Just ahead ofthe invasion it declared there were“no limits” to its friendship with Russia and the two countries signed long-term deals to deliver Russian energy and grains to China.

While critical of the sanctionsthe West has imposed on Russia,China’s banks,including its stated-owned banks,have been careful not to breach them and risk being shut out of the global financial system by the secondary sanctions that will be levied on sanctions busters.

The target for China’s GDP growth this year would have been ambitious even without the invasion of Ukraine and the impact it is having and will have on the global economy and markets.

No bank with extra-territorial exposures can afford to beshut out of the SWIFT global messaging system that underpins the flow of global financial transactions.

Neither Vladimir Putin nor Xi Jinping could have foreseen the unanimity of the West nor the severity of the sanctions they have imposed,includingthe effective freezing of much of Russia’s foreign exchange reserves.

China is going to have to come to a conclusion about the extent to which it is prepared to risk damage to its own economy and institutions by supportinga new best friend whose miscalculations have left it bogged down in an increasingly nasty battle with the Ukrainian forces even as its economy is being assaulted by the unexpected strength of the sanctions.

At the moment the Chinese leadership appear to be sitting on their hands,unsure whether to help Russia circumvent the sanctions,particularly those that have cut it off from the US dollar-dominated international financial system,risking blowback from the West.

The target for China’s GDP growth this year would have been ambitious even without the invasion of Ukraine and the impact it is having and will have on the global economy and markets.

The implosion of China’s property development sector has yet to be stabilised. It has resulted in a significant slump in property and housing market activity and has impacted the local governments that are heavily reliant on land sales for their revenues.

Within the budget released at the weekend there was an 18 per cent increase in transfers to local governments to prop up their finances and enable them to cut taxes and fees in line with the central government’s plans to shore up growth through infrastructure investment,reduced taxes and efforts to stabilise the housing market and encourage construction and sales.

The overall increase in spending envisaged by the budget – 8.4 per cent --- is,along with some easing of monetary policy by the People’s Bank of China already this year,aimed at stabilising the economy without over-heating it and adding to the risks posed by pervasive excessive levels of debt.

Stability and national security might be Premier Li’s top priorities (social welfare and education spending will increase about 10 per cent while military spending is budgeted to increase 7.1 per cent) but China does face some peculiar challenges,given that it is the world’s biggest buyer of many of the inputs to the growth and economic stability it is seeking.

The oil price is at $US118 a barrel. Thermal coal prices have blown past $US400 a tonne in recent weeks,more than doubling in a fortnight. Asian LNG prices soared more than 50 per cent in a week after Russia launched its assault on Ukraine. Wheat prices are up more than 50 per cent this year;soy beans about 25 per cent.

Energy and food security are essential to economic and social stability in China. With the Communist Party’s own five-yearly national congress looming later this year and Xi Jinping wanting to cement his place in China’s history by maintaining the party leadership for an unprecedented third term,there will be a particular emphasis on stability,whatever it takes to achieve it.

There are already suggestions that Xi is prioritising energy security over the decarbonisation goals he set for China,the world’s largest producer and consumer of coal,in 2020 – peak emissions by 2030 and net zero by 2060 – after China experienced power blackouts last year as generators tried to reduce their emissions.

China isn’t going to walk back its approach to the pandemic but there are reports it might fine tune it to try to reduce the severity of the economic effects of the lockdowns.

The vast increases in the prices of energy and key agricultural commodities,if sustained,will make growth targets even more challenging and will hit consumption -- already weakened by the chaos in the property sector and the confusion and losses of wealth generated by the crackdowns on tech companies -- unless the authorities do more to blunt their effects.

This year,more than any other,if more does need to be done it’s a reasonable assumption that more will be done.

Given the pre-existing instability within China’s economic setting and the property crisis in particular,the continuing effects of the pandemic and now the increased commodity prices and volatility generated by Putin’s ambitions,the lead up to the party’s congress late this year might be far more challenging than Xi anticipated when he started reorienting China from private sector-led growth to “common prosperity” last year in preparation for his big moment.

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