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Ukraine and the Sino-Russian Relationship, An Update

Jan 19, 2023

Media pundits and geopolitical experts in the West have been analyzing the Sino-Russian relationship as it relates to Russia’s Special Military Occupation (SMO) in Ukraine since the beginning of the conflict. Many analysts thought that China might betray Russia due to border disagreements, aspirations in Siberia or Eastern Russia, and the desire to become Eurasia’s hegemon, effectively kicking Moscow into a less desirable and insignificant regional role.

However, while China has been cautious and measured in its support to Russia during the SMO, which is now officially a war, as labeled by Russian President Vladimir Putin, the numbers and broken trade records do not seem to lie – China and Russia have become more connected and complementary in their regional economic and trade relations since the beginning of the SMO. Further, one might believe that China’s measured approach is prudent and forward-looking as the West continues to pump money, military equipment, and diplomatic capital into a crusade-like war against Moscow, which is unfolding tragedy after tragedy for Ukraine, and all of the civilians and soldiers on both sides who will lose their lives in a war that could have, and should have, been prevented. Instead of rushing and escalating severely, Russia has let the SMO drag on, while contributing about 5 percent of its GDP and sacrificing conservative troop numbers, while simultaneously strengthening ties with Beijing and accepting a complementary role to China’s massive economy and population base. In short, Russia produces commodities, sells them to consumers in China, all the while Moscow and Beijing maintain close enough relations while keeping Western military planners and the State Department guessing. 

As an example, we see China’s ambassador to Russia advocating for a comprehensive cross-border transport, accounting and settlement system for their booming trade relations. Chinese ambassador Zhang Hanhui stated that “thanks to the joint efforts of both sides, bilateral trade has maintained a strong upward trend, and this is why it has reached another record high.” In the first 11 months of this year, Sino-Russian trade totaled US$172.41 billion, up 32 percent year on year. This would mean that that trade continued to grow after the war in Ukraine in February of 2022. The goal of both Moscow and Beijing is to hit an annual trade target of US $200 billion by 2024. The soaring trade volume this year was driven by Chinese imports from Russia, which increased by 47.5 percent to US$105.07 billion from January to November, according to Chinese customs officials. Eighty percent of these imports were minerals and crude oil. During the first 11 months of this year, China’s imports of Russian crude jumped 10.2 percent in U.S. dollar terms. Natural gas imports also surged, while China and Russia also expanded trade in agricultural goods, chemicals, and mechanical and electrical products. Zhang suggested that land port accessibility needed to be improved by modernizing the capacity of railways and ports in Russia’s Far East. 

Zhang also argued that infrastructure along the border between China’s Inner Mongolia region and Russia’s Transbaikal must improve to enhance connectivity, while also working on the potential to develop a China-Europe Railway Express through a transit cargo transport in Kazakhstan. However, the deputy head of Russia's Chamber of Commerce and Industry, Vladimir Padalka, also stated that although trade continues to grow at an impressive rate, there is still a concern about a rise in illegal trafficking of knockoff goods to the regions on the border with China.  

As usual, both countries have also argued that both countries should continue utilizing national currencies and gold for more product sales and trade with the aim of threatening America’s dominant dollar status as the world’s dominant reserve currency. 

While trade between China and Russia has increased, the Chinese yuan also surpassed the euro in the foreign exchange settlement of Russian small and medium-sized enterprises (SME). This trend will also contribute to the further expansion of Sin-Russian bilateral trade. In 2022, businesses paid in yuan 506 percent more than in 2020 and 294 percent more than in 2021, according to the report. The increase in the proportion of yuan settlement in the Russian market is promoting the process of yuan internationalization, which is likely the goal of both Russia and China. 

Given these developments, it’s clear that the China-Russia relationship grew in 2022 and will likely continue to grow in the coming year.

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