The international reaction to Russia’s invasion of Ukraine is delivering China a message: its current approach to the world won’t keep working much longer.
Does that title above seem odd? Surely it’s Russia that’s losing in Ukraine – in May of 2022, anyway. China hasn’t been defeated; it’s just an onlooker, right?
No. I suspect China is anything but an onlooker. China’s political future is at stake on the plains of Ukraine.
Let me explain. Russia is a relatively small country these days, by most measures apart from raw land area, and Vladimir Putin has destroyed its remaining military significance in just a few weeks in February and March 2022.
But China is one of the world’s two most significant nations. And even if Russia finds some way to recover and eke out a victory in Ukraine … well, as far as I can see, China’s autocrats have already lost there. Badly.
The reasons for that loss are much more to do with values than with military power.
The Chinese regime’s problem is this. Russia’s Ukraine invasion is nudging the world’s democracies towards a new awareness that relationships with autocracies carry great risks. Liberal democracy matters.
And such an awareness is a poison-tipped umbrella for China’s autocrats.
Four points – predictions, maybe – in support of this idea:
I: A change in moral leadership
Outside the boundaries of Ukraine and Russia, the war’s biggest effect of the war has been to reinvigorate the moral leadership of the US and Europe. NATO suddenly looks strong. Germany, France and Poland all look like leaders. More distant nations like Japan, South Korea and Taiwan (to which we’ll return) all stand a little taller in their neighbourhoods. The Biden administration has quietly made the military-first George W. Bush approach look expensive, outdated and impotent. Meanwhile the Chinese leadership has seemed pretty much frozen in shock.
The line between democracies and autocracies has been lit up so brightly that all sorts of people will have to stop ignoring it. More people in Africa and Central Asia (and Brunswick and Paddington too) will be starting to think that liberal democracy might, after all, work best.
II: A new wariness about industrial supply
Until late February 2022, democracies had long avoided thinking about the repercussions of deep economic links with persistent, long-lived autocracies. But that has now changed. Europe is suddenly looking to cut its reliance on Russian gas, of course. But hydrocarbons aside, the autocracy that matters is China. The democracies are spending anew on industrial capacity that may blunt China’s edge. Most notably, democracies are planning for semiconductor plants – and building them in places where they don’t look vulnerable to invasion, which means outside China.
How far this goes is a big open question. Some experts doubt it will go very far at all, because China and the rest of the world are too enmeshed. But the Financial Times reports that “[t]he US and Europe are … planning tens of billions in support for chip manufacturing, in an attempt to reduce their reliance on Asian manufacturers.” The process will take years.
As the FT points out, a shortage of capital equipment will delay this process; even to make more chip-making machinery, for instance, you first need to build more lens-making factories, and lord knows what supply-constrained equipment those factories in turn need. But analysts are already talking about a future chip supply glut caused by new non-Chinese supply.
The wariness about relying on Chinese components is probably affecting investments in less high-profile industries too. And that wariness will probably not quickly abate.
III: Taiwan slipping out of reach
The Russian failure in the Ukraine will be sapping Chinese enthusiasm for retaking Taiwan. Since the Sino-Vietnamese War ended in the late 1980s, China has been a relatively peaceful member of the international community (more so than Australia, really). But retaking Taiwan still appears to be the Chinese leadership’s number one foreign policy ambition. And it’s slipping away:
- Ukraine has just shown how a determined resistance can stop an invading force by destroying its logistics – and stretched supply lines would be an unavoidable feature of any Chinese assault on Taiwan. That has boosted Taiwanese belief in the value of resisting China.
- Taiwan has already officially adopted a “porcupine” strategy, relying first on guerilla strategies at sea and then on large numbers of hidden and mobile land-based weapons that can be used against invading ships and planes. Ukraine is showing how effective this can be. Right now, Taiwanese leaders are planning further expansion of the country’s drone fleet, while looking at boosting their missile stockpile and training their people in the sorts of guerilla-style tactics the Ukrainians have been using.
- Meanwhile, a large group of democracies has shown that they are willing to support nations attacked by autocracies, at least while the costs to them are limited.
From Beijing, that little island across the Taiwan Strait suddenly looks far less reachable.
IV: Sanctions concern
China is a trading nation, to a far greater extent than the US, Australia, or the EU taken as a bloc. Chinese leaders will be calculating what sanctions could do to the Chinese economy, especially if the democracies fill the current holes in their non-Chinese supply chains.
The answers will not fill them with joy: severe sanctions were imposed on Russia in less than a fortnight and are proving at least somewhat damaging to the Russian economy. Notably, Russian banks have been turfed out of SWIFT, the main global payments system, and Russia’s central bank has been denied access to a large slice of the country’s foreign reserves.
And while we often talk as if China manufactures everything these days, in fact Chinese industries like electronics and aviation are almost irretrievably globalised; they import components before exporting finished products. The Chinese must treat sanctions as a profound economic threat.
And from the leadership’s Beijing offices, the likely club of prosperous Chinese allies in a future trade war looks worryingly small (see the diagram below). China is closing on the US economy in overall size – but the US has strong allies, while China has only weak ones. Nations like India, South Africa and Brazil have notably failed to rush to China’s side. After Russia, its next biggest ally is probably Iran, whose economy produces just one per cent of world GDP.
Maybe it would be better to just concentrate on fixing internal problems for a while longer?
The rules-based order re-ascendant
If most of the above is true, that does not mean that China’s integration with the global economy is going to be unpicked. It does not mean China’s economy or government will be left a smoking wreck, like those Russian tanks.
Rather, it means that the China leadership will slowly begin to see more clearly that it has put itself into a particular type of cage – a very prosperous cage from the average Chinese citizen’s point of view, but a cage that imposes more constraints than the Chinese leadership previously realised. Being part of the global economy means playing by the global rules, and those rules are becoming clearer, more explicit, and more expensive to break. The price of looking untrustworthy to your global neighbours is going up.
Note that this would apply to other countries too, perhaps most importantly the US. As Sam Roggeveen suggests in the comments below, in Afghanistan and Libya and the Second Iraq War, the US has gotten away with a great deal in the past two decades since 9/11. It’s usually done it with Australia’s help. And both countries have usually followed it with a lame defence of their motivations after everything goes arse-up. Now the US, too, will need to pay more lip service, and probably more actual attention, to international standards of behaviour. (Unless, of course, Donald Trump or some acolyte wins the 2024 US election, in which case anything could happen.) Australia will have to hold itself to a higher standard too.
But China is potentially pretty much alone as a major opponent of the liberal democracies. Russia is its largest potential autocratic ally, and Russia, though it loomed large in the 20th century, is now economically no bigger than Australia. China’s second-biggest autocratic ally is Iran, populous and yet not exactly a power in the world. Individually, the nations arrayed against are a great deal more secure; collectively, they have a great deal more clout.
The democratic and the autocratic
Global GDP by nation and level of political rights and liberties
Source: Freedom House; IMF; Bloomberg
As a result of all this, I suggest, the pendulum may be swinging back towards a rules-based international order, of the type we were moving towards before 9/11. I do think that order is becoming more orderly over the decades, even if that is happening very slowly and with many setbacks. Its strength has surprised some in the democratic nations who had forgotten it. It has certainly surprised Putin. I think it may have surprised the Chinese leadership as well.
A values challenge
It may be that in a year’s time, none of this matters, the Ukraine slaughter is over, and we are back to worrying about pandemic disease and other constants of peacetime life. But that seems by no means certain.
The Chinese leadership certainly seems worried that its values will be questioned in the wake of the Russian attack on Ukraine. And no wonder. China’s regime looks a lot like Russia’s. And the Chinese leadership has to worry not just about the outside world, but about China’s own people.
I joked earlier about people in Brunswick starting to think liberal democracy is winning the values battle. But in fact the Chinese leadership seems worried about a related issue – people in Beijing starting to think that liberal democracy might be winning the values battle. An essay along these lines by prominent Chinese policy thinker Hu Wei appeared and then quickly disappeared from Chinese media in March. I recommend you read the whole thing at the link. When I read it, I found that Hu Wei had made a lot of the same points as this little essay, but earlier.
Writes Wei: “After the Russo-Ukrainian War, no matter how Russia achieves its political transformation, it will greatly weaken the anti-Western forces in the world … China will not only be militarily encircled by the U.S., NATO, the QUAD, and AUKUS, but also be challenged by Western values and systems.” (The emphasis is mine.)
From Beijing, these points probably seem worryingly clear.
Appendix: Views from professional analysts
Initially similar views from international relations experts seemed thin on the ground apart from Hu Wei’s effort. In late April, they’re more common:
- European studies expert Alexander Clarkson of King’s College London agrees that the Ukraine War shows small states need not be pushovers for greater powers: “The current trajectory of the Russo-Ukrainian war should act as a wake-up call when it comes to these entrenched assumptions about the ability of great powers to militarily overwhelm smaller states.” Tufts’ Dan Drezner agrees.
- The Economist looks at how the war challenges the EU to take a less accommodating, economy-first view of China. Conclusion: “Mr Putin has shown Europe that it needs a new China policy.”
- At Bloomberg, John Micklethwait and Adrian Wooldridge agree that the Ukraine War has sharpened the division between liberal democracies and autocracies, but worry that it will further shrink international trade, separate the world into two blocs and close down the global order:
“CEOs who used to build empires based on just-in-time production are now looking at just-in-case: adding inefficient production closer to home in case their foreign plants are cut off. The head of one of the world’s most powerful investment firms, with shares in almost every significant Western company, talked privately about ‘a tsunami of recalculations’ on the weekend after Putin invaded Ukraine. The CEO of one of America’s most iconic multinationals admits that he is reexamining production across China.”
- Former Stratfor analyst Peter Zeihan also sees China as a big loser from the Ukraine war. Summary: China will lose flows of hydrocarbons; it will lose important access to the globalised liberal democracies; and its leadership now knows that a sanctions regime could cut its flows of hydrocarbons and food, vital commodities that it imports in huge quantities.
- At Hedgehog Review, University of Virginia political scientist John M. Owen reckons: “The war has exposed Russia as a conventional also-ran bristling with 4,500 nuclear warheads, but not a great power.”
Update: I’ve tweaked various bits of this since first posting it.
Update 2: Thanks to Lowy’s Sam Roggeveen for pushing me to clarify both my thinking and my expression. A new section now looks at the rules-based international order.