The Act is unprecedented as it has named Xi Jinping in person, and could be seen as an attempt to bolster his detractors to stop his third term.
On 27 April 2022, the US House of Representatives passed “The Assessing Xi’s Interference and Subversion Act” or the “AXIS Act” requiring the US State Department to submit ongoing reports to Congress on China’s support for Russia’s invasion of Ukraine, initially within 30 days of the enactment of the law and every 90 days thereafter. The abbreviation of the Act is surprisingly synonymous to the Axis powers (Germany, Italy and Japan) of the World War II. According to the Act, “the new Axis of evil threatens the United States and the rules-based international order.” China’s “no limits”, “no forbidden areas” relationship with Russia pronounced weeks before Russia’s invasion of Ukraine, 30-year China-Russia gas deal in Euros, China’s abstentions from the United Nations resolutions that condemned the Russian invasion, and spreading disinformation whitewashing Russia’s war crimes, are considered as “findings” and “sense” of the Congress; the report also includes any other material, technical, logistical and military Chinese support to Russia, and if found true the Congress recommends “swift and stringent consequences for China.”
On 22 April, exactly five days before the passage of the Axis Act, People’s Bank of China held the party committee meeting to assess the current economic and financial situation in China. According to a brief press release, the meeting was of the view that while Chinese economy has “made a good start overall” (开局总体良好), but the uncertainty facing the current economic growth has further exacerbated owing to the Russia-Ukraine conflict, domestic Covid-19 situation, and the disruptions of the supply chains. The committee emphasized on maintaining market and economic stability, and creating a conducive environment for the successful convening of the 20th National Congress of the Communist Party of China (CPC). The Financial Times, quoting some sources, revealed in a report that in a meeting held on 22 April, officials from People’s Bank of China, finance ministry, as well as executives from many local and international banks including the HSBC participated in the meeting. According to the report, Yi Huiman, chairman of the China Securities Regulatory Commission asked the participants “what could be done to protect the nation’s overseas assets, especially its US $3.2 trillion in foreign reserves.”
It is obvious that China is concerned about the safety of its assets in foreign countries, especially in the US, if China is subjected to “swift and stringent” sanctions as warned by the above Axis Act that remains valid until the end of the war in Ukraine. Since the weight of the Chinese economy is more than eleven times of the Russian economy, the consequences are going to be disastrous. China is the largest trade partner of most of the countries in the world; trade alone, which accounts for 34.18% of the GDP, if disrupted, the entire industrial sector will suffer, rendering millions jobless. Unlike Russia, China’s economy remains integrated with the world; of its US $3.5 trillion foreign reserves, almost 60% are held in US dollars. Though China has been buying good quantity of gold in recent years, but it is just a little over 3% of the entire reserves. Therefore, it is the structure of Chinese economy that makes it vulnerable to the kind of sanctions the US and its allies have imposed on Russia. Needless to say, the western economies will also bear the brunt and witness unprecedented disruptions of their supply chains. If this appears to be the case, then why on earth should China be asking the bankers how to protect its assets overseas? There could be two possible scenarios—China’s support for Russian invasion of Ukraine, and China’s possible invasion of Taiwan for realising the Chinese dream of national rejuvenation.
As regards the first scenario, a UK government report has alleged that “China launched cyber-attacks on Ukrainian military and nuclear targets shortly before the Russian invasion.” Ukraine has also accused China that the Russians were using Dajiang Innovations (DJI) drones to navigate their missiles, and had asked the company to block all DJI products in Ukraine. Mykhailo Fedorov, Ukraine’s deputy prime minister and minister of digital transformation, while attaching the two-page letter to the DJI CEO on Twitter on 12 March, asked the company to provide information as regards the “number of functioning DJI products in Ukraine, their ID, where and when they were purchased and activated, and whether there was a problem in activating a new DJI product in Ukraine?” obviously, China has denied all these allegations, but on 26 April, a day before the passage of the “Axis Act” the company temporarily suspended business in Russia and Ukraine to ensure that its products were not used in combat. Huawei’s situation is also somewhat similar; it has continued its operations in Russia even as Western companies suspended their operations one after another. Huawei has developed 5G network for Russia’s biggest mobile phone operator, the MTS, but latest reports say that Huawei has stopped receiving new orders from Russia. Both Huawei and ZTE have come under scanner for selling US technology to Iran and North Korea. As regards the second scenario, threat of a Chinese invasion of Taiwan is real according to the Taiwanese Foreign Minister, Joseph Wu in his recent interview to the CNN. He believed that Russia’s invasion of Ukraine and China’s threatening behaviour towards Taiwan share a number of similarities. He said that Taiwan was drawing lessons from Ukraine’s successful resistance, including the importance of asymmetrical capabilities and civil defence, but also said that Taiwan also counts on support of the likeminded countries.
The “Axis Act” undoubtedly is meant to subdue China, and intensify factional feud within the CPC. The Act is unprecedented as it has named Xi Jinping in person, and could be seen as an attempt to bolster his detractors to stop his third term. But if this creates the desired effects, seems very unlikely at this point. China has long realised the dangers of export-oriented economy in an increasingly protectionist world, therefore, the restructuring has been going on for some years, and one witnesses that the proportion of trade has been gradually declining in the GDP. Simultaneously, China has been unfolding policies such as “unified domestic market” (统一大市场) to spur massive “internal circulation” (国内大循环) so as to make China less dependent on foreign countries. On the other hand, whether it is owing to the “Axis Act” or the nature of Russia-Ukraine war, or domestic troubles amidst the pandemic, China, through its official media appears to have hinted at some policy calibration as regards Ukraine as well as the United States.
On 3 May, Cankao Xiaoxi published an article entitled “How Zelenskyy was governing his country from the bunker” which for the first time mentioned Russian “invasion” of Ukraine, massacre of Bucha, and Ukraine’s resistance to Russia. The article was widely circulated on other official media outlets like Guanchawang, Sohu, etc. The tone and tenor of Zhao Lijian, spokesperson of China’s Ministry of Foreign Affairs during his press briefing on 29 April was unusually different when an AFP reporter quoted the Pew Research Center opinion poll that says 80% of the Americans hold unfavourable views of China, and asked whether this can be attributed to some of China’s remarks and actions in recent years? Zhao’s reply was, “people of China and the United States have always had friendly feelings, and the friendship between the two peoples has always been the source and important foundation of the development of bilateral relations.” He blamed “anti-China forces” (反华势力) for “wantonly provoking confrontation and division between China and the United States, and spreading a large number of political viruses, which seriously poisoned the public opinion atmosphere of the two countries.” China certainly sees the pressure mounting at home and abroad, and perhaps sees the futility of “wolf warrior diplomacy” under present circumstances.
B.R. Deepak is Professor, Center of Chinese and Southeast Asian Studies, Jawaharlal Nehru University, New Delhi.