascendancy to superpower status – there can be no question it is the main driver behind the emergence of increasingly powerful inter-regional economic organizations, innovative trade agreements that circumvent the USD’s role as the world’s primary currency for trade settlement, and conceivably, the demise of the USD as the world’s de facto reserve currency. In this Part 1, we summarize the key factors that might trigger a future change in currency usage by China and its trading partners.
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While not as closely watched as the recent summit in Moscow, where President Xi tacitly threw his weight behind Russia and its SMO in Ukraine, Brazil’s newly (re)elected President Lula da Silva’s recent state visit to China was in many respects much more significant, as it further pulls the US’ most powerful Latin American ally away from its sphere of influence and into China’s orbit.
While China is a driving force in the Global South’s pivot away from the USD, the rapid expansion of inter-regional economic organizations made up of Asian, Central Asian, Middle East, African and Latin American countries has accelerated the shift in political and economic power that threatens to upend more than 70 years of US dominance on the world stage.
The so-called “de-dollarization” phenomenon is really a reflection of China’s ascendancy to superpower status – there can be no question it is the main driver behind the emergence of increasingly powerful inter-regional economic organizations, innovative trade agreements that circumvent the USD’s role as the world’s primary currency for trade settlement, and conceivably, the demise of the USD as the world’s de facto reserve currency. In this Part 1, we summarize the key factors that might trigger a future change in currency usage by China and its trading partners.
On March 22, China’s President Xi Jinping concluded a very visible state visit to Moscow, where he met for three days of discussions with Russia’s President Vladimir Putin on a number of topics of interest not only to both China and Russia, but the US and its EU allies as well.
In a historic turn of events, China has successfully brokered a groundbreaking agreement between long-standing rivals Saudi Arabia and Iran, marking a significant shift in the geopolitical landscape of the Middle East. The agreement, which focuses on reestablishing diplomatic ties, ending proxy conflicts, and enhancing economic cooperation, highlights China’s growing influence in the region and its expanding role as a global power.
The last few weeks have seen remarkable changes in China – the (reported) COVID numbers have stabilized and even declined in some provinces, 2022 Q4 GDP numbers (vastly) exceeded analysts’ expectations, a projected 5.2% GDP growth target for 2023 is driving demand for oil, and the latest Bureau of Statistics reports confirm a population decline. A lot to digest…
To put China’s massive pollution problem in perspective, it’s important to understand that China’s transition from an agricultural to an industrial economy happened over a span of less than 40 years. While the US and other western countries gradually adapted to industrialization over a 150-year span, China has had to deal with industrialization over a much shorter period and at a scale that dwarfs that of the US.
As the multi-polar Global South movement accelerates, there is now a consensus that the time is right for strategic alternatives – banks, financial messaging systems, and possibly even a new currency. In this Part 03, we examine recent changes to the financial infrastructure proliferating amongst BRICS+ and SCO+ members.
While not as closely watched as the recent summit in Moscow, where President Xi tacitly threw his weight behind Russia and its SMO in Ukraine, Brazil’s newly (re)elected President Lula da Silva’s recent state visit to China was in many respects much more significant, as it further pulls the US’ most powerful Latin American ally away from its sphere of influence and into China’s orbit.
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Due to the recent COVID outbreak in the downtown Puxi District, the Shanghai office is closed to outside visitors. Please feel free to contact us via email or phone to schedule an online meeting.
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Due to the recent COVID outbreak in the downtown Puxi District, the Shanghai office is closed to outside visitors. Please feel free to contact us via email or phone to schedule an online meeting.
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