China warns of retaliation if hit by trade sanctions for not condemning Russia invasion of Ukraine

Tue 15 Mar 2022
Posted by: Noelle McElhatton
Trade News

russia china uk

China has said it will retaliate if it is hit with Western sanctions for not condemning Russia over its invasion of Ukraine.

In a phone call to discuss the conflict, Chinese foreign minister Wang Yi told his Spanish counterpart, José Manuel Albares that “China is not a party to the crisis, nor does it want sanctions to affect China”.

The Telegraph reports Wang added that China “always opposed using sanctions to solve problems, let alone unilateral sanctions that have no basis in international law”.

Tensions between China and the West have resurfaced as the re-emergence of Covid-19 is forcing the closure of key Chinese supply-chain ports.

Neutral China

China has insisted it remains neutral in the conflict, but the US has indicated that China could join Russia in facing sanctions if it decides to provide military equipment for the war in Ukraine.

The US has told its allies that China is prepared to supply Russia with military equipment for its war in Ukraine, reports the FT.

America believes that Russia has asked for military support and China has indicated that it will help.

Both China and Russia have denied the claims but a senior US defence official said the Pentagon was watching the situation “very, very closely”.

Consequences likely

“If China does choose to materially support Russia in this war, there will likely be consequences for China,” the defence official said.

Yesterday, US national security adviser Jake Sullivan held a meeting in Rome with Yang Jiechi, China’s top foreign policy official about Russia and Ukraine.

Ahead of the meeting, Sullivan warned China that Washington was watching closely to see to what extent Beijing provided economic or material support to Russia, and would impose consequences if it did, reported the Guardian.

“We are communicating directly, privately to Beijing, that there will absolutely be consequences for large-scale sanctions evasion efforts or support to Russia to backfill them,” Sullivan said.

According to the Guardian, the Americans left the seven-hour meeting pessimistic that the Chinese government would change its minds about backing Moscow.

Russia’s ‘shopping list’ was said to include armed drones, ammunition, and ration packs.

A US official said Washington had “deep concerns with China’s alignment with Russia”.

European support

If China backs Russia, the Biden administration will shift its focus to persuading European allies to rethink their relationships with Beijing.

Bloomberg reports concerns are growing among investors that Chinese companies will face US sanctions over the Russian request for military and financial assistance from Beijing.

Sanctions by the US and its allies has hit equity markets around the world and sent the cost of some commodities, such as oil and wheat, soaring. 

An index of Chinese shares in Hong Kong has plunged 21% in the world’s worst performance among actively traded benchmarks since the invasion, falling to the lowest level since 2008. The Hang Seng index in Hong Kong fell by another 6% today.

As the world’s top trading power, China is an integral part of the world’s supply chains, so any sanctions would be more complex than those that are being levelled against Russia.

Existing tariffs against China

As previously covered in the IOE&IT’s Daily Update, China is already subject to US tariffs that date back to trade disputes under then-US president Donald Trump but have been maintained by his successor.

The US has complained that China has not met its commitments to buy $200bn more of US goods as part of the ‘phase 1’ trade agreement reached in 2020.