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Pressed to choose sides on Ukraine, China trade favors the West

Published 03/21/2022, 01:07 AM
Updated 03/21/2022, 05:56 PM
© Reuters. FILE PHOTO: U.S. President Joe Biden holds virtual talks with Chinese President Xi Jinping from the Situation Room at the White House in Washington, U.S., March 18, 2022. The White House/Handout via REUTERS

By David Lawder

WASHINGTON (Reuters) - U.S. President Joe Biden's warning of "consequences" for any aid China may give to Russia's Ukraine war effort aims to force Chinese President Xi Jinping to choose a longstanding lucrative trade relationship with the West over a growing strategic partnership with Moscow.

Based on trade flows alone, both China and the United States have a lot at stake after Biden's nearly two-hour video call with Xi on Friday, with the White House confirming that sanctions on Beijing were an option.

Despite growing trade ties to Southeast Asia and an economy that is less dependent on trade over the past decade, China's economic interests remain heavily skewed to Western democracies, trade data reviewed by Reuters showed.

Siding with political ally Russia would make little economic sense for China, according to analysts, as the United States and European Union still consume more than a third of China's exports.

"On the pure economic question, if China were to have to make the choice - Russia versus everyone else - I mean, it's a no-brainer for China because it's so integrated with all of these Western economies," said Chad Bown, a senior fellow at the Washington-based Peterson Institute for International Economics think tank who tracks China trade closely.

China's ambassador to the United States, Qin Gang, on Sunday emphasized China's close relationship with Russia.

"China has normal trade, economic, financial, energy cooperations with Russia," Qin told the CBS program "Face the Nation" when asked if Beijing would provide financial support to Moscow. "These are normal business between two sovereign countries, based on international laws, including WTO (World Trade Organization) rules."

Targeting Beijing with the type of broad economic sanctions that have been imposed on Russia would have potentially serious consequences for the United States and globally, given that China is the world's second-largest economy and the largest exporter. As China's economy has ballooned to $16 trillion in the past 20 years, its dependence on trade with other countries for its economic well-being has diminished.

Title: Trade's share of China's economy eases to 1990s levels Trade's share of China's economy,https://graphics.reuters.com/USA-TRADE/CHINA/zdvxokzqzpx/chart.png

As Chinese citizens become wealthier, domestic consumption and services are playing a bigger share in China's economy.

However, China is still more dependent on trade, at about 35% of GDP, than the United States at 23% or Japan at 31%.

The wealthy G7 countries that form the heart of an anti-Russia alliance following last month's invasion of Ukraine still consume more than a third of China's exports. That is a drop from almost half of China's exports nearly two decades ago, but a relatively steady share since 2014, when Russia annexed Ukraine's Crimea region.

Title: China exports still dominated by U.S. and Western allies, https://graphics.reuters.com/UKRAINE-CRISIS/TRADE-CHINA/jnvwebqbavw/chart.png

The share of China's exports to Association of Southeast Asian Nations (ASEAN) countries, with which China recently has forged new trade agreements, has doubled to about 15%, eclipsing Japan in importance. But China's January-February 2022 trade data showed that exports to the European Union grew the most at 24%.

OIL FOR CELLPHONES

Russia's overall trade with China has grown since the West first imposed sanctions on Moscow in response to its annexation of Crimea.

But China's exports to Russia have remained between 1% and 2% for the past 20 years.

Russian imports from China track those of many other countries, with electronics and consumer goods including cellphones, computers, apparel, toys and footwear topping the list.

Title: Russia's top imports from China: electronics, apparel Russia's top imports from China: electronics, apparel, https://graphics.reuters.com/UKRAINE-CRISIS/TRADE-CHINA/lgpdwarzavo/chart.png

China exported 10 times as many cellphones, by value, to the United States alone, at $32.4 billion in 2020, based on UN Comtrade data.

China's imports from Russia are dominated by oil. At $27 billion in 2020, crude oil and other petroleum dwarfs all other imports from Russia, mainly commodities including copper, softwood lumber, liquefied natural gas, coal, metals and ores.

Title: China's top imports from Russia: all about the oil, https://graphics.reuters.com/UKRAINE-CRISIS/TRADE-CHINA/xmvjoezddpr/chart.png

Turning Western sanctions against China would cause significant difficulties for the United States, which heavily depends on China for imports of key consumer goods from computers and cellphones to toys and textiles.

Title: Few alternatives for top U.S. imports from China Few alternatives for top U.S. imports from China, https://graphics.reuters.com/UKRAINE-CRISIS/TRADE-CHINA/jnpwekgdnpw/chart.png

© Reuters. FILE PHOTO: U.S. President Joe Biden holds virtual talks with Chinese President Xi Jinping from the Situation Room at the White House in Washington, U.S., March 18, 2022. The White House/Handout via REUTERS

"In America, we don't depend on the Russian economy - hardly for anything," Bonnie Glick, director of Purdue University's Center for Tech Diplomacy, told a Commerce Department forum on Monday.

"But an economic or a trade war with China would have tremendous impacts," Glick said, adding that it was important for the United States to reduce trade reliance on China.

Latest comments

We created a monster when Nixon opened the doors to trade.Now we need to put the beast down. He is too immoral.
I don't think china wanna depend from west and dollar anymore. Besides trump have started economic conflict with china. Just my opinion.
China knows who butters their bread ;)
why are we still so dependent on china knowing it could devastate us if war broke out? is it because if we fall they fall economically? what happens when they don't need to trade with us when they are the number one supplier of basically everything? what then?
then get ur ***into a factory in the US and start working?
don't dream
Off course china will choose to put their money in the west russia has no future under putin rule
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