Important Takeaways:

• China has been supporting Russia’s economy since the start of the Ukraine war by buying its oil while supplying it with everything from microelectronics to washing machines.
• Meanwhile, Beijing has been getting its own strategic benefit: a real-world case study in how to circumvent Western sanctions.
• Russia’s economy has been surprisingly resilient throughout the Ukraine war, but it has shown fresh signs of cracking under Western pressure recently. In the past week, the Russian ruble plunged to its lowest point since the early days of the conflict after the U.S. imposed new banking sanctions.
• Moscow owes much of its economic durability to its oil exports and its cooperation with Beijing, as the leaders of both countries seek to challenge the U.S.-led world order.
• “Sanctions can be really disruptive for any production sector that is enmeshed in global supply chains,” Fishman said. “That makes China highly vulnerable.”
• While the U.S. has already imposed sanctions on China, including export restrictions on advanced semiconductors and measures against telecommunications giant Huawei, a crisis over Taiwan could lead to an economic war of a different magnitude.
• Full-scale financial sanctions by the West would disrupt the country’s financial system, interrupt trade and put $3.7 trillion in Chinese overseas bank assets and reserves at risk, according to a report last year by the Atlantic Council and Rhodium Group think tanks.
• One major lesson for China from Russia’s experience has been the importance of preparation, analysts say. Before the war, Russia had sought to diversify its foreign reserves, de-dollarize its economy and build domestic financial plumbing. Even though its success was mixed, those moves helped shield the Russian economy and buy it time to adapt.

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