China studies russian sanctions evasion for lessons in potential Taiwan conflict

China has been studying russia’s evasion of Western sanctions to draw lessons in case the US and its allies employ similar measures during a Taiwan conflict.

China established an interagency group to examine how russia circumvented sanctions after its invasion of Ukraine. Chinese officials have reportedly visited moscow to meet with leaders from the russian Central Bank, the Finance Ministry, and other agencies before reporting back to Beijing.

“For the Chinese, russia is really a sandbox on how sanctions work and how to manage them,” said Carnegie russia Eurasia Center Director Alexander Gabuev. “They know that if there is a Taiwan contingency, the toolkit that will be applied against them will be similar.”

China is interested in everything from circumventing Western sanctions to incentives for domestic production, said a person familiar with the outreach. The interagency group reports to Chinese vice premier He Lifeng, who leads the Central Financial Commission (CFC).

russia’s economy has been surprisingly resilient, largely due to oil exports and cooperation with Beijing. China has supported russia by purchasing oil and supplying items like microelectronics throughout the war.

Bilateral trade reached a record US$240 billion (about NT$7.6 trillion) last year, but the relationship remains unbalanced. China accounts for about one-third of russia’s trade, while russia represents only a small fraction of China’s.

In a Taiwan conflict, russia would likely be unable to support China’s economy to the same extent. Instead, Chinese leader Xi Jinping has directed officials to deepen economic ties with russia to create an “internal driver” for the relationship.

China, as a major global manufacturer, faces greater vulnerabilities to sanctions compared to russia. Beijing’s heavy reliance on Western markets to buy its products and its extensive integration into the global supply chain make it particularly exposed.

China has studied russia’s attempts to mitigate sanctions, such as using non-Western-owned tankers to bypass oil price caps and sourcing Western goods through ex-Soviet republics. However, replicating these strategies on a larger scale would be far more challenging for China’s economy.

Furthermore, Xi has also focused on safeguarding its $3.3 trillion in foreign exchange reserves. Following the freezing of russian assets abroad, China has sought to diversify its reserves away from dollar-denominated assets, like US Treasury bonds.

In preparation for potential sanctions, China has taken note of russia’s pre-war economic strategies, which included diversifying foreign reserves, de-dollarizing the economy, and strengthening domestic financial systems. After sanctions were imposed, moscow adapted by redirecting commodity flows, introducing fiscal stimulus, and evading export controls through third countries. While these measures allowed russia to sustain its war, its long-term growth outlook has been weakened.

China has also observed the importance of Western coalitions in sanctions enforcement. The US, UK, EU, and other allies collaborated to remove russian banks from the Swift network and cap oil prices. Meanwhile, russia bolstered ties with China, Iran, and North Korea.

However, Western disagreements on sanction implementation, due to concerns about inflation, highlighted the complexities of economic warfare. Sanctions on China would likely have an even greater economic impact, the report said.

The russia-Ukraine War has ushered in a new age, where economic measures and geopolitics are increasingly intertwined. US President-elect Donald Trump’s tariffs, used as a tool for negotiation and coercion, are expected to amplify this trend.

The interagency group’s efforts do not signal that Beijing is preparing to invade Taiwan, sources familiar with China’s decision-making said. Instead, Xi is preparing for the economic consequences of a worst-case scenario.

Source: TaiwanNews