China stands to lose not gain from war in Ukraine

As Russia becomes increasingly isolated, it will lean more heavily on China as a trading partner. That will present some opportunities for Chinese firms to take market-share from western suppliers and to purchase energy at a discount. But any such gains will be small when set against the cost to China of higher commodity prices and the dent that those price rises have put in real consumer incomes in China’s major export markets. We expect a small but non-negligible drag on economic activity in China from higher imported inflation and weaker net trade.