What lies in wait for Xi and Putin in the Year of the Dragon?

Both leaders will be emboldened by a divided and distracted West but they will also have to wrestle with economic vulnerabilities
Xi will watch closely Russia’s progress in Ukraine and its overtures to North Korea, while Putin will be nervous about losing any Chinese support

Philipp Ivanov

Published: 5:30am, 6 Feb, 2024

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Russian President Vladimir Putin and Chinese President Xi Jinping will enter the Year of the Dragon emboldened but weakened.

Emboldened by the resilience of their countries in the face of growing Western pressure, and the tacit support of the geopolitical “swing states” of the Global South. And quietly confident that the Western resolve to confront, contain and compete with Moscow and Beijing is being diluted by elections, and political and societal divisions.

But behind the bravado, Xi and Putin will greet the New Lunar Year weakened by the vulnerabilities in their economies, which have lost, or are losing, access to Western markets, technologies and investment. China’s glow as the world’s most dynamic economy and Russia’s credentials as an energy superpower are fading.

Putin faces a presidential election in March and has made the Ukraine war a centrepiece of his re-election. But most Russians are ambivalent or annoyed about his war campaign. Reconciling the fears of the inward-looking electorate with the overblown war rhetoric will be a challenge, even for such a masterful political narrator. Still, Putin’s win in March is guaranteed. His victory in Ukraine is far from certain.

Ukraine’s failed counteroffensive and uncertainty about Western support for Kyiv has given Putin a confidence boost. And Russia’s overhauled military production gives his army a superiority in ammunition. Putin is also closely watching elections in the West, hoping war fatigue and a swing to the right further weakens Western support.

But a change of leadership in Washington and London may not be enough to turn the West away. Ukraine will not surrender. A stalemate is the best scenario for Putin this year.

Putin will also watch Russia’s economy for signs of overheating and breakdown. The International Monetary Fund expects 1.1 per cent growth this year. But this will be fuelled by the war – over 29 per cent of this year’s budget will be spent on defence.

Inflation pressure is persistent and ever-tightening sanctions are depleting the economy of critical technologies. The energy sector remains robust. But if oil prices hover around US$50-US$60 a barrel, it won’t sustain Russia’s war and social spending.

Putin will also keep an eye on tensions in Russia’s impoverished periphery, such as the recent nationalist protests in Bashkortostan. Overreaction will upset a delicate balance of inter-ethnic relations. A weak response will embolden other regions unhappy with Moscow’s heavy-handed rule.

Across the Eurasian heartland, Xi is more assured. China is not at war. It is not isolated. Its globally connected economy is robust. Xi has overwhelming control of the Chinese political system and society. He has steadied China’s relationship with the United States and is building China’s credentials as a leader of the Global South.

09:04

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This is an auspicious year for Xi. It’s been 12 years – a full cycle of the Chinese zodiac – since he replaced Hu Jintao as general secretary of China’s Communist Party.

While Xi is confident, he also looks anxiously at the year ahead. On his mind are the economy, Taiwan and US-China relations.

On the surface, the Chinese economy is strong. It grew by 5.2 per cent last year, meeting the government’s target. But trends point to long-term headwinds and even stagnation. Deflation is persistently high. Problems in the real estate sector are affecting consumer confidence and business investment. Foreign direct investment has been in sharp decline. Local debt problems are creating economic tensions in the provinces.

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Xi would be well advised to rekindle China’s entrepreneurial spirit, stifled by the ideological rigidity and overbearing hand of the state. China’s youth are disillusioned by fading career prospects and high unemployment. Capitalists and foreign firms are voting with their money – last September saw China’s largest net outflow since 2016, at US$53.9 billion.

China also faces an increasingly complex world. Across the Taiwan Strait, William Lai Ching-te from the Democratic Progressive Party, a candidate least favourable to Beijing, was elected president. Lai advocates for the status quo approach to cross-strait relations and is resistant to reunification. His election dashes any hopes in Beijing for a more favourable and friendly leadership as well as public opinion in Taiwan.

The US is ramping up its strategy of competition with China, seen by Xi as containment by stealth. Xi has already factored in a long-term competition. But he worries about the unpredictability of the US election and Donald Trump. He will worry about Trump’s anti-China policy instincts and the escalation of containment and competition in trade, technology and security.

But Putin and Xi will also be looking for tactical gains, which the Trump victory may present – a weakening of US alliances, widening divisions in the West, and a more transactional and erratic American foreign policy.

Xi and Putin are optimistic about their relationship. As lonely major powers with few friends, they are united by their common enemy – the West – and their burgeoning trade and convergent foreign policy interests. But Xi will watch closely Russia’s progress in Ukraine and its overtures to North Korea. Putin will be nervous about any signs of China dialling down economic and diplomatic support for Russia.

We don’t know if the Chinese and Russian leaders believe in horoscopes. But we know they care about their legacies. Both are in their 70s and in charge of the world’s major powers, each year at the helm is worth hundreds of pages in history books. How will Putin and Xi respond to the ups and downs of a volatile and dangerous world? Against domestic problems and hostile global competitors, can they both get through the Year of the Dragon unscathed?

Philipp Ivanov is senior fellow at the Asia Society Policy Institute’s Center for China Analysis and the founder of the China-Russia Programme at the Asia Society