Russian Expert Alexei Maslov: China Is Not A Magic Wand For Solving Russia’s Economic Problems

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Professor Alexei Maslov, one of Russia’s foremost authorities on China, weighs in on the question preoccupying many Russians: when will Beijing come to Russia’s economic rescue?

 

Interviewed by Moskovskiy Komsomolets’ senior correspondent Mikhail Rostovsky, Maslov intersperses the good news with the bad. On the plus side, official China, and Chinese public opinion fully identifies with Russia’s position in Ukraine and anti-American feeling in China has reached a critical mass. Vladimir is held in high esteem by the Chinese leadership and Chinese public as a brilliant leader.

On the minus side, Russia’s actions caught China by surprise and upset the timetable for detachment from the West. China expects a return on its investment and will not simply open its purse strings. The Chinese are not sure if the Russians themselves know what sort of economy they would like to have. As the Chinese are wary of American secondary sanctions, they will come in a big way only when the special operation in Ukraine has concluded. However friendly a neighbor China has been and will continue to be, Russia must develop its own capabilities rather than exchange dependence on the West for dependence on China.

The interview with Alexei Maslov (subtitles original) follows below:[1]

 

“We will get help from abroad.” In the Russian mass consciousness, the role of [Victor Pelevin’s] the “Wizard in the Blue Helicopter” has traditionally been played by the West. But following the start of the special operation in Ukraine on February 24, all eyes seeking “help” for our country turned to Beijing. China is the only country in the world, aside from Russia, that America truly fears. China is the largest power center, whose active intervention in the conflict could tip the balance against the Western camp. But is the People’s Republic of China itself ready to grant us such a “gift”?

What lies behind Beijing’s vague official declarations expressing understanding of Russia’s actions and condemning the “hegemonic inclinations” of the US? How do the top leaders in the Zhongnanhai (Beijing’s equivalent of the Kremlin) intend to proceed on their real political course in relation to the battle between Moscow and the West? The following is what one of our country’s most prominent experts on the Middle Kingdom, the Director at the Institute of Asian and African Studies at Moscow State University and an expert on Chinese psychology and Chinese martial arts, Alexei Maslov, thinks about all these questions.

Alexei Alexandrovich [Maslov], we constantly repeat the thesis about the completely equal nature of Russo-Chinese relations. This is a purely propagandist thesis, isn’t it? After all, the asymmetry of resources and capabilities is evident.

We do have a tenfold asymmetry in economic development. The GDP of South China’s Guangdong province alone is greater than that of Russia in its entirety. If one regards Russia purely as an economy, then we really are no match for China.

But if one was to perceive Russia as a certain political element of Beijing’s overall global doctrine, then China will have a very difficult time without Russia. China is surrounded by countries that are not quite friendly to it: India, with which Beijing has a ton of conflicts, Japan, which is quarreling with China over the Senkaku Islands; Vietnam, which went to war with China in 1979; a surfeit of conflicts in the South China Sea. Russia is the country with which China has settled all its disputes so far.

Let me list the conclusions. Is our partnership equal? Economically-, no. Militarily and politically, I believe it is equal.

Without Russia, many of China’s political, military-political, and geoeconomic plans are in principle unattainable. This is precisely what gives us hope that China will not turn its back on us, or stand sideways towards us [neither for nor against]

All right, I’ll try my other thesis on you then. Does the Russian special operation in Ukraine mean that without firing a single shot, China has won a sugnificant victory in the great geopolitical game? After all, the possibility of a dangerous (for Beijing) rapprochement between Moscow and the West has now been totally eliminated.

Actually, in China itself, they do not evaluate the situation as unequivocally as you yourself think it is. China has always been afraid: today (I mean, before the recent events) Russia is drawing closer to us, and tomorrow it may turn its back on us or turn sideways. The Chinese have repeatedly spoken about this at conferences.

They wondered: why did prominent figures in Russia’s elite, who until recently advocated rapprochement with the West, suddenly begin to talk about rapprochement with the East? Can we believe them after that? Today, the situation has seemingly changed drastically. But let’s be honest, all these radical changes depend on a single person: the president of Russia. And if something happens to him and his entourage, our Chinese colleagues fear that the balance would tip towards the West faster than it moved to the East.

China has good analysts, they analyze the Russian elites, and our public opinion. And they understand very well: Russian public opinion may be anti-American, but it is not anti-Western. There is a subtle difference in this.

In addition, Chinese analysts also understand the following: Russia percieves China as a partner and an ally, but to argue that the Russian soul is closer to the Chinese one than to the European soul is also impossible. This puts China in a rather complicated position. So far, it turns out, that China has won a certain amount of time, from 5 to 15 years.

But winning that much time is a very significant geopolitical victory too, isn’t it?

Once again, you are being overly unequivocal in your assasement. Apparently, China intended to disengage itself from the US, but not now. It was preparing to take such a step in 5 to 8 years. This conclusion comes from a close analysis of China’s official development plans, for instance the “Made in China 2025” plan, a plan for new infrastructure, and much more.

China has been methodically moving towards this: i.e. to developing its own technological standards, its own economic macro-region. The Russian special operation, as it seems to me, have spoiled these Chinese plans. On the one hand, China got an absolutely decided ally in the form of Russia, which now effectively has no other way out. But on the other hand, China will now have to modify its disengagement model at an accelerated pace.

China doesn’t like surprises; there everything goes according to plan. Naturally, China knows how to restructure quickly. But even it has a set of options A, B, C and D. However, I assume that this particular scenario of Russia’s rapid disengagement from the West, was not calculated [by the Chinese].

Given its huge trade volume, China is not ready to let go of the West due to Russia’s actions. China’s annual trade with the EU amounts to more than 800 billion USD, while that with the US is 740 billion USD, and that with Russia is 146 billion USD.

In addition, in the best years (for instance, in 2016 and 2017) China was investing 100-120 billion USD into the US. This is not just money lying in banks. This is money invested in enterprises. China was counting on them. Now it turns out that China has to restructure everything very quickly.

Are there any signs that such a restructuring has already begun?

The anti-American wave in China has now intensified dramatically. An anti-American rhetoric has become mainstream.

There is very little discussion of the Russo-Ukrainian situation in media publications and social media posts. Instead, according to Chinese public opinion, there is only the US, which has banged Ukraine and Russia’s heads together, playing on their ambitions and sentiment.

China immediately extrapolates this situation to itself. They argue, we too have “our own Ukraine,” i.e. the island of Taiwan, around which, as it seems, exactly the same situation is being played out. The Americans, who are attempting to rule the entire world like puppets, support Taiwan too. We [Russia] has long stated that the problem should be solved fundamentally: i.e. solve the issue of the US-controlled global financial and banking system, and the issue of the world’s development institutions that are also controlled by the US.

In short, China immediately toggled everything into “constructive grievance” mode, i.e. having indicated the problem, it immediately designated its solution.

China Began To Understand

that Western Sanctions Are Scary

So, rhetorically, tectonic shifts are evident. But are there any true shifts in terms of political substance?

The shifts in rhetoric reflect a deep change that began long ago but has now sharply intensified. Anti-American rhetoric existed in China previously. But its “mass” was not critical. This rhetoric took the form of explosive outbursts in official newspapers. Now, on virtually all political fronts, China is beginning to speak out sharply against the US.

China has begun to understand that Western mechanisms of economic blockade are quite scary. Even back in 2014, after Crimea, we told our Chinese colleagues during many conferences, “Everything that is being done now with regard to Russia, will also be done with regard to China. But Russia is less integrated into the world economy than China is. So things will be much more difficult for you.”

The Chinese responded to that: “They wouldn’t dare. The US is too dependent on us.” But after Trump started trying, albeit unsuccessfully, to relocate American businesses from China back to the US, many American companies began to look at countries like Argentina, or Brazil as alternatives to China. Thus, China realized – it’s not that simple.

Beijing is seriously thinking: if the same sanctions that are now being imposed on Russia would be applied to us, what are we to do?

China is so dependent on import-export operations that Russia has never even dreamed of. China generates almost 40% of its GDP from export-import transactions. Moreover, these transactions are much more diverse than in our country. In our case, it’s mainly oil and gas, but [in the case]of the PRC it’s the entire range of goods. And now the Chinese are saying, “we need to detach as quickly as possible from this system, upon which we are so dependent.”

Another important point. As part of its main international initiative “One Belt One Road,” the PRC has, according to unofficial estimates, invested at least 300 billion USD into the European, Asian and African states. It turned out, however, that many countries welcome Chinese investment, but don’t welcome the Chinese presence. During conferences, many Chinese participants said that this is a repeat of the negative experience of the USSR, when the Soviet Union believed it was loved for the cause, but, in fact, it was “loved” for the money.

A number of countries that had gotten a lot of money from China (for instance, the Nordic countries, the Baltic States, the Czech Republic, Poland, Romania) suddenly became harsh critics of China, while continuing to receive large investments from Beijing. China doesn’t like this. It’s used to living in conditions of comfortable and pleasant treatment.

For the last 40 years, China has been admired by everyone. Suddenly, China realized that it wasn’t liked, and not only in Europe. For example, Australia, formerly the largest exporter of coal to China, has become an outright adversary of Beijing. There is also serious friction with South Korea. Psychologically, all this is very painful.

And what does Beijing intend to do in this regard?

China realized that it must establish its own macroeconomic region consisting of countries that sympathize with it and/or share its model of development.

What do I mean by the term “its own macroeconomic region”? [I mean] not just a platform for investment, but a platform for developing a united regulatory framework, for finances, business, and direct payments. Russia (psychologically for China) has already been part of this platform. Russia needs China, as it’s the largest buyer of our goods. But China feels uneasy without Russia, too.

Who is China’s true ally? There are very few major countries [on this list]. That is why China percieves Russia, as a country that can always be leaned on and say, “look, this is a major power (at least militarily) that supports us!”

Is there a prospect that China also plans to speed up and deal with the Taiwan problem once and for all, because of our actions in Ukraine?

I believe that last month they had an idea of doing so. But in the end they abandoned it. Why, you ask?

Attacking Taiwan is technically possible. But it’s a quite fortified island, and the Chinese losses would be enormous. The US is also openly behind Taiwan, the Taiwan Relations Act of 1979 is in effect in the US.

Furthermore, once China fires the first shot, it will completely change its [statehood]concept. It will transform from an economic power to a military power.

I believe that China, as always, wants the fruit to fall into its hands. The current situation in Europe is extremely beneficial to China right now. All the negativity is directed at Russia. Beijing can well use it to its own advantage and improve its image, for instance by offering humanitarian aid after the end of hostilities. An attack on Taiwan would degrade this image.

What would change such an approach? – oddly enough, internal pressure within society. Many Chinese argue, “just as Russia solves everything with Ukraine, we should solve everything with Taiwan in the same manner.” Although, I must emphasize, the nature of the Taiwanese and Ukrainian issue is absolutely different. The image of Russia and the image of Putin in China now resembles that of epic heroes. The Chinese themselves would like to act as tough as Russia does. For the Chinese, Putin’s behavior is an example of the correct response to the West.

Russia Must Make A Special Offer

Image is fine and dandy, but let’s talk about something more tangible. To what extent can the potential growth in economic cooperation with China outweigh the negative effect of ending similar cooperation with the West?

Regarding the short term perspective, one should have no illusions at all about large investments from China in Russia.

China is a pragmatic country. It will care about a stable ruble (no matter the exact exchange rate). China cannot just give money away. It has to get a positive return effect. Until we ourselves build a new work pattern for the Russian economy, it’s implausible that China will invest in it. China invests either in stable or very cheap markets. There will be no major investments in the near future, other than those that have already been made.

Furthermore, China will invest only in industries with guaranteed high liquidity, i.e. oil, gas, refining industry, transport, and, possibly, coal mines. China still operates more than 60% on black coal, and Australian coal is not being imported.

It is not China’s task to invest in building factories and creating industry. In other countries, China invests in railroads and tourism. However, the current return rate on such projects in Russia will be low. Will China supply those goods from the category that ceased coming to us from the West? -Partially, yes. But one must understand that contracts for many Chinese goods (textiles and IT technology) are being concluded for a year or two in advance. It is impossible to instantly restructure factories and plants. The [goods]flow will increase, but not radically. The short-term prospect is the prospect of negotiating, not of receiving goods.

Everything is clear regarding the short-term perspective. But is there a similar clarity regarding the strategic prospects for Moscow – Beijing economic cooperation?

It’s quite obvious that now China is wary of the secondary US economic sanctions related to trade with Russia. Chinese banks and Chinese companies fear this. We are witnessing delays in payments coming from the PRC, delays in goods deliveries.

There is an objective reason for this, i.e. the new outbreak of the coronavirus in China. But there is also a subjective reason. A basic political decision must be made at the highest level in the PRC regarding economic cooperation with Russia. Provided such a decision will be taken, then (and only then) will all thee issues be “unblocked.”

So when can we expect this fundamental political decision to be made?

In order for this to happen, three factors must coincide: a total conclusion to the military operation; the signing of some sort of ceasefire agreement, or some sort of treaty that will “freeze” the situation at any point. Until then, nothing will happen.

The second point: China needs to hear Russia’s economic stance. We haven’t formulated global demands, nor an economic position. There is no answer to the main question, what does Russia want in the economic sphere?

Finally the third point: Naturally, China is waiting for special offers. And this special offer should be radically different from what we [Russia] did in the economic sphere previously. I believe that at least until the end of the year, there may be complex and lengthy talks between Moscow and Beijing regarding this issue.

How necessary and beneficial is it for us to make such a special offer to China?

We should make such a special offer to a large number of Asian countries: India, Vietnam, or, strike that, maybe we should do the following: we should either do it to a group of countries (five, six, seven), or not to make it at all.

What could such a special offer entail? – For example, an absolute lifting of any taxes for decades for zones, where joint ventures will be established; participation of the Russian state as a co-investor in such projects. It’s beneficial for us not just to buy goods in China, but to simultaneously create joint Russo-Chinese enterprises on the PRC’s territory, which will produce and supply products to Russia.

The second point is the localization of Chinese manufacturing in Russia. In many ways, this would be a return to a position, where China started back in the 90s, when its slogan was “market in exchange for technology.” [It meant] “we have a huge market, come to us, but in return educate our engineers and establish modern production lines.”

It is not very easy task to accomplish. China is ready to localize its production in many countries around the world. But we have a lot of competitors. When a Chinese manufacturer puts Russian offers on his desk, next to it he puts offers from Indonesia, Vietnam, or Latin America. In these countries, there are better conditions in many respects: in terms of taxes, business registration, and security.

“To Tear Down The World’s Financial System Completely”

Suppose America will “detonate the economic nuclear bomb,” i.e. it will impose secondary economic sanctions against any of Russia’s partners, thereby banning any economic ties with us. How would China behave?

No one knows that. I believe even China itself doesn’t know it yet.

There are only two ways out of this situation. First, Russia, China and a number of other countries should agree to tear down the current global financial system completely. This would be terrible for everyone, including China. But, technically speaking it can be achieved. In order to do this, the Chinese will have to put the three trillion USD they have up for sale at foreign markets and introduce alternative financial and settlement centers to the Western ones.

The second option for Beijing is to quietly sit the situation out. Contracts with Russia, which do not concern critical technologies, will be executed. Russia, following Iran’s example, starts to steal technology. We start to develop on our own basis.

Which option is the more realistic one? I don’t believe that China will stop its supplies altogether. Psychologically, China suffers terribly from the fact that it is a great country, but very dependent on the US. One can see this trend in all the publications. China exists in someone else’s economic model. To submit to the US is to descend even deeper into that model, which is extremely uncomfortable for China. That is why I said that it will be first and foremost a political decision about whether China is willing to make sacrifices.

So, is China ready or not?

This is the big question. The Chinese people are used to getting more prosperous, used to living well. Every year they have a little added money. We place China before a terrible choice.

And how much longer can China drag out this choice?

For no more than a year. One can’t drag out this issue any longer than that. Many countries observe China: Malaysia, Indonesia, Central Asian states. The question may arise: is China a major country that makes its own decisions, or is China a country that follows the US’s course?

Is there an understanding in China that if one strives for a breakthrough, then it should be done now, as no such favorable circumstances may present themselves in the future?

Ironically, there are at least two categories of people in the PRC, who understand this well. The first group are the Chinese generals. The Chinese generals state, “war has been practically declared on us, however in a different form. We have to respond and go for a breakthrough.”

The second category consists of young and very critically-minded Chinese businessmen. In China, it’s widely discussed that many Chinese brands are prompted to hide behind American names in order to gain access to the US market. The “young and angry” businessmen respond to this by stating that if China is treated so badly in the West, then let’s respond to it!

But it’s not the generals and young businessmen who make decisions. It’s the seven-member Standing Committee of the Politburo of the CPC Central Committee that decides. These are extremely balanced and serious figures. Strong economic-clan and financial groups are behind them. To pass such a decision means striking a blow also to Chinese financial groups affiliated with the US and their investments. No one knows whether China is ready to embark on such a scenario. Any speculation is nonsense. We don’t know very well what is really going on in the Chinese “Areopagus.”

Secrets Of The Politburo

Is it still possible to attempt an understanding of the balance of power in the Politburo: who stands for more decisive actions in relation to the US, and who doesn’t?

There is Premier, Li Keqiang, who is in charge of the economy. Obviously, he is in favor of minimal economic turbulence, peaceful action, an open economy, and against trade imbalances.

Li Keqiang

There is a bloc in charge of international policy, headed by Politburo member (but not a member of its standing committee), Yang Jiechi. This bloc consists of extremely determined and very tough people. The Foreign Ministry, headed by Minister Wang Yi, is subordinate to this block.

Exactly this duo participated in the famous meeting with [Jake] Sullivan and [Antony] Blinken in Alaska. For the first time, during that meeting China used such harsh language in conversation with Western leaders. Nothing like this or close to this had ever happened before.

In China a generation called “wolf [warrior]diplomats” has appeared. For them, [Russian Foreign Ministry Spokeswoman] Maria Zakharova is a model (if not an icon) of sound behavior.

Xi Jinping himself is trying to stay above the struggle. But lately he has managed to neutralize the South China clans, which were focused towards the US and on financing Hong Kong and Malaysian projects. Li Keqiang and Jiang Zemin, who are still alive, provided support to the South China clans in every way possible, percieving them to be the main “point of growth.”

Is it possible to know how Xi Jinping really feels about Russia? We knew how Jian Zemin felt about it. He sang “Midnight in Moscow,” had a good command of Russian. What can we say about Xi?

[First] I believe he has a very pragmatic attitude. This is a normal Chinese situation. It’s neither bad nor good.

[Second], Xi Jinping, as it seems, created for himself such a world picture, in which Russia occupies an important place and plays the role of a spoiler in relation to the US, i.e. it does for China what China would like to do, but doesn’t do.

Third, Xi perceives Russia as a friendly country. One can see evidence of this in hints and phrases he uses.. In Chinese, there are a lot of nuances in terms of how someone can be addressed. You can’t just call a country “friendly.” For this, a special political decision must be passed.

There is one more issue. Xi Jinping is as positive as possible about Putin personally. What I’ve personally witnessed indicates that there is “chemistry” between them.

However, it’s also possible that for Xi, Putin is one thing, while Russia is somewhat another. Putin is a successful and prominent leader. At the same time, Russia is a country that has not yet been able to fully realize its financial and economic model.

And finally, one last thing. Psychologically, Xi does not perceive Russia as a threat. We never criticize China or Xi. In addition, it’s obvious that there will be no economic confrontation between China and Russia in the next century. However, the US, the EU and Britain are, naturally, adversaries in Xi’s eyes.

Who has more real power: Xi Jinping in China or Putin in Russia?

Putin [has more real power]in Russia. Because of the power structure arrangement, Xi Jinping is compelled much more to take the opinions of others into account. If a country that hosts a population of one billion four hundred million people goes beserk (for example, let’s say social unrest erupts in some province or county), then there will be a huge chain reaction following to the “domino principle.” When it’s argued that China is a communist state, it’s not simply a figure of speech. China has democratic centralism, collective deliberation and collective decision-making. Xi Jinping is not an absolute leader, but the first among equals. Therefore, he is extremely careful and cautious.

Shouldn’t we as well be extremely careful and cautios with China? For example, is it a justified opinion that if China becomes a monopoly buyer of Russian energy resources, it will harshly dictate low prices to Moscow?

It is justified. There has not been a negotiation where China has applied pressure on prices. Russia’s task, therefore, is not to turn into a hostage the one (even of extremely friendly) monopoly buyer.

Be that as it may, China shouldn’t be perceived as a magic wand, which would solve for Russia all of her problems. If we simply “unhitch” our economy from the USD and “hitch” it to the yuan, then we will, of course, give ourselves a respite. But we won’t provide anything in terms of economic revival.

The same applies if we simply cut loose from American technological standards and attach ourselves Chinese ones.

The only way to achieve absolute security for our country is to develop our own points of growth.

Over the past 40 years, China has not behaved aggressively towards Russia and, I believe, it won’t behave that way in the future. China, for example, is not interested in undeveloped Siberia and the Far East. The Chinese are very pragmatic in this respect. But this does not cancel the task of achieving technological independence.

 

[1] Mk.ru, April 5, 2022.

MEMRI

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