"Momentous change": Europe rethinks China business, Beijing warns it will retaliate if hit by Russia sanctions & Biden unable to convince Xi to join West against Putin's war -- China Boss news 3.21.22

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“Momentous change”: Europe rethinks China business

“It took just one week after Vladimir Putin ordered an invasion of Ukraine for Volkswagen, BMW and Mercedes-Benz to suspend production and sales in Russia,” wrote Financial Times Joe Miller last week. But, as an advisor to one of the carmakers put it, “a similar scenario” for the German auto industry’s China business “would be close to an existential crisis.”

Putin’s invasion of Ukraine and China’s refusal to condemn it has made German policymakers reconsider the “risks of relying authoritarian states,” Miller said, citing interviews in German media with political representatives.

Miller, FT:

“I don’t want us to be facing a similar situation with China in 10 years,” Lars Klingbeil, co-chair of the Social Democratic party, told Der Spiegel at the weekend. “We have to drastically reduce our dependence on authoritarian states. We can see that with Russia in terms of our energy supply. With China, we can start now.”

The wind of change was already blowing through Berlin after last year’s parliamentary elections delivered a new coalition government that has taken a more confrontational approach to Beijing, particularly over human rights in Hong Kong and in international security, than that of former Chancellor Angela Merkel. (For a quick explainer, watch “No Status Quo: Germany and China after the Bundestag elections,” on the China Boss Youtube channel. )

But questions over what Chinese officials knew about Putin’s plans to invade Ukraine prior to the war, as well as Beijing’s amplification of Russian disinformation, have unsettled leaders elsewhere in Europe. In a recent post for GMF’s Asia Program, Senior Transatlantic Fellow Andrew Small highlighted, both, the EU’s and NATO’s growing distrust.

Small, GMF:

While Beijing can argue that it believed Russia was “only” trying to coerce concessions or stage a more limited military intervention, this “reassurance” only amounts to China arguing that it had extended its backing with the expectation that Moscow would succeed. Unsurprisingly, the result was that several European leaders, including the president of the European Commission and the NATO Secretary General, started speaking of China and Russia as a conjoined threat. This was not a lazy conflation of authoritarian powers, but rather a facing-up to the bleak consequences of the decisions that Xi appeared to have taken. 

GMF Visiting Senior Fellow Noah Barkin earlier this month also noted that China’s “awkward rhetorical dance” of “voicing support for Ukraine’s territorial integrity but refusing to criticize Russia” along with the suggestion that “the invasion was provoked by the United States and NATO” would leave a lasting impression on Europe and has “triggered a fundamental foreign policy rethink.”

Barkin, GMF:

In the old world, Germany could depend on Russia for its gas, on China to buy its cars, and on the United States to take care of its security. The first of these pillars crumbled over the past week. The second pillar is beginning to show cracks. And the third is likely to depend on having a president in the White House who believes that the transatlantic alliance is worth fighting for. Hence, the foreign policy revolution witnessed in Germany over the past days, in which postwar taboos have been shattered, one after the other: the death of the Nord Stream 2 pipeline and the decision to Russia-proof energy supplies through major investments in new LNG terminals; a €100 billion defense fund and commitment to meet NATO’s 2 percent goal faster than anyone thought possible; the decision to send arms to Ukraine. Make no mistake, this is momentous change.

Emphasis added.

The war in Ukraine and China’s friendless position in backing Putin’s aggression have greatly complicated an already difficult situation for multinationals doing business in China. "Material support" for Putin's war is the red line that Beijing must not cross if it wants to avoid similar economic sanctions that have been imposed on Russia by Europe and the United States.

But China's stance has "made life harder for itself," Small said, and, going forward, China Boss thinks Russia's increased dependence on the Middle Kingdom will elicit the kind of assistance “material” enough to warrant Western sanctions.

For the rest of FT’s report, Volkswagen and China: the risks of relying on authoritarian states, click here. For Andrew Small’s post on the George Marshall Fund’s website, China Faces the Consequences of Supporting Russia, click here. For Noah Barkin’s post on GMF, What did Xi know?, click here.

Law and International Xi

China warns it will retaliate if hit by Russia sanctions