China’s support for Russia in the war in Ukraine is showing its limits as the domestic costs for President Xi Jinping start to outweigh the benefits of confronting the U.S.
Whether a trade war or a real one like in Ukraine, China has shown that it will try to prevent its geopolitical struggles with the U.S. from hurting the domestic economy. A rapidly worsening COVID-19 situation and the need to maintain stability in a pivotal year for Xi make it less likely the Chinese leader would allow Vladimir Putin’s invasion of Ukraine to blow back at home.
Signs of domestic pressure were evident Tuesday, as U.S. warnings against Chinese financial and military support for Russia deepened investor concerns that the world’s two largest economies might decouple. An index of Hong Kong-listed Chinese shares sank 6.6% to the lowest level since 2008, while the Shanghai Composite Index fell the most in two years. A so-called fear gauge — similar to the VIX in the U.S. — has now surged 78% in the past two days.