Xu Qinduo

    xuqinduo@gmail.com

    THE ruble seems to have stabilized, at least temporarily if not for the long term, at about 60 per dollar. The Russian Government has declared the end of the free fall of the value of their currency. But everyone concurs that the year 2015 will remain testy for the Russian economy and the ruble, given the expected low oil prices and ongoing Ukraine problem. So what can Moscow do to fend off more potential risks?

    There is no doubt that Russia will largely tackle the crisis on its own, either by alleviating the impacts of Western sanctions or by strengthening monetary policymaking. But if the need for external assistance rises, China will for sure step into the breach because the International Monetary Fund, which as a U.S.-controlled institution, has found no reason to extend a hand to the Russians.

    China has made clear its willingness to help quiet the stormy situation with the ruble. Foreign Minister Wang Yi said recently: “Russia has the capability and the wisdom to overcome existing hardships in the economic situation. If the Russian side needs, we will provide necessary assistance within our capacity.”

    The remarks alone are believed to have already played its due role in shoring up confidence in the ruble and the Russian economy because they can be read as a strong signal that “China will come to the rescue.” Coincidently maybe, the Russian currency stopped its plunge last week and recovered some of its lost ground from the previous week when it was hit at 80 per dollar.

    Wang is right in pointing out that Russia has the capability to overcome the current challenges. There are two rainy-day funds in Russia intended to support the national economy at times of crisis: the Reserve Fund and the National Welfare Fund. The Reserve Fund contributes to economic stability by reducing inflationary pressure, which is expected to shoot up next year, and insulates the economy from outside volatility, such as extremely low oil and gas prices.

    One Russian official noted, “Next year we will, without a doubt, have to bring the Reserve Fund into play.” So there are still some options in their toolbox.

    China has a national interest in seeing a stable Russia. There’s a spillover effect of the ruble crisis into neighboring countries, including Belarus, China and many others. Also, there have already been talks of capital flight in emerging economies, something similar to what happened in Russia, as the U.S. Fed is expected to increase interest rates and the dollar continues to appreciate.

    In addition, China and Russia need each other to protect their global strategic interests in the international arena. If Russia is weakened in its political standing, China is likely to suffer too.

    But China is cautious in whatever assistance it might extend to Moscow. It doesn’t want to be seen as a “rescuer” to the Russians, who could find it embarrassing, similar to how Moscow was once viewed as a big brother to China.

    A high-profile bailout program by China could also be regarded as strengthening the China-Russia alliance against the U.S., which is bent on pressuring Moscow to withdraw from involving in the Ukraine crisis.

    Domestically speaking, Chinese policymakers have to take into consideration public opinion, which is increasingly critical of some of China’s international aid programs. The argument is not totally without merit since there are 92 million people living in poverty in China.

    It is no wonder then that Foreign Minister Wang has been low-key in speaking of aiding the Russians and listed three conditions for Chinese assistance: 1) Russia asks for help; 2) It’s necessary; 3) It should be within Chinese capacity, meaning there’s probably no large-scale Chinese bailout.

    As a result, Chinese assistance is likely to come in the form of more investment in infrastructure projects or loans to Russian companies. That kind of aid is in line with the Chinese win-win doctrine, which serves not only Russian interests, but also Chinese ones.

    (The author is a current affairs commentator with China Radio International.)