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The author is a senior fellow in geoeconomics at the European Council on Foreign Relations and author of “Failure‘
On paper, trade relations between Russia and China look huge: in 2023, trade turnover between the two countries reached $240 billion, an increase of 26.3 percent in just one year. Moscow and Beijing can rejoice, as such flattering statistics support the view that the two capitals enjoy a “boundless” friendship. However, if you look beneath the surface of the Russia-China trade data, you get a more nuanced picture.
It’s no surprise that the world’s second largest economy (China) and its eighth largest (Russia) do business with each other. It is also not surprising that these trade ties are strengthening as Moscow shifts trade away from Europe and towards Asia due to sanctions. What is more interesting, however, is whether Chinese companies have developed unusual relationships with their Russian counterparts.
First, look at whether the trade turnover between Russia and China is unusually high. Russia’s nominal gross domestic product is between that of Brazil and Australia. As it turns out, Russia, Brazil and Australia’s trade turnover with China is broadly the same. This is not enough to conclude that such relations between Russia and China are nothing special, but it does at least suggest that the rhetoric about a special relationship between the two countries is on shaky ground.
China’s imports from Russia rose 12.7 percent in 2023. But such high growth rates are anything but unusual in Chinese trade statistics. In 2022, for example, Chinese imports from Canada rose 39 percent, but few observers would suspect that Beijing is forging a special bond with Ottawa.
It might be more instructive to look at the level of Chinese imports from Russia if we want to determine whether Chinese companies are disproportionately dependent on Russian goods and raw materials. The Kremlin may not like the picture: Russia remains a small supplier for Chinese companies. At $129 billion last year, Chinese imports from Russian companies accounted for only 5 percent of the total volume. Furthermore, increased exports to China could well be a double-edged sword: Russian raw materials companies are increasingly reliant on China as an export market, giving Beijing leverage over Moscow.
Maybe the boundless friendship is due to the fact that Chinese exports to Russia are unusually high? They certainly grew by 46.9 percent in 2023, the highest rate among China’s trading partners this year. But here too, a different picture emerges when you look at the data in terms of trade levels: Chinese companies export as much to Russia as to the Netherlands, an economy almost 2.5 times smaller than Russia’s and not a long one border with China. At $111 billion, Chinese exports to Russia are lower than those to Vietnam.
Of course, quality issues and Chinese exports of tools that will help Russia produce military equipment are crucial for Moscow. But by and large, Russian companies are not big customers for Chinese firms, showing how unbalanced the pair’s trading relations are.
Instead of booming, trade relations between Russia and China could rebound from unusually low levels. Trade between the two countries was underdeveloped until Russia’s invasion of Ukraine in February 2022. With Russia now cut off from Europe by sanctions, Moscow has no choice but to turn to Beijing, fueling catch-up growth.
If the catch-up theory is correct, trade between Russia and China could soon plateau. Recent events support this view. Negotiations over the Power of Siberia 2 gas pipeline are stalling. Additionally, only a handful of Chinese refineries can process high-sulfur Russian crude. Both factors suggest that Russian energy sales to China may soon stabilize.
Meanwhile, Chinese banks stopped processing IT equipment sales to Russia in March, likely halting the growth of Beijing’s exports to Moscow since IT equipment accounts for the majority of Chinese sales to Russia. In the first quarter of this year, China’s exports to Russia remained largely unchanged.
The fact that Chinese financial institutions appear increasingly reluctant to do business with Russian companies highlights growing concerns in China about the risk of running afoul of secondary US sanctions. As Washington now steps up enforcement of these measures, these fears could become even more acute in the coming months. The rapid growth rates in trade between Russia and China could soon be a thing of the past. Moscow and Beijing may boast of their boundless friendship, but this closeness does not seem to extend to the commercial sphere.