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The United States and its allies have imposed a series of coordinated economic sanctions on Russia in response to its invasion of Ukraine. They are the most comprehensive sanctions aimed at a major economy—previously the 11th-largest in the world—in more than 70 years. Their use has raised questions in Western capitals and Beijing about what similar sanctions could do if aimed at the second-largest economy, China, particularly during a crisis over Taiwan. But an equally important question is whether Washington and its allies would use similar sanctions against China, including as a deterrent. Judging from Western actions and preferences during the Ukraine crisis, the answer appears to be no.
The sanctions targeting Russia cover finance, imports, exports, travel, and individuals. In the China context, the discussion has focused on what equivalent financial sanctions would do to China and global finance and trade. There is no doubt that banning major Chinese banks from the SWIFT messaging network, severing their U.S. dollar correspondent banking links, or freezing the central bank’s foreign exchange reserves would be massively disruptive.
The scenarios are complex, but a few comparisons of China with Russia give us an idea how much more impactful such sanctions could be if aimed at Beijing. In 2021, China’s GDP was roughly 10 times larger than Russia’s, Chinese banks had more than 30 times as many assets as Russian banks, and cumulative foreign direct and portfolio investment in China was more than six times the amount that had flowed into Russia. China is the world’s top trading economy and the number one exporter of manufactured goods by a wide margin. Despite its economic heft, China continues to rely on the U.S. dollar for most of its international financing, including for trade, making it vulnerable to U.S. financial sanctions, especially if—as with the Russia sanctions—these sanctions are conducted with other advanced economies.
However, it is also worth considering the conditions under which Washington and its allies might consider such sanctions on China, rather than focusing solely on their potential economic implications. The course of the actual sanctions on Russia offers some useful insights into this hypothetical question. The Russia sanctions have proceeded under a sequence of three goals: to deter, to destabilize, and to degrade.
First, the United States and its allies sought to deter Moscow by threatening to impose sanctions if Russian forces invaded Ukraine. Clearly, this failed. But that failure deserves an important caveat—the sanctions Western governments threatened before the invasion were less severe than the sanctions they imposed after the invasion. While we will never know the counterfactual, it is at least plausible that a stronger threat of sanctions could have affected President Vladimir Putin’s thinking before the invasion.
Next, Western allies sought to use sanctions to destabilize Russia’s financial system and economy in the hopes of triggering a political backlash from Russian oligarchs and perhaps from the public. While the financial sanctions—especially those on the Russian central bank—did have a significant impact on the Russian ruble and banking system early on, deft financial management, capital controls, and continued energy exports have since stabilized the Russian ruble and banking sector. Those who argue that there is still hope that economic sanctions could somehow compel a quick end to the war often focus on the potential to hit Russia’s economy even harder with new sanctions preventing it from continuing energy exports.
Finally, the sanctions narrative has shifted toward degrading Russia’s ability to sustain military operations, perhaps over the long term. For this, Western export controls on technology and industrial components are particularly important. There is evidence that in this regard the sanctions are working. For example, Russia is reportedly struggling to produce tanks due to a lack of imported components.
Compare the strategic conditions Ukraine faces today with what Taiwan might face in the event of Chinese actions to forcefully compel unification with Taiwan. The latter two sanctions goals—destabilization and degradation—depend in large part on Ukraine’s ability to sustain its military operations with ground lines of communication linking it directly to the West. The skill and bravery of Ukrainian forces are clear, but their ability to counter Russian forces also relies on a steady inflow of foreign weapons and munitions. In the event of full-scale Chinese military actions against Taiwan, equivalent Western flows of military and nonmilitary aid to Taiwan would be far more difficult—perhaps impossible—as Chinese naval and air forces would seek to blockade the island even short of a full-scale amphibious invasion. Resupplying Taiwan under those conditions would be more analogous to resupplying Ukraine now only via the Black Sea.
Chinese leaders, perhaps even more so than Putin, are likely to fully commit to achieving their military goals once forces are engaged. Beijing is unlikely to order military actions against Taiwan if it believes sanctions, including export controls, would jeopardize its ability to sustain operations. Indeed, much of Chinese economic planning—including the 14th Five-Year Plan (2021-2025)—centers on achieving technological and material self-sufficiency. Furthermore, Beijing will learn from Russia’s errors, including by stockpiling supplies and munitions and thinking through logistics in the context of a potentially prolonged campaign.
The implication is that an equivalent Western strategy of sanctioning the aggressor and resupplying the resister—to fight the aggressor alone—would not be viable in a Taiwan scenario. As such, the latter two sanctions goals—destabilization and degradation—would be less feasible unless Western leaders believed that China’s war effort would collapse from sanctions alone, which is implausible.
Instead, only the first goal—economic deterrence—would make sense. And that is the goal that sanctions clearly failed to achieve against Russia.
Why did Western leaders impose stronger sanctions than they threatened before the invasion? This seems to defy the logic of deterrence. This “under warning” probably occurred for several reasons. First, some Western governments—excluding the United States and United Kingdom—did not believe that Putin would invade Ukraine. Second, they probably did not expect the strength and effectiveness of Ukrainian resistance, perhaps then believing that imposing large costs would be in pursuit of a hopeless goal. Third, they did not anticipate the degree of moral outrage that would emerge among their politicians and populations upon witnessing a level of violent national aggression that many—especially in Europe—previously thought unthinkable.
Finally, Western leaders were—and largely remain—reluctant to enact sanctions that might substantially harm their own economies, especially by stopping Russian energy exports. From the perspective of economic deterrence, this is troubling. One can debate whether such sanctions would meaningfully affect the course of the war; whether they are worth the pain they would inflict globally, including on developing countries; and whether domestic electoral concerns should outweigh international strategic goals. These are all reasonable questions, and responsible political leaders need to weigh such tradeoffs seriously.
But the fact remains that Western leaders—including in the White House—appear worried about inflation and other kinds of economic blowback. What does that suggest about future Western economic threats aimed at a far more important economy—China?
There are at least four implications for U.S. policymakers wishing to maintain credible economic deterrence against China.
If economic deterrence were to fail in a crisis, there is the potential that U.S. forces might be engaged directly in the event of a Chinese attack on Taiwan. For political reasons, Washington might impose sanctions to destabilize or degrade the Chinese economy irrespective of their chances of success. But in that scenario, the direct impact of severe sanctions on China might be far less important economically than the physical disruptions to Asian maritime trade and the course of the war itself.
More broadly, policymakers should not be complacent or assume too much about economic deterrence. Even with such planning, Western leaders should not delude themselves into believing that economic deterrence is a substitute for credible military deterrence.
Gerard DiPippo is a senior fellow with the Economics Program at the Center for Strategic and International Studies in Washington, D.C.
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