A year ago, on the eve of the Eastern Economic Forum in the Russian city of Vladivostok, China was the center of attention for Russian experts and journalists. Everyone was wondering how Chinese businesses would react in the face of unprecedented sanctions on Russia and an international political crisis.
There were doubts about whether China would continue cooperating with Russia in light of the sanctions, and whether Russian companies could continue making progress in China after the doors to Europe closed.
All eyes are again on the Chinese business delegation at the Eastern Economic Forum, which will take place in Vladivostok on September 10-13, as the forum has always been regarded as one of the indicators of the economic and political relations between Russia and China.
China’s ambassador to Russia, Zhang Hanhui, told the state-run news agency Tass that this year’s high-ranking Chinese delegation will be led by one of the country’s vice-premiers. He noted that China regards the forum as an important platform for developing cooperation with its northern neighbor.
That cooperation got a boost last year as companies exited Russia en masse in the wake of Western sanctions resulting from Moscow’s invasion of Ukraine. Instead of following suit, Chinese companies stayed, and captured a significant share of the Russian market. Since the beginning of 2023, trade between the two countries has increased by 13.3%, reaching US$155.1 billion, according to China’s customs administration.
It’s important to note the structure of this trade. While it was driven in the past primarily by Russian energy exports to China, the main growth driver now is Chinese exports to Russia, which increased by a record 63.2% in the first eight months of 2023.
It’s also worth noting that the difference in monetary value between Russian exports to China and Chinese exports to Russia is insignificant, despite the fact that the former have grown by 32%, while the latter have increased by 63.1%.
The two countries have set a goal of increasing bilateral trade turnover to $200 billion by 2024, and at current growth rates, it is very likely that this goal will be achieved.
Chinese businesses continue to strengthen their positions in the Russian economy and are enjoying rapid growth in various sectors, such as commercial and passenger transportation, telecommunications equipment, and consumer electronics.
The Chinese automotive industry has been particularly successful. According to China’s customs administration, deliveries of Chinese passenger cars to Russia in the first half of the year surged by 543% compared with last year, reaching $4.6 billion. China now accounts for over 70% of the Russian automobile import market.
Facing difficult conditions, Russian companies have also found opportunities in China. For example, the petrochemical giant Sibur, which is a long-term partner of Sinopec, has increased exports of polymers, rubbers and other products to China. Despite existing challenges, as stated by Sibur itself, payments in national currencies are helping increase exports.
Meanwhile, the Russian mining company Udokan Copper, which is developing the country’s largest copper deposit, is set to begin production as early as this year. Exports of copper and copper products will be aimed at China, one of the primary consumers of the metal globally; the country’s appetite for copper is expected to continue growing as it bets on the production of electric vehicles and renewables.
Energy mega-projects such as the Russia-China oil pipeline, the Power of Siberia gas pipeline, and the Tianwan nuclear power station, implemented by Transneft, Gazprom, and Rosatom respectively, have been and remain the cornerstones of Russian-Chinese economic cooperation.
However, changes in Russia’s economic landscape and a shift in export orientation have provided the impetus for the development of cooperation in other areas, such as agriculture, e-commerce, and the banking sector.
The main driving force behind the rapid growth of cooperation between the two neighbors, particularly in the economic area, is the restrictive measures imposed by the West and rising tensions between China and the United States.
Russia and China share common political interests in challenging principles of the Western-dominated international system. The two major founding members of BRICS have been teaming up to reduce their reliance on the US dollar. Russia is pushing this process to make its economy sanctions-proof, while China is trying to make the yuan an alternative international currency to the dollar.
Clearly, it is not only economic relations that are growing closer but political ones as well. Chinese President Xi Jinping paid an official visit to Russia in March, his first since 2019, before the conflict in Ukraine began. Russian President Vladimir Putin is expected to visit China in October.
It appears that Russia and China are inclined to collaborate, even in the face of escalating global tensions, as they both work toward their respective national interests and objectives.
Mikhail Karpov is an associate professor at the School of Asian Studies, affiliated with the Russian Higher School of Economics (HSE University).