China has a lot riding on the war in Ukraine. If the Russians win, Europe will be preoccupied for a long time to come, unable to further the transatlantic consensus that has slowly been building around confronting the challenge posed by China and, more broadly, the defense of the post-Cold War world Europe helped the U.S. create. A Russian stalemate in Ukraine would serve the same purpose. But if the Russians lose, Beijing will face a West not only reenergized, but united and with an ax to grind.
This goes a long way toward explaining China’s support for Russia to date.
But how does all this affect China’s calculations closer to home, especially its decades-long designs to take Taiwan? Beijing is on its own timetable there. Even from a strictly military perspective, unless forced to act by an overt move toward formal Taiwan independence, China is not ready to make a move. Xi Jinping and the leadership in Beijing are many things, but rash is not one of them. Besides, they think time is on their side in the broader global competition with the United States, Taiwan’s principal protector.
Indeed, the Chinese think they stand a much better chance letting what they see as American decline play out than rolling the dice on a risky invasion of Taiwan.
Another factor that argues in favor of caution in Zhongnanhai, the Chinese Communist Party compound in Beijing, is the furious, unprecedented international economic response to Russia’s invasion of Ukraine. Just hitting some of the highlights: The assets of Putin, key government officials, oligarchs, corporate executives and Russian banks have been frozen around the world; financial transactions of the Russian central bank has been targeted; several Russian banks have been removed from the SWIFT international payments system; business with select Russian corporations has been banned; listings on international stock exchanges have been curtailed; and bans and restrictions have been imposed on energy imports from Russia as well as a select prohibition on exports to the country. The full sanctions list is much longer.
China is vulnerable to a similarly comprehensive sanctions effort in the event of a crisis over Taiwan. It would necessarily be a different, tailored package. For example, China is not an energy exporter, let alone one that depends on energy for the bulk of its exports. Russia is, in fact, statistically more dependent on international trade than China—as the result of purposeful Chinese policy prioritizing domestic demand. China has a more diverse portfolio of trade interests.
At the same time, China is much more reliant on inbound international investment flows than Russia. Same goes for outbound investment. China has many times more external debt to service—if a healthier ratio to its export earnings. China’s economy is also much more capital intensive than Russia’s.
Finally, over the years, there has been a great deal of concern regarding China’s holding of U.S. debt. Yet, who is more vulnerable in this regard, the U.S. or China? As the old adage goes, if you owe the bank $100, that’s your problem; if you owe the bank $1 million, that’s the bank’s problem. Disruption in financial ties between the U.S. and China would hurt both, but the Chinese more because dollars account for such a large share of its global debt holdings.
The impact on China of a Ukraine-like sanctions response is clear, and no doubt, well understood in Beijing. The room for doubt revolves around American and allied resolve in the event of a crisis over Taiwan. That is, given that not only is China dependent on the world, but the world is dependent on China, would the U.S. and others pull the trigger on comprehensive sanctions?
The answer to this question is “yes,” and for one reason. If China moves on Taiwan, the U.S. will go to war with China—and this holds whether the Chinese go all in or only seize an off-shore island. The use of military force changes everything—overnight. If observers thought the U.S. put pressure on its allies regarding reaction to Ukraine, imagine the pressure when the lives of its servicemen and women are in jeopardy. Moreover, from the start, an American military response will involve rallying its allies to the fight, including most prominently Japan, but also Australia and likely the United Kingdom as well.
There are only a few places in the world where a U.S. military response is so predictable, and Taiwan is one of them. Beijing itself is banking on it. Virtually everything about its military, its equipment, doctrine, etc., is designed to prevail in a war with the U.S. over the future of Taiwan.
All this argues for Beijing biding its time, warding off what it sees as Taiwanese moves toward independence, continuing to restrict its international space by keeping Taiwan out of additional international organizations and poaching the diplomatic recognition, and directly interfering in the island’s politics in favor of Beijing-friendly outcomes.
Following the 2008 financial crisis, Beijing calculated that time was on its side in a global competition with the U.S. Nothing has happened in the years since—including in the last few weeks—to change its mind. By its way of thinking, one day Taiwan will fall into its lap. This being the case, there is very little value in risking military confrontation with the U.S. today. Add to this the threat of crippling sanctions, which makes discretion overwhelmingly the better part of valor. Better for China to wait.