Why China is not coming to the aid of the Russian economy

In an effort to maintain ties with its main European and American trading partners, Beijing has so far shown no desire to help Russia bypass Western sanctions.

China is walking on a wire. Since the beginning of the war in Ukraine, Beijing has been in no particular hurry to help its Russian ally, which has become the object of harsh economic sanctions from the West. At the United Nations on Wednesday, the second world power chose to abstain from voting on a resolution demanding that Moscow “immediately cease the use of force” against its neighbor. An exemplary silence on the ambiguous position of the Chinese regime in the current crisis.

Growing relationship

If she said she “understands” Russia and dropped the term “invasion” from her lexicon, then China has never really explicitly supported Moscow in this conflict. The two powers, often on the same wavelength, nevertheless continued to strengthen their ties for several years with the common goal of challenging American hegemony and the dollar as a world currency.

The Beijing Olympics last month provided the two countries with an opportunity to reaffirm their commitment to strengthening ties. Sino-Russian friendship is “an example of worthy relations, when everyone helps and supports each other in their development,” Vladimir Putin immediately assessed.

This “friendship” has taken many forms in recent years. Faced with a depreciation of the ruble during the annexation of Crimea in 2014, China agreed to pay in yuan to offset the increase in dollar-denominated imports. Today, Russia has become “a major investor in the Chinese bond market,” according to ANZ Bank, with yuan-denominated assets equivalent to about $140 billion.

The two countries are also jointly developing gas pipeline projects, the first of which was commissioned in 2019. Last month, they also signed a new agreement to supply 10 billion m3 of natural gas from the Far East from Russia. More recently, after the invasion of Ukraine, Beijing’s lifting of restrictions on Russian wheat imports led to the Asian giant being taxed by Australia as Moscow’s lifeline.

Economic interests

However, this agreement, which allows the import of wheat from all regions of Russia, and not just from seven earlier, has become known since the beginning of February. And its entry into force may be more indicative of China’s desire to secure its supplies than of Russia’s continued support.

Because apart from this commercial gesture, Beijing seems to have distanced itself from Moscow in recent days. At least the Asian giant, visibly embarrassed by the situation in Ukraine, is keeping a low profile. There is no possibility for him to fly to the aid of his neighbor at any cost. And in this case, the game is probably not worth the candle.

If China is Russia’s largest trading partner, the reverse is obviously not true. China bought $79.3 billion, or 3% of its imports, from its neighbor last year, according to ANZ Bank. Its sales to Moscow amounted to $67.6 billion, or just 2% of all Chinese exports. This makes Russia Beijing’s 18th trading partner away from the EU and the US.

In an effort to protect its economic interests, China has a lot to lose by helping Moscow bypass Western sanctions. And it can be said with certainty that if this were the case, then its main Western partners would impose no less severe sanctions on it. Moreover, Chinese banks did not dare to replace the Swift messaging system, from which several Russian banks were excluded, with a similar Chinese CIPS system for conducting transactions with their neighbor, fearing that Westerners would react and deprive them of access to the dollar.

Thus, according to Bloomberg, several Chinese state-owned banks will not want to finance purchases of raw materials in Russia. The Beijing-based Asian Infrastructure Investment Bank (AIIB), China’s answer to the World Bank, on Thursday suspended its activities with Russia and Belarus, also under sanctions.

China wants to buy Ukrainian wheat

If China really shows no desire to help its ideological partner, it is also because it has strategic interests in Ukraine, one of its important trading partners on the famous new Silk Road, the expansion of which risks derailing the current conflict.

Beijing, which became Kyiv’s leading trading partner before Russia, is also dependent on Ukrainian wheat supplies. The middle empire, which continues to lose arable land due to the urbanization of the country, has been sending businessmen for several years to buy grain products from the “breadbasket” of Europe. In 2020, Ukraine exported 7 million tons of grain to China worth 1.9 billion euros.

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