Ukraine war will worsen US-China tensions

On March 14th China’s top diplomat, Yang Jiechi, met with the US national security adviser, Jake Sullivan, in Rome, Italy. The US has been applying pressure on China to distance itself from Russia, and before the meeting media leaks indicated that the US had told its European allies that China was considering providing military support to Russia. EIU expects the crisis to precipitate an even more severe deterioration in the US-China relationship. 

Why does it matter?

We had not expected the meetings to yield diplomatic breakthroughs, given China’s (carefully messaged) support of Russia. The US will be unable to persuade China to deviate from this position, partly given the elements of mutual mistrust and strategic competition that underpin current bilateral tensions. In particular, China will have been angered by the media leaks by US officials prior to the meeting, and by recent US threats of reprisals if China were to evade US sanctions or provide military support for Russia. 

The Ukraine crisis will inflame US-China tensions, rather than ease them. For the US, an improvement would be contingent on China distancing itself from Russia, and also signalling a more explicit willingness to comply with international sanctions (which China will continue to publicly oppose, even as Chinese banks and private firms quietly comply). For China, the US would need to halt its escalating sanctions regime on Russia (where Chinese officials have drawn parallels to existing US investment and export prohibitions facing certain Chinese technology firms) while also offering other bilateral concessions, such as tariff removal, to secure a more co‑operative attitude. Neither scenario is likely, given closer strategic China-Russia ties and the personal relationship between Xi Jinping, the Chinese president, and Vladimir Putin, the Russian president. Chinese officials would also view any withdrawal of economic support for Russia as risking economic and regional stability. In addition, domestic political considerations will prevent Joe Biden, the US president, from offering concessions seen as benefiting Chinese economic and strategic interests.

The status quo means that China and the US will find themselves on opposing sides in the Ukraine crisis. The US and China will remain dissatisfied with each other’s response to the war, contributing to a worsening of relations that further erodes future bilateral trust and space for compromise. This will hasten the existing bifurcation of China’s political and economic relations with Western democracies.

What next?

Allegations of Chinese military support for Russia will enhance US scrutiny of Chinese companies, increasing the risk of them falling foul of US (or other international) sanctions. We see China’s role as a mediator in the Russia-Ukraine crisis as unrealistic, with China’s increasingly pro-Russia stance sparking US, EU and Ukrainian hostility to any proposed arrangement

Additional analysis on the Russia-Ukraine war can be found in EIU Viewpoint. This integrated solution provides award-winning forecasts and data for nearly 200 markets. Learn more about EIU Viewpoint and how you can benefit from our world-class economic and political intelligence here.