China has much to lose as war in Ukraine turns Europe away from globalisation

Optimism about globalisation could be snuffed out for a long time, making the outlook for China and its deeply global value chains problematic
How China chooses to respond could deepen Western fears – or begin the long process of nurturing a new form of sustainable cooperation

David Morris

Published: 1:00am, 12 Apr 2022

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The post-Cold War system of globalisation that helped drive the spectacular growth of East Asia has steadily eroded in recent years. Trade wars, securitisation of supply chains, ethno-nationalism and the pandemic have all taken a toll.

Will Russia’s brutal invasion of Ukraine be the last straw for globalisation? That is a rapidly forming view in Europe. Not only has the war led to Russia’s isolation by the developed world, but it has cut off crucial Belt and Road Initiative routes and has the secondary effect of deepening Western distrust and fear of China.

A newly solidified European consensus fears global interdependence with economies that do not share its liberal values. Without trusted connectivity with the wealthy US and European markets, it will be much harder for China to lead the next phase of globalisation.

A few years ago, developed economies from Germany to Australia were enthusiastically integrated with Chinese supply chains, seemingly proving that economic interdependence could overcome differences in political systems. While there remain powerful economic and other arguments for such countries to keep investing in rules-based economic cooperation, security concerns may well trump economics.

The United States initially abandoned engagement with China in favour of economic warfare, but it soon morphed into a security competition framed – as often in the US – as a battle of values. At first, Europe considered itself aloof from ideological narratives emanating from the US about its contest with China. That aloofness is no more.

In response to Russia’s recent actions, Germany is investing €100 billion (US$109 billion) in rearmament that is unprecedented in modern times. Across Europe, a new unity is evident and there is even earnest talk of building a European defence force. Among Europe’s opinion leaders, Russia and China are commonly grouped together, and distrust of China is deepening as a result.

All major economies are looking to reduce strategic vulnerabilities and strengthen self-reliance, which could yet see a further fracturing of supply chains to reduce exposure to apparent risks. China, as the biggest beneficiary from globalisation, may be the biggest loser in globalisation’s demise as a new, more divided world order takes shape.

To be sure, the conflict in Ukraine is not the only war that has undermined the international order. The 2003 US invasion of Iraq was an equivalent snub to the United Nations Charter, dismaying many Europeans. Nevertheless, the Russian invasion of Ukraine has shaken Europe in a way that only war in Europe can, and has united the West overnight.

Further, the conflict has come at such a time, after a series of crises, to confirm the worst fears of the West, that authoritarian powers are not to be trusted. If we were already plummeting towards geopolitical confrontation between the US and China, the European response to the Ukraine war ensures the broader “West” will now cleave even closer to the US.

These views were expressed in a variety of research interviews conducted for this article across central Europe in recent weeks. In Poland, once anticipated to become a key hub for belt and road railways linking China to Europe, the trains are now standing still.

The war in Ukraine, the internal instability in Belarus and a sanctioned Russia have strangled the chances of the belt and road reaching Europe in the foreseeable future. Polish attitudes to China, once divided between those with geopolitical concerns and those seeking an economic boost, now commonly conflate China with Russia, as twin powers to be feared in any new world order.

It does not require too much knowledge of European history to remember it was the Polish people whose Solidarity movement helped to topple the Soviet occupation of Eastern Europe in the 1980s.

People attend a demonstration against the war in Ukraine, in Krakow, Poland, on April 9. Photo: Agencja Wyborcza.pl via Reuters

Today, most Poles are counting their luck to have joined the European Union and Nato. Indeed, with their long experience of Russian expansionism, countries throughout central Europe are likely to look West, not East, to reduce their risks (and trade deficits) in the future.

China, which once looked distant enough to be an alluring economic partner, now looms as a perceived threat because of its “no limits” partnership with Russia, sealed on the eve of Russia’s invasion of Ukraine.

01:45

China says ‘no limits’ in cooperation with Russia

A critical factor supporting this narrative is that central European countries perceive that China has benefited more than they have from economic interdependence. This is despite the EU representing the world’s biggest regional experiment in economic interdependence, successfully reducing rivalry between countries that used to see each other as mortal enemies.

By the time of US President Joe Biden’s visit to Warsaw at the end of last month, his remarks on the “battle between democracy and autocracy” were no longer heard as rhetorical hyperbole, but appeared self-evident to everyone interviewed for this article. To many ears, Biden’s words sounded as if they were aimed as much at China as Russia. Security appears to have indeed trumped economics.

03:26

Putin ‘cannot remain in power’ says Biden in speech condemning Russia's invasion of Ukraine

For Europeans today, everything appears to have changed. Globalisation as we know it may be ending. Nevertheless, what appears certain today may not be an accurate prediction of the future.

Indeed, after the collapse of the Soviet bloc three decades ago, Francis Fukuyama’s suggestion that history had ended turned out to be rather premature. It remains possible that globalisation can be reconstituted despite its recent battering, and that key actors can protect against their feared vulnerabilities.

Yet it is also possible that the 21st century conflict in Europe will snuff out recent optimism about international interdependence for a long time. In that case, the outlook for China and its deeply global value chains is problematic indeed.

How China chooses to respond to this change may either deepen Western fears or begin the long process of nurturing a new form of sustainable international cooperation.

David Morris is a former Australian and multilateral diplomat. He is vice-chair of the UNESCAP Sustainable Business Network and is currently engaged in EU-funded Jean Monnet Network research on Eurasian interdependence and conflict. Twitter @dm_aus