Chinese leader Xi Jinping arrived in Moscow Monday for meetings with Russian President Vladimir Putin. The visit has been anticipated as Russia is traditionally the first country a re-elected Chinese leader visits, and Xi was recently re-elected to a third 5-year term as China's General Secretary. While both Russia and China have long described their relationship as a strategic partnership and friendly, Russia's war in Ukraine has changed the dynamic of the two countries' relationship from one of cooperation and partnership to one of co-dependency.
According to a report from The Bell, Chinese customs data has shown that Beijing's trade with Moscow increased by almost one-third in 2022, reaching a stunning $190 billion. Given that Russia exported $114.15 billion and only imported $716.12 billion in goods from China, Moscow finds that trading with the Chinese allows Russia to maintain a surplus.
Behind Saudi Arabia, Russia is China's second-largest supplier of oil and fourth as China's supplier of LNG, coming in behind Australia, Qatar, and Malaysia.
Russia's war in Ukraine, which has brought an onslaught of new sanctions, has forced Beijing to become Moscow's main trading partner. According to estimates from Likka Korhonen, Director of the Institute of Transition Economies at the Bank of Finland, China now accounts for over 40 percent of Russia's commodity imports. When it comes to importing dependency on China, "Russia is now second only to North Korea," Korhonen said.
China is frantically trying to fill the gaps that are appearing in the Russian market as Western brands are leaving due to the war. Of the 14 auto brands remaining on the Russian market, 11 of them are Chinese. This has led China to become the largest exporter of family cars to Russia.
Beijing has not only become a top supplier of consumer goods to Moscow, but also of technological imports, with deliveries of Chinese components for automobiles along with trucks, loaders, and excavators drastically increasing in 2022. Last year the import of high-tech industrial equipment saw a 16 percent increase over an 11-month period and reached a total of $14.9 billion.
While China has been careful to follow Western sanctions when doing business with large companies, many of the second and third-tier companies are taking an interest in Russia's microelectronic market. "Given the volume of production in China, it is easy to hide goods that are banned from export to Russia," a source familiar with the market told The Bell. China has continued to export semiconductors and microchips to Russia, while Moscow's supply of microelectronics from Western nations has dried up amid all the sanctions.
The increased trade between Russia and China has also led to the internationalization of the Chinese yuan, which has risen from being used in only 0.5 percent of Russia's exports in 2021 to a solid 16 percent in 2023.
While Putin has said that Russia is "open" to Chinese-mediated peace talks with Ukraine as the war enters its second year, it is clear that Russia has found a workaround to secure critical oil and LNG supplies along with consumer goods in China should Ukraine refuse to negotiate and the war and resulting sanctions continue.
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