China should be concerned over Putin`s financial isolation

China Should Concerned Putin’s Financial Isolation

Vladimir Putin invaded Ukraine; this caused sanctions from the U.S. and allies, that ridge appears sharper than ever; however, the match also looks more uneven. The economic isolation set on Russia has been a stark reminder of the persistence of American power.

The ruble tumbled, the central bank lost the key to a large piece of its foreign-currency savings; the government had to set capital controls, and giant international companies from Apple Inc. to Royal Dutch Shell Plc raced each other out of the country.

China’s President Xi Jinping just weeks ago expressed a no-limits friendship with Moscow; for it, the rate with which Russia has been cut off is a cautionary tale and a reminder of why China’s leaders are so frantic to develop an alternative to the U.S. dollar hegemony. It may yet encourage Beijing to speed up that project.

It’s early for anyone to claim victory. The shockwaves from Russia’s war in Ukraine are only just starting. Oil prices exceeding $110 a barrel already threaten to push inflation, driven to multi-decade highs in the epidemic, even higher. That spells danger for Biden; his popularity has previously been corrupted by skyrocketing gasoline costs, and for leaders in Europe, whose economies still rely on Russian energy.

Stopped Clock

Investors have run to price in a more divided global economy. Defense stocks have been on a slash behind European countries like Germany. They were long resistant to allocating more cash to their military forces and suddenly promised to ramp up spending. Moreover, in China, companies connected to the payments system that the country has been asking to build as an alternative to Western ones have seen their shares soar. Plenty of economists decides that the polarization is real. Adam Posen, president of the Peterson Institute for International Economics, names it the “corrosion of globalization”. He states it started with President Donald Trump’s trade war with China and continued through the epidemic as economies turned inward. Now it’s a go.

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