The Pandemic Depression
The Global Economy Will Never Be the Same
In March of 1969, Chinese troops ambushed and killed a Soviet border patrol on an island near the Chinese-Russian border. Fighting on and near the island lasted for months and ended with hundreds of casualties. Fifty years later, the ferocity of the skirmish between Mao Zedong’s China and Leonid Brezhnev’s Soviet Union seems to belong to a very distant past—so distant, indeed, that many foreign-policy experts are convinced that an anti-U.S. alliance between the two countries is emerging. Yet even half a century on, such an assessment stretches the evidence beyond what it can bear. On closer inspection, Chinese-Russian economic, foreign policy, and military cooperation is less than impressive. The history of relations between the two countries is fraught, and they play vastly different roles in the world economy, making a divergence in their objectives all but unavoidable. In short, reports of a Russian-Chinese alliance have been greatly exaggerated.
Economic relations between Russia and China are rapidly expanding, and some experts have cited these ties as evidence of a growing closeness between the two countries. Indeed, just last year, bilateral trade increased by at least 15 percent compared to 2017 and reached a record $100 billion. Yet asymmetries in the scale and structure of bilateral commerce suggest caution: although China is Russia’s second-largest trading partner (after the EU) and Russia’s largest individual partner in both exports and imports, for China the Russian market is at best second-rate. Russia ranks tenth in Chinese exports and does not make it into the top ten in either imports or total trade.
The structure of the trade is similarly skewed. More than three-quarters of Russia’s exports to China are raw materials, specifically crude oil, wood, and coal. China’s sales to Russia are 45 percent consumer goods and 38 percent electronics and machinery. The completion this year of the Power of Siberia natural gas pipeline will further widen the disparity by facilitating the export of $400 billion worth of Russian raw materials to China over the next 30 years. The nature of this exchange corresponds quite closely to Karl Marx’s and Vladimir Lenin’s description of colonial trade, in which one country becomes a raw material appendage of another. It is rare for metropolises to ally themselves with their colonies.
Russia’s and China’s efforts at joint economic development and investment do not look much like cooperation between two eager allies. Even after Moscow’s so-called pivot to the east, spurred by post-Crimea sanctions, from 2014 through 2018 China directly invested no more than $24 billion into its northern neighbor’s economy. During the same period, China invested $148 billion in sub-Saharan Africa (including $31 billion in Nigeria alone), and $88 billion in South America (including $34 billion just in Brazil). Or consider the Program of Cooperation in the regions of Far East, Russian Eastern Siberia, and Chinese North-East in 2009–2018, signed in 2009 by Chinese President Hu Jintao and Russian President Dmitry Medvedev. The initiative included 91 joint investment projects. Six years into the program, China had financed only 11 of these, while the rest were delayed, in the words of the Carnegie Moscow Center’s Ivan Zuenko, by “bureaucratic hassles.”
China’s parsimony is evident in both the private and public sectors. A much-heralded plan for the CEFC China Energy company to purchase a 14 percent stake in Russia’s largest, and majority state-owned, oil company, Rosneft, fell through. So did a Chinese government pledge to invest $25 billion in the Power of Siberia pipeline, which cost Russia $55 billion. Moscow has celebrated its projected annual delivery of 38 billion cubic meters of natural gas to China via Power of Siberia as a big step toward economic interdependence. But to China, the pipeline is no more than a diversification of the country’s energy sources. In 2017, it imported over 90 billion cubic meters of natural gas, mostly from Australia, Qatar, and Turkmenistan.
Russia and China are hardly any closer in foreign policy than they are in trade. To be sure, the two countries stand together in their declared opposition to U.S. primacy in world affairs. Both advocate a multipolar world and swear to resist the perceived threat of U.S. intrusion into their spheres of influence. Beijing and Moscow also see eye to eye with respect to the threat posed to their regimes by what they see as U.S.-inspired, if not U.S.-engineered, pro-democracy “color revolutions.” They vote almost in unison at the United Nations.
Yet away from the global limelight and closer to their shared Eurasian home, the two countries are hardly aligned. They poach in each other’s spheres of influence, contest each other’s clients, and reach for each other’s economic and geopolitical assets.
Russia and China poach in each other’s spheres of influence, contest each other’s clients, and reach for each other’s economic and geopolitical assets.
China has failed to support Russia in matters of great geopolitical importance to Moscow. Beijing refused to recognize the independence of Abkhazia and South Ossetia after the Russian-Georgian war in 2008. It abstained from, instead of voting against, the UN resolution condemning Russia’s 2014 seizure of Crimea. In another symbolic display that could not have pleased Moscow, President Xi Jinping chose to inaugurate the 2013 Belt and Road Initiative (BRI) in Astana, the capital of Kazakhstan. By choosing to flex Chinese power in the largest of the former Soviet Central Asian republics—the one that shares the world’s second-longest border with Russia, at 4,250 miles, and is home to the greatest proportion of ethnic Russians in Central Asia—Xi flagrantly intruded on Russia’s sphere of influence. (A year later, Putin mused about the fragility of Kazakhstan’s statehood during a question and answer session at Russia’s National Youth Forum.) Xi and Putin later agreed to “coordinat[e] cooperation” between the Russia-led Eurasian Economic Union and Belt and Road. But although some of the subsequent Chinese- and Kazakh-led infrastructure projects have been completed, many Russian-led projects have stalled due to financing and negotiation problems.
For its part, Russia periodically flirts with China’s foe, Japan, by dangling the return of the four Kuril Islands, which the Soviet Union seized from Japan at the end of World War II and which remain the main obstacle to a peace treaty between Moscow and Tokyo. In the latest round of that game, during Prime Minister Shinzo Abe’s visit this past January to Moscow, Putin, yet again, held out the possibility of normalizing relations by giving Japan back at least two of the islands, a gesture that Beijing likely resented, even though it did not lead to a breakthrough. Russia also exposed tensions with China within the Shanghai Cooperation Organization—an international body founded by Moscow and Beijing to promote economic and security cooperation among its members—when it invited another Chinese rival, India, to join the group. China tied the score by inviting India’s archrival (and the largest customer for Chinese weapons), Pakistan, to join.
Chinese-Russian military cooperation in particular is often held up as evidence of a growing closeness. Much has been made of the fact that Russia has sold China the latest version of its most advanced antiaircraft S-400 missile defense system. But India, Qatar, Saudi Arabia, and Turkey are next in line for the same equipment. And although China was the first to buy Russia’s most advanced Su-35 jet fighter, it will not be the last. Indonesia has contracted for 11 jets, Egypt has purchased dozens more, and India has reportedly considered buying 114 jets. Overall, from 2013 to 2017, India was a far likelier destination for Russian defense hardware than China, with 35 percent of Russian arms exports going to New Delhi, compared with 12 percent to Beijing.
Last year’s first joint Russian-Chinese land exercise, Vostok-2018, pointed to an imbalance in military cooperation not unlike the one in the two countries’ bilateral trade. Russia fielded between 75,000 and 100,000 soldiers and 1,000 aircraft; China contributed just 3,200 soldiers and six planes. Mathieu Boulègue of Chatham House argued that China was invited to participate not so much to bolster an alliance as to allay any Chinese concerns about the demonstration of force so close to its borders.
Indeed, the need for strengthening mutual trust between the putative allies was evident three years before Vostok-2018, during the Kremlin’s search for Internet policing technology. Following a series of high-level internal consultations, the Kremlin decided to buy data storage and servers from the telecom giant Huawei. Then, suddenly, the deal was off. The security services became so alarmed by the likelihood of Chinese espionage that they dared to challenge the Kremlin’s decision—and, even more surprisingly, managed to reverse it.
In the end, the most promising portent of an alliance might be the personal relationship between the rulers of the two countries. The Putin-Xi bonhomie extends beyond surface pleasantries. They have met more than 25 times, far more frequently than either has with any other head of state. Xi recently called Putin his “best friend,” and his first visit as president was to Moscow. Putin has extolled his relations with Xi as the finest personal rapport he has with a foreign leader and fondly recalled celebrating his sixty-first birthday with Xi, over slices of sausage and shots of vodka, during the Asian-Pacific Economic Cooperation summit in Bali in 2013. Xi presented Putin with China’s very first Order of Friendship, designed to reward foreigners who contributed “personally to the PRC’s cooperation with the world community.” Putin hung a gold chain of the Order of St. Andrew, Russia’s highest civilian award, on Xi’s neck.
Sustained mutual affinities between the leaders of great powers almost always reflect not only overlap in geopolitical objectives but regime similarities. Both Putin and Xi preside over versions of state capitalism. Putin’s attraction to Xi is not hard to fathom: the Chinese leader is a fellow authoritarian who controls an enormous economy, which even in today’s downturn posts rates of growth of which Russia can only dream of. And China does this even while importing huge quantities of oil and gas.
Xi’s alleged respect for Putin likely stems from the Russian president’s deft defusing of several potentially explosive domestic political problems similar to ones Xi himself has faced. After taking office, Putin recentralized power within the Russian state, taming the oligarchs and wiping out the political strongholds of elected governors and presidents. Then, early in Putin’s third term in 2012, as he faced bleak economic prospects and rapidly declining approval ratings, he rejected the liberalizing reforms that his minister of finance suggested. Instead, Putin began to shift the foundation of his regime’s legitimacy from economic progress and income growth to the Kremlin as a defender of Russia against U.S. aggression and restorer of its past glory as a global superpower—a formula that the leading Russian political sociologist Igor Klyamkin has labeled “militarized patriotism.”
Concomitantly, Putin cracked down on public displays of dissent, called for the “patriotic upbringing of the youth,” and further intimidated civil society by signing a law designating many NGOs as “foreign agents,” rendering them social pariahs subject to harassment by the security and tax authorities. He made the Orthodox Church the guardian of national mores, and he personally guided the politicization of history textbooks, which began to whitewash the Soviet experience and rehabilitate Stalin.
On the road to his own chairmanship—and presidency for life—Xi has reprised Putin’s choices, in spirit if not always letter. He concentrated policymaking in the office of the party chairman, broke the baronies of regional party secretaries, and instigated a widespread “anti-corruption” campaign aimed at eliminating, or intimidating, potential critics and rivals. He abolished the de facto term limits for top party and government positions and tightened controls over media and book publishing.
As Chinese growth rates began to decline, Xi, like his “best friend,” spurned pro-market reforms and instead opted for his own version of Putin’s militarized patriotism: the reassertion of the Communist Party’s supremacy, the merger of “core socialist values” with “traditions of Chinese culture,” and a war on “spiritual pollution” that has led to heightened repression in Tibet and Xinjiang.
Similarly, “national rejuvenation” and the pursuit of the “Chinese dream” became central to the regime’s foreign policy discourse. In Xi’s words, China was facing “the most complicated … external factors in [its] history.” Admiral Sun Jianguo, a deputy chief of the General Staff of the People’s Liberation Army, described these factors as “invasion, subversion,” “undermining … stability,” and “interrupting socialist development.” Much as Putin had done, Xi transformed his country’s foreign policy from assertive to aggressively expansionist. The Chinese leader has militarized territorial disputes in the South and East China Seas and fortified Chinese-constructed artificial island chains with missile batteries and aircraft bases.
Putin’s and Xi’s kinship is real and formidable, but even it may not be enough to overcome the obstacles to a genuine alliance. One such obstacle is aptly described by a Russian expression, “istoriya s geografiey.” Literally “a history with geography,” the collocation refers to a seemingly straightforward matter suddenly turned into something involved and complicated. History and geography militate against an entente cordiale between the two Eurasian giants. Authoritarian states sharing a 2,600-mile border, with much of that boundary first imposed by imperial Russia on a weaker neighbor, are hardly ideally set up to build mutual trust.
Reinforcing that barrier are very significant structural differences between the two countries’ economies, which result in their holding divergent stakes in the present world economic order. Confined largely to exporting oil and gas, Russia’s integration in the world economy is at once quite secure and quite limited. Moscow can afford to rock the boat and to seek from Beijing a pointedly anti-Western, active, and committed military-political partnership.
China’s economy, on the other hand, is the world’s second largest—more than seven times the size of Russia’s—with exports that include advanced communication technologies, cell phones, computers, and cars. The country’s trade with the United States and the European Union comes to at least five times the value of its Russian account. Because of its greater interdependence with other leading world economies, China’s system is also far more vulnerable to geopolitical disruptions than Russia’s. And as a greater beneficiary of the liberal international economic order than Russia, China is warier of antagonizing that order’s ultimate guarantor, the United States. Skillfully promoted optics notwithstanding, China is not likely to follow Russia into an anti-Western geopolitical crusade, preferring to cooperate with its alleged ally on a more modest scale economically and especially militarily.
When I was living in Moscow in the fall of 1969, a rumor circulated that, returning from Vietnamese leader Ho Chi Minh’s funeral, Chairman of the Council of Ministers Alexei Kosygin stopped over in the Beijing airport for talks with his Chinese counterpart, Zhou Enlai. When the Chinese premier moved to embrace him, Kosygin drew back, saying, “Тhis is premature.”
Apocryphal or not, Kosygin’s injunction seems applicable today. Despite claims to the contrary, the notion of a Chinese-Russian alliance is still premature.