“China has shown no restraint in its dealings with Russia”
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Dn the context of the uncertainties engendered by the war in Ukraine, China has proven to be one of Russia’s staunchest partners. Chinese imports from Russia – largely made up of raw materials – have surged. First in value, driven by soaring commodity prices: then in volumes, before a slight drop due to the slowdown in Chinese growth from June 2022.
This upward trend goes against the steady decline in Russian export volumes to G7 countries. However, it remains more moderate than the leap in flows of Russian products to the other major emerging countries, but this increase is observed from more modest levels at the start.
Similar trends are found for Chinese exports to Russia. A rebound followed a sharp fall during the first months of the war, although current exports are still weaker than last year, due to the collapse of Russian consumption.
Here too, the contrast with the G7 countries, whose export flows to Russia have virtually disappeared, is flagrant. Among the major emerging countries, less affected than the advanced economies, only Turkish exports were more dynamic than Chinese.
Chinese suppliers in a quasi-monopoly
The semiconductor sector, vital to any modern economy, is a particular illustration of China’s lack of restraint. A brief decline gave way to an almost 300% growth in Chinese semiconductor exports to its “strategic partner”. The rise in the unit prices of these goods, specific to Russia, reflects both a move upmarket to replace imports from advanced economies, and the opportunism of Chinese suppliers, who find themselves in a quasi-monopoly.
Indeed, at the same time, Russian imports from other major producers, in solidarity with the G7 sanctions, have collapsed. If the major Chinese producers of semiconductors directly dependent on American or European inputs, and therefore exposed to sanctions, seem reluctant to trade with Russia, the companies reprocessing these products seem less embarrassed.
Their websites bear witness to their recent commercial efforts towards the Russian market. Several Russian companies have also communicated on their way of accommodating Chinese products, which are certainly less efficient. International sanctions and uncertainties surrounding the Russian economy have, however, weighed on certain aspects of bilateral trade.
More nervous financially
Chinese manufacturers, sensitive to the vagaries of the market, seem on the whole to have considerably reduced their sails in the face of uncertain prospects. Huawei, for example, closed 30% of its stores in Russia. The main Chinese drone producer, DJI, has withdrawn from the Russian market to avoid seeing its products used in Ukraine. The Chinese Uber, Didi, announced its exit from Russia, before timidly denying it in the face of the wave of indignation on Chinese social networks.
On the side of financial investors, on which the data is more scattered, the trend is towards reluctance. It is true that the massive influx of foreign currencies in payment for the export of raw materials, in particular to Europe, since the beginning of the war have more than met Russia’s needs for external financing…
However, no new Chinese infrastructure projects and no new cross-border bank credits were recorded. The main Chinese financial institutions, vulnerable to US sanctions because of their use of the dollar, have reported their withdrawal from the Russian market despite calls from the foot of Moscow.
A multiplication of exchanges between leaders
While the Chinese currency has experienced renewed activity in the Moscow financial center, its international use has not significantly jumped at the global level, indicating the limits of a substitution of the renminbi for the dollar for the settlement of trade with Russia.
Alongside this reorganization of exchanges, Chinese economic diplomacy has displayed its proximity to Russia. The affirmation of the recognition of a common adversary, the United States, has relegated to the background the historically competitive, even conflictual, nature of diplomatic relations between the two giants.
Exchanges between their leaders have ostensibly multiplied, while Ukrainian demands have often remained a dead letter. The great annual Russian economic forum, which was held in Saint-Petersburg from June 15 to 18, enabled them to confirm the ambition of rapprochement enshrined in the Xi-Putin agreement of February 4, 2022. New cooperation agreements have since been signed, particularly in agriculture, energy and aerospace, while joint military exercises are going well.
Strong criticism of China over G7 sanctions
The proposals made by Xi Jinping on June 23 at the summit of the countries Brazil, Russia, India, China and South Africa (BRICS) in Beijing to secure cross-border settlements and value chains between major emerging countries confirm this rapprochement. Beijing has also vehemently criticized the G7 sanctions against Russia, described as unilateral and responsible for problems in the global economy.
On the other hand, the Chinese silence vis-a-vis the efforts of the G7 to cushion the repercussions of the war in Ukraine on the rest of the world is edifying. Especially since China is the main holder of strategic reserves of essential goods whose prices have soared… To make matters worse, China has maintained its restrictions on the export of fertilizers and refined oil, two areas where it has the most significant global capabilities!
Neither companies nor the Chinese authorities have provided unlimited support to their Russian partners, but China has shown no restraint in its dealings with a state that has brought war back to Europe. The European Union could hardly have had a better reminder of the urgency of its transformation into a geopolitical actor in its own right.
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