3 ways China and Russia are forging much closer economic ties | CNN Business

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CNN Business
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Chinese leader Xi Jinping and his Russian counterpart Vladimir Putin Will meet face to face this week. The first since Moscow sent troops into Ukraine earlier this year.

When they last met, during the Winter Olympics in Beijing in February, they declared that their friendship knew no bounds. Since then, Russia has sought ever-closer ties with China as Europe and the United States responded to the attack with wave after wave of sanctions.

Beijing has carefully avoided violating Western sanctions or providing direct military assistance to Moscow. Experts say the balancing act is a sign that Xi will not sacrifice China’s economic interests to protect Putin, who will join his military in large swathes of Ukrainian territory at the Shanghai Cooperation Organization summit in Uzbekistan this week. Had arrived to retreat from the section.

But trade ties are increasingly one-way, as Russia desperately seeks new markets and China — an economy 10 times its size — seeks cheaper goods.

Bilateral goods trade is at record levels as China boosts oil and coal sales. Tackling the energy crisis. Russia, meanwhile, has become a top market for China’s currency, and Chinese companies are rushing to fill the void left by Western brands.

China’s spending on Russian goods rose 60 percent in August from a year earlier, reaching $11.2 billion, according to Chinese customs data. A 49 percent increase from July.

Meanwhile, its shipments to Russia rose 26 percent to $8 billion in August, faster than the previous month.

Total goods trade between China and Russia rose 31 percent to $117.2 billion in the first eight months of this year. That’s already 80 percent of last year’s total — a record $147 billion.

“China needs Russia more than Russia needs China,” said Keith Kirch, former undersecretary of state for economic development, energy and environment in the US.

As the war in Ukraine continues, Putin is increasingly losing friends and becoming increasingly dependent on China, which has an economy 10 times the size of Russia’s, he added.

For China, Russia now accounts for 2.8% of its total trade volume, up slightly from 2.5% at the end of last year. The European Union and the United States have very large shares.

It was China. Already Russia’s largest single trading partner. Before the war, and accounted for 16 percent of its total foreign trade.

But the world’s second-largest economy has become increasingly important to Russia. has plunged into recession. Due to western restrictions.

When war broke out in Ukraine, Russia’s central bank stopped publishing detailed trade data. But Bruegel, a European economic think tank, recently analyzed statistics from Russia’s top 34 trading partners and estimated that China accounted for about 24% of Russia’s exports in June.

“China-Russia trade is booming as China takes advantage of the Ukraine crisis to buy Russian energy at a discount and replace Western firms exiting the market,” said Neil Thomas, a senior China analyst at Eurasia Group. Is.”

Russia Displaced from Saudi Arabia in May. As the largest supplier of oil to China. According to the latest data from China Customs, Moscow has held the top position for three consecutive months since July.

China’s coal imports from Russia also suffered A five-year high 7.42 million metric tons in July.

The war in Ukraine has also sent demand for the Chinese yuan soaring in Russia, as have Western sanctions. Moscow was largely cut off from the global financial system. and limited its access to the dollar and euro.

Yuan trading on the Moscow Stock Exchange accounted for 20 percent of total trading volume by major currencies in July, up from 0.5 percent in January, according to a Russian news media outlet. The merchant.

Daily trading volume in the yuan-ruble exchange rate also hit a new record last month, surpassing the ruble-dollar one. Trade for the first time in history, according to Russian state-controlled media RT

According to statistics Published by SWIFT, Russia, the messaging system used by financial institutions globally to process international payments, was the world’s third-largest market for yuan payments outside mainland China in July, after Hong Kong and the United Kingdom. . The country was also not included in SWIFT’s list of top 15 yuan markets in February.

Russian companies and banks are also increasingly turning to the yuan for international payments.

Last week, Russia’s Gazprom said it would Start billing China in yuan and rubles. for natural gas supplies, while Russia’s VTB Bank said it was starting to transfer money to China in yuan.

For Beijing, this is a boost to its ambitions to make the yuan a global currency.

“Increasing Russian use of the yuan also helps advance China’s long-term goals of making the redback a global currency, protecting itself from Western financial sanctions and increasing its institutional power in international finance,” ” said Eurasia Group’s Thomas.

For Russia, this partnership with China is “born out of desperation,” Krauch said.

“Since Russia has been severely weakened, in part by sanctions, Putin is willing to make deals with a predatory power as long as it has access to capital,” he added. said

Chinese companies are also taking advantage of the outflow of Western brands from Russia.

Chinese smartphones accounted for two-thirds of all new sales in Russia between April and June. Reuters reported.citing top Russian electronics retailer M.Video-Eldorado. has gone

According to Russian media, Xiaomi was the best-selling smartphone maker in Russia in July, with a 42 percent market share. The merchant.

Samsung

(SSNLF), once the market leader, had just 8.5% of the market in July. apple

(AAPL) 7 percent kept. The two companies had about half of the Russian market before the invasion of Ukraine, but sales of new products to the country were suspended after the war broke out.

Chinese cars also came to Russia.

Passenger cars from Chinese manufacturers accounted for about 26 percent of the Russian market in August, the highest on record, according to the Russian Analytical Agency. Autostat. That compares with just 9.5% in the first quarter.

Major global auto playersFord and Toyota, among others, have pulled back from Russia this year.

But the China-Russia partnership also has significant limitations, analysts said.

Eurasia Group’s Thomas said China was not providing military, commercial or technical assistance that would “risk US sanctions on China”.

He said that Beijing will not sacrifice its economic interests to support Moscow.

Craig Singleton, senior China fellow at the D.C.-based Foundation for Defense of Democracies, said that fearing a US backlash, China has so far refused to “future” violate international sanctions against Russia, prompting Moscow to do so. has been forced to request military assistance from North Korea.

“Beijing’s refusal to violate US and international sanctions reflects its acceptance that China relies on Western capital and technology to sustain its continued growth, although Xi personally Ready to help Putin’s war effort.”

Also, China’s rapid economic slowdown This year will further limit Xi’s willingness to help Putin. The Chinese president will not want to risk anything further destabilizing the economy. A few weeks before that The Communist Party Congress is poised to secure a historic third term.

Relations are likely to remain strained in the future. Analysts said China would like to keep its options open.

“There has always been mistrust between the two governments, which have historically treated each other as rivals,” noted Crouch.

Susan Thornton, a senior fellow and visiting lecturer at Yale Law School, said the current China-Russia partnership is primarily a “defensive one,” enhanced by Beijing and Moscow’s shared view that NATO and the United States “have clear national security interests.” are at risk”.

He further said that Russia’s war in Ukraine is not in China’s interest, but in view of Western hostility, China will not oppose Russia.