Xi’s Long Game Comes Into Focus

Xi Jinping departed Moscow eight days ago following his three-day state visit. In broad brush, the trip removed some uncertainties about the basic direction of Xi’s positioning on the global stage. No, this was not a peace-broker’s mission. Xi clearly prioritized propping up a faltering “friend without limits” over any serious — or even half-hearted — effort to play the honest broker. Washington and Kyiv still want Xi to talk with Zelensky (likely) or perhaps even visit Kyiv (unlikely) but the aim is not for any mediation by Xi but rather to reinforce the messaging to Xi about not sending lethal armaments to Russia. And, no, Xi seems quite clearly to be prioritizing the recovery of his wobbly economy over the risk of sanctions from the U.S., Europe and key Asian partners should he defy the Biden Administration red-line against China supplying Russia with lethal armaments.

As the third door opens, it’s now possible to glimpse some of the finer brush-strokes of Xi’s long-term plan to counter the liberal, rules-based world order. These are revealed in the 9-point joint statement released by Putin and Xi at the conclusion of Xi’s Moscow visit as well through related moves by China on the world stage. Five of the more subtle brush-strokes to observe:

• Xi used his trip to signal to Washington and to NATO and its other democratic allies that China now largely has Russia under its thumb. It can draw increasingly on Russia as a plentiful supply of heavily-discounted oil and other energy resources. Similarly, it can address its own food insecurity and inflation concerns by throwing its market open to Russian food commodities at cut-rate prices. It can force Russian banks and the Russian financial system to do its bidding (see next point). And it can count on Russia to parrot its propaganda line with particular focus on Africa, South America and the Pacific region. All of this serves to prop up Putin and prolong the war, serving Xi’s interests without triggering retaliation against China.
• Xi revealed that his weapon of choice to counter the post-WWII world order will not be lethal armament deliveries to Moscow but the Chinese yuan (RMB, renminbi). Moreover, he put the brush in Putin’s hand for this particular stroke. Towards the end of the summit, Putin pointedly stated “We (Putin and Xi) are in favor of using the Chinese yuan for settlements between Russia and the countries of Asia, Africa and Latin America.” From a broad strategic perspective, it makes perfect sense that Xi would choose this approach. Why risk retaliation by getting involved in a hot war in Europe (where Russia is losing ground), when China can force Russia to support a Chinese-led challenge to U.S. dollar domination elsewhere throughout the world. The standing of the dollar as the world’s reserve currency is arguably the United States’ most potent, non-military asset globally. Others have tried to dislodge it and have failed. But, as the world’s second largest economy, as the de facto leader of the developing world for the past 50 years, and as a vise-grip political command structure, Xi clearly sees this approach as his best bet for now (while the Taiwan issue still hangs unresolved in the background).
• Putin’s statement comes not as an announcement of any new undertaking by Xi but rather as an exclamation point on an ever-evolving geo-strategic campaign which Xi has been conducting in Asia, Africa and Latin America since 2012 in the form of Belt and Road Initiative (BRI). There is particular urgency to this campaign now in the wake of the COVID pandemic and the recent rapid rise in U.S. interest rates. As a result of these developments, many BRI partner/client countries now find themselves unable to service their earlier loan obligations to China. To adjust, China has been forced to dramatically increase its overall lending through loan restructurings to keep major BRI projects afloat. As a result, Chinese lending to debt-ridden countries now stands at more than $40 billion, not far off the level of the traditional, post-WWII lender of last resort, the International Monetary Fund (IMF), whose loan exposure stands at more than $65 billion. While a strain on PRC finances, this hefty lending posture gives Xi the ability to speak softly (through Putin) while carrying a big stick against the dollar-denominated international order.
• China’s burst of Mid-East diplomacy is a further brush-stroke filling out this picture. The opportunistic stage-craft positioning PRC Foreign Minister Wang Yi as the go-between in the mid-March entente between Saudi Arabia and Iran — which was happening anyhow — was meticulously executed. Likewise, the bullhorn which the Foreign Ministry has used to welcome the possibility of rapprochement between Saudi Arabia and Syria is notable. All of this is leading up to a summit between Iran and the six-nation Gulf Cooperation Council in Beijing in the fall. Against the broad backdrop of events, it is certainly not a coincidence that Mohammed bin Salman, Saudi Arabia’s leader, has been mentioning under his breath the possiblity of settling more of his country’s oil exports with the Chinese yuan.
• A final point is the deep planning behind what is now unfolding. None of this reflects ad hoc or reactive moves in response to the Ukraine crisis. Instead, this plan is organically tied to the development of the ten-year-old Belt and Road Initiative and signs of it became clearer with the convening of the 20th Party Congress last October, with the unveiling of the CCP’s newest Five Year Plan (FYP) and with the announcement of the country’s new ministerial line-up at the Two Sessions meetings in Beijing earlier this month. In hindsight, the strongest proof of this is in the meeting just concluded with Putin. Ukraine was just a minor, slightly discomfiting blip for Xi in Moscow last week, just as it was only a blip for Xi when Putin invaded Ukraine just days after their meeting in Beijing in February 2022 on the eve of the Olympics. Xi is extolled in China as being “unswerving.” At least as far as his plan to offer an alternative world order is concerned, this characterization is apt. No swerving from the plan just because of an unprovoked invasion of a sovereign nation by his Russian friend. As Alexander Korolev’s (University of New South Wales) observed regarding the Xi-Putin 9-point joint statement: “It looks like a strategic plan for a decade or even more. It’s not a knee-jerk reaction to the war in Ukraine.” Fits in well with the three 5-year chapters through which Xi has been telling his heroic ‘rejuvenation of China’ story. A story that can’t end well for Xi without closing the book on Taiwan.