Last week China’s leader Xi Jinping visited Moscow. Beijing’s agenda was twofold: to study Russia’s unique experience of surviving under tough Western sanctions, and to gain a foothold on the Russian market, argues sinologist Mikhail Korostikov in a piece for Carnegie Politika.
Chinese leader Xi Jinping at the Kremlin on March 21. Photo: Kremlin.ru
By Mikhail Korostikov
China had good reason to defy Russia’s growing international isolation with a pomp-filled three-day visit to Moscow by Chinese President Xi Jinping last week. Beijing’s agenda was twofold: to study Russia’s unique experience of surviving under tough Western sanctions, and to gain a foothold on the Russian market deserted by Western businesses. Both countries are in confrontation with the West, though on a different scale and for different reasons, and this predetermines their mutual interest, regardless of current events.
Strategic adversaries of the US
The Chinese president wants to assess how stable the Russian state is under unprecedented external difficulties. For Xi, today’s Russia is a giant lab in which the government is conducting an experiment in forced disengagement from the Western economic, industrial, cultural, and financial sectors.
Being able to observe the experiment in real time allows Beijing to prepare for similar shocks, since China’s own confrontation with the West is also deepening. For several years now, Washington has been gradually turning Chinese companies away from Western markets, technologies, and services. This approach was President Donald Trump’s official doctrine, but has remained in effect under Joe Biden.
The Chinese leadership is deeply worried that even last year, when the United States seemed to be consumed by introducing a plethora of new sanctions against Russia for its aggression against Ukraine, Washington still found time to sanction China, too. Since the start of Russia’s invasion of Ukraine, the United States has imposed new export controls on microelectronics to China and added 110 new Chinese enterprises to its partial exports sanctions list.
Moreover, to Beijing’s disquiet, all American strategic documents list both Russia and China as the key strategic adversaries of the United States, sometimes alongside Iran and North Korea. The EU has adopted a softer but similar approach, listing China as a “systemic rival” in its strategic reviews since 2019.
Russia’s survival experience
Under normal circumstances, China would have had to adapt to the restrictions on its own, but Russia’s policies have gifted Beijing a unique opportunity to see its prospects in advance and prepare for them. There is certainly something to be learned, since a year after the invasion, Russia has avoided collapse in all essential economic spheres.
While accounting for just 2 percent of the global economy, Russia is involved in a conflict with 60 percent of it. It’s cut off from capital markets and can no longer trade normally with its traditional partners (38 percent of Russia’s trade volume in 2021 was with the EU). Nevertheless, the country has so far avoided massive bank failures, sky-high unemployment, and shortages of consumer goods.
China’s economy is much more stable and diversified, but it is very dependent on imports of raw materials and external markets for its exports. Since the very beginning of his tenure, Xi has worked to reduce dependence on exports by stimulating domestic consumption, and he hopes to solve the raw materials problem by strengthening cooperation with Moscow. In fact, Russia has already switched a significant part of its exports over to China: trade between the two countries increased by a third in 2022 up to $190 billion. At the same time, the growth of Russian exports to China outpaced that of imports, at 44 percent compared with 14 percent.
As well as wanting to study Russia’s survival experience, it also makes sense for Beijing to help Russia stay afloat, thereby distracting the United States and EU from a standoff with Beijing.
President Xi Jinping and president Vladimir Putin during an official welcome ceremony at the Kremlin. Photo: Kremlin.ru
China fills the vacuum
China’s fundamental interests would preclude it from joining sanctions against Moscow even if the sympathies of the country’s government and all of its people lay with Ukraine. For Beijing, Russia remains a unique source of raw materials and experience that would be too costly and painful to acquire independently.
The second reason for Xi’s visit to Russia is to stake a claim to the Russian market abandoned by European companies. Chinese business executives interested in securing the gains they have made in the past year comprised a large part of Xi’s fifty-car motorcade.
Indeed, eleven out of fourteen remaining brands on the Russian automobile market are Chinese, and Chinese vehicles accounted for 38 percent of all new car purchases in Russia in February 2023, up from 9 percent a year earlier.
Seventy-five percent of the cellphones sold in Russia in 2022 were Chinese, up from 50 percent in 2021. Seventy percent of construction equipment and 40 percent of laptops sold in Russia also now come from China, while the country’s Haier refrigerators have become the most popular brand in Russia for the first time ever.
In the past, conservative Russian consumers would certainly have chosen German products over Chinese ones, but many market segments now offer no European products at all, or their pricing is prohibitive. Consumers have no choice but to buy Chinese goods.
The process already happening in the auto industry will extend to other industries, with Chinese companies filling the vacuum left by Western companies. Right now, that process is in its early stages, since only 8.5 percent of G7 and EU businesses have so far divested from Russia since the war started, despite all of the dramatic announcements.
Another issue is China’s compliance with Western sanctions against Russia. Officially, China exports no weapons or military technology to Russia. Beijing claims that even its high-performance Loongson processors can no longer be exported to Russia. But the reality is that most products and components used in the war can be classified as dual-use technology, and can be formally exported for civilian purposes. The Ukraine war requires a lot of medium and low-quality electronics that Russia can obtain from Chinese household appliances.
The current situation benefits everyone: China is buying more oil and gas from Russia, while selling more household appliances used for both peaceful and military purposes. In addition, much of this trade will be conducted in yuan, whose share in Russian trade has increased from 0.5 percent to 16 percent in two years.
The leaders have signed documents on 'strategic cooperation'. Photo: Kremlin.ru
New Russian-Chinese relations
The new format of Russian-Chinese relations is both simpler and more complicated for Moscow than it was before the war. On the one hand, it’s increasingly dependent on Beijing economically and politically. On the other, Beijing is also left with fewer options as its confrontation with the West escalates.
China has few alternatives to the Russian resource base. While Africa and Latin America can potentially replace it, they are too far away, and the Chinese fleet will continue to lag far behind its U.S. counterpart for at least the next fifteen or twenty years.
This fact evens the playing field a little, and gives Moscow hope that Beijing won’t use its newly acquired economic leverage excessively. In fact, it has no reason to do so yet, since Russia is voluntarily providing China with everything it needs and is quite happy with the exchange. As a bonus, Xi Jinping provides Vladimir Putin with respect and symbolic capital: the commodities the Russian president values the most.
This article was originally written for and published by Carnegie Politika.