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How Russia’s Ukraine Invasion Weighs on China’s Economy

How Russia’s Ukraine Invasion Weighs on China’s Economy



China's top political leaders are meeting in Beijing this week and have announced the country’s new GDP goal for 2022, a major benchmark that Premier Li Keqiang has said will remain around 5.5%, the lowest target in decades.To get more economy news today, you can visit shine news official website.

After two years of grappling with the coronavirus pandemic, Beijing is also dealing with turmoil in real estate markets and bankruptcies of large developers, rising debt and continuing trade tensions with the United States. But leaders are saying little publicly about how Russia’s invasion of Ukraine will affect economic growth.

Analysts tell VOA’s Mandarin service that the war in Ukraine could bring both short and long-term impacts, such as disruption in the trade of goods and increased U.S. efforts to insulate itself from geopolitical shocks to international supply chains fueled by key sectors of the Chinese economy.

In a speech during the Two Sessions, which began late last week and wraps up on Friday, Premier Li said, "There is no doubt that China's economy will withstand any downward pressure and continue growing steadily long into the future.”

Economists, however, think the 5.5% goal may be a bit high, given the global economic shocks from the fighting in Ukraine.

“The target will be challenging to meet — given recurring mobility restrictions due to COVID-19 outbreaks, weak domestic demand and a distressed housing market — and would require the government to boost pro-growth policies such as infrastructure investment,” he added. “The Ukraine crisis will add to the challenges as China faces soaring commodity prices.”

David Dollar, a leading expert on China’s economy at the Brookings Institution, agreed.“The tragic situation in Ukraine will have some spillover on the Chinese economy because the EU is one of China’s big trading partners,” he told VOA Mandarin.

China’s trade with Russia and Ukraine is valued at $147 billion and $19 billion respectively, according to Chinese customs data. These transactions will likely be affected by the ongoing conflict and sanctions imposed.

Facing intensifying sanctions from Western countries, Russia’s leadership will increasingly try to turn to China for goods. That is the biggest upside for China, said Gary Hufbauer, a senior fellow at Peterson Institute for International Economics.

“Russia will gladly sell oil and gas, plus wheat and other grains, at lower prices to China. Russia will also likely be willing to pay higher prices for a wide range of Chinese products, from semiconductors to clothing, he told VOA Mandarin.

Yet according to EIU’s Xu, international sanctions on technology will pose compliance risks to Chinese companies, which have now established a large presence in the Russian consumer market. High-tech firms, such as Xiaomi and Lenovo, will have to take a loss if they choose to comply with the U.S.’s export controls against Russia because a majority of their products use U.S. technology.

“They will be reluctant to circumvent global sanctions in ways that could jeopardize their more profitable operations elsewhere,” Xu told VOA Mandarin.

The ongoing crisis will also have a negative impact on the world’s supply chain. According to an analysis released by from the EIU last week, the disruption in land-based trade routes between Asia and Europe will increase as transit through Russia becomes more difficult.

“This will particularly affect some Chinese companies, which had increased their traffic over land-based routes through Russia [en route to Europe] as an alternative to sea and air freight during the coronavirus pandemic,” it said.

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