Since its February 24 invasion of Ukraine, Moscow has grappled with severe sanctions on its economy and a flood of Western political and military aid to Kyiv that caught the Kremlin off-guard.
For China, Russia's war in Ukraine has already provided a series of instructive episodes.
Policymakers in Beijing are closely watching the continued Western response toward Moscow to better understand the potential reaction in the event of a Chinese invasion of Taiwan, which China claims as its territory and has threatened to invade if Taipei refuses to submit to its control.
Beijing has thus far been left "unsettled" by the aftermath of Russia's invasion, according to CIA Director William Burns, who told the Financial Times on May 7 that the tough Western response against Moscow came as a surprise to China's leadership and could affect its calculations for Taiwan.
But Burns added that he doesn't believe Chinese President Xi Jinping's long-term desire to gain control over Taiwan has changed.
So what lessons is Beijing drawing from the Ukraine war?
Chinese leadership appears to be pushing forward on a self-reliance drive, a trend that was already under way but which the war in Ukraine made more imperative for Beijing. In the meantime, Chinese companies have moved cautiously while interacting with Russia's sanctioned economy, despite both Xi and Russian President Vladimir Putin declaring a "no-limits" partnership between their countries in February.
With concern mounting in Beijing that it could be blocked from Western economies by sanctions and penalties similar to those that have been put on Russia, RFE/RL spoke with Alicia Garcia-Herrero, the chief economist for Asia-Pacific at the investment bank Natixis.
RFE/RL: We've seen lots of headlines lately about some smaller-scale Chinese refineries buying up Russian oil at a discounted price. What do you make of these moves and what does that tell us about how China will approach dealing with the Russian economy moving forward?
Alicia Garcia-Herrero: There isn't an obvious [answer] here. China is approaching Russia on the surface, at least, in a very friendly way. [When] we look at words rather than the deeds, the narrative is extremely positive: both officially but also in the media; but in reality China is quite hesitant and very careful about avoiding secondary sanctions [from the United States].
We see, certainly when it [comes to] banks, they have generally stopped offering letters of credit to Russia. We also know from anecdotal evidence that some smaller [Chinese] refineries are buying up oil [often at a discounted rate]. [But] to me, that's not big proof of massive support because India is doing the same and so are many other [countries]. Therefore, I would not see that as a game changer.
What could be a game changer is Chinese exports [to Russia], but exports of the right thing, meaning exports of semiconductors -- especially commercial and military fusion semiconductors -- because we know that Russia needs that for its military equipment. [But] that can be much harder to track.
But from what we can track, I would argue that all in all, China's being quite careful in its actual actions. If [Beijing] needs to [take a] risk it will be where it's most needed for Russia and I don't think that is imports of energy, because they can always [get it] at a discount.
RFE/RL: It seems that some investors are pulling back from the country and there are reports that Chinese regulators have held an emergency meeting with domestic and foreign banks to discuss how they could protect the country's overseas assets from potential future U.S.-led sanctions similar to those imposed on Russia for its invasion of Ukraine. So, how is the war in Ukraine affecting the Chinese economy?
Garcia-Herrero: First we need to notice that beyond Russia and the war, China is going through its own hell due to COVID, which is a major shock for the country. So it's hard to disentangle those, in my view. COVID and [COVID-related lockdowns] are much bigger economic hits. So even if China's ambiguous position on the war in Ukraine could have had an impact, we might not see it because of COVID having such a larger one.
But beyond this immediate impact there [were] quite large [investor] portfolio outflows from China [in] March and April. So one could say that's a sign that investors are fearing sanctions, but I think there are many other reasons to explain that. For instance, the yield differential with the United States has vanished because we're well above 3 percent already for U.S. treasuries, so, it just doesn't make much sense to keep your Chinese sovereign bonds right now with a depreciating currency. That makes it hard for me to say that China is really suffering from its position on Ukraine. Rather, what I would say is that Beijing is anguishing over what may happen to China because of Ukraine, which is not necessarily something immediate.
I think that's the key. It's more about how China may react. It's a fear over what may happen to China [and how] that could actually change the picture rather than any sanctions themselves.
This brings me to the reported emergency meeting that the [People's Bank of China] held about what to do in the event of sanctions [on China]. We only have some leaks here and there [about this meeting], so it's hard to know what they were discussing; but my sense from those leaks is that it was not really about secondary sanctions. I think what China is really worried about is what happens if [Beijing] does something about Taiwan.
When you read [the leaks], it's more about protecting China's [foreign-currency] reserves. That means it's actually preparing for a type of Russia scenario, but on steroids, because China's foreign-currency reserves are many times bigger than those of Russia.
And fretting about this could indeed lead China to make decisions that could be quite something for the world, like starting to divest from U.S. Treasury [bonds]. So, it is indirectly related to what we've seen happen from the war in Ukraine, but it's not a direct [effect]. I think that it's important to take into account that the whole world is learning right now from the [Western reaction] to [Russia's invasion] and, in the case of China, it is even preemptively reacting based on what it is learning from this war.
RFE/RL: The future is obviously very difficult to predict, but what is a realistic forecast for what we can expect from China economically and also down the road with its relationship with Russia?
Garcia-Herrero: I think China will continue to make precautionary, isolationist decisions. We've already seen this with the Great Firewall that blocks off the Internet and we saw more moves happen related to the trade war with the United States that happened under the [administration of U.S. President Donald] Trump.
[Beijing] has already been creating barriers, but this [process] has accelerated because of Trump and then COVID, then [the war in] Ukraine, and then again due to COVID [in China]. I don't think we're going to see that trend change, either. If I were asked to advise the Chinese government -- which I don't think will happen -- about what to do to reduce the risk of sanctions, I would say to do the exact opposite of what they are doing now. They should be increasing their interdependence because that's their leverage [with the West]. The fact that they're not even seeing it this way is because this [more isolationist] mindset has already [set in].
This brings me to Russia, which is also in a similar mindset. That makes it a type of strategic partner, but in a coincidental way. [Beijing and Moscow] find themselves seeing the world in a shared way with the same type of mindset and that has brought them closer, but I think it's important to note that these kinds of coincidental partnerships don't last very long, especially if you look at Russian and Chinese history. The [set of] conditions that made them partners might change over time and could change very quickly when it finally does.
I think that it's unavoidable for Russia and China to be closer together, but it's not a choice. It's a friendship of need, not of want. They happen to be in similar circumstances, and I don't even want to say that they were forced into these circumstances, it's mainly due to their vision of the world.
And for the West, I think it's important to understand the reasons why, because other than China and Russia, there's many other countries out there watching [who] could begin to feel the same way.