Despite the most difficult situation in the world related to the military conflict in Ukraine, which began in February this year, relations between Russia and the People’s Republic of China (PRC) are experiencing the best period and at the same time have the potential for their further deepening. The two largest powers of Eurasia continue to strengthen economic ties and develop partnership in the field of security and international cooperation. At the same time, the principle of non-interference in each other’s internal affairs, which is shared by the leaders of both States, and the similar nature of their political regimes guarantee the absence of any political friction between them and ensure their common position on most issues of global development.
It should be recalled that in the joint statement signed by Chinese President Xi Jinping and Russian President Vladimir Putin. Putin 28.06.2021 during the summit on the occasion of the 20th anniversary of the “Treaty on Good Neighborliness, Friendship and Cooperation between Russia and China”, it was noted that: “Not being a military-political union, similar to the alliances formed during the Cold War, Russian-Chinese relations surpass this form of interstate interaction. They have no opportunistic nature, are free from ideologization, assume comprehensive consideration of the partner’s interests and non-interference in each other’s internal affairs, are self-sufficient and are not directed against third countries.”
The stability of Russian-Chinese relations is based on three key factors: mutually beneficial trade and economic ties, the absence of serious ideological and political differences between the countries and the need to preserve peace on the border between Russia and China.
Western sanctions against Russia, which significantly expanded in 2022, contributed to the expansion and deepening of its economic cooperation with China. The development of this cooperation is based on strong political relations between our countries, established economic ties, Russia’s objective need for Chinese technologies and investments, and China’s reciprocal interest in the widest Russian market, from which almost all Western campaigns have left.
The deepening confrontation between Russia and China, on the one hand, and with the United States and their partners, on the other hand, contributes to the rapprochement of Beijing and Moscow, and the escalation of Western sanctions against both our countries to a certain extent stimulate their closer economic and political cooperation.
Nevertheless, it is important for Russia to realize that the process of its further economic rapprochement with China will be difficult, primarily because of the danger of the introduction by the United States of secondary sanctions against Chinese companies. In recent years, China has been seriously integrated into the global world economy. Therefore, the risks of losing the markets of the USA, Europe or other countries due to these restrictive measures are a serious constraint for representatives of large Chinese businesses in their relations with Russian partners.
Let’s take a closer look at what factors have the most serious impact on the further development of Russian-Chinese trade and economic relations in the current situation.
For Russia it is:
1. Maintaining and possibly even expanding the markets for its export goods, primarily gas, oil, coal, ferrous and non-ferrous metallurgy products, which are gradually being displaced from the world market due to sanctions from the United States, the EU and a number of other countries. China has already taken on significant volumes of released Russian exports and its role in solving this problem remains key, at least for the near future.
2. Given the serious restrictions on ensuring financial transactions between Russia and its leading foreign partners, it needs, firstly, to establish reliable financial cooperation with China to ensure the sustainability of bilateral trade. And secondly, in the transition in the future to the use of the yuan to finance its trade and economic cooperation with third countries. The solution to both of these problems will not be easy to implement in practice, but it will be extremely important for the preservation and development of cooperation between the Russian Federation and China and other countries in the new conditions.
3. The need to replace Western goods and technologies that have ceased to be supplied to the Russian market due to Western trade and economic sanctions and informal restrictions. Particularly sensitive is the replacement of high-tech goods and industrial equipment, including equipment for the extraction and processing of oil and gas, various kinds of machine tools, machines and components, electronics, etc. The Chinese economy can potentially ensure the supply of these goods and technologies, and in the long term become the basis for the formation of new more complex value chains.
China’s interest in expanding cooperation with Russia may be related to the following factors:
1. The expansion of the share of Chinese imports of Russian hydrocarbons and other natural resources, which it can buy at significant discounts under new conditions, will undoubtedly have a positive impact on the development of its economy due to the diversification of raw materials sources.
2. The conversion of the yuan into the main currency of Russian international transactions will help strengthen China’s role as another influential global financial center.
3. In the conditions of the fleeting liberation of the Russian market, which remains quite capacious, Chinese companies have great opportunities to occupy significant niches in this market, especially in such industries as the production and sale of automobiles, electronics and other essential goods, engineering products, etc.
4. The crisis in relations between Russia and the West allows China to strengthen its position on the world stage by deepening its partnership with Russia. Moreover, China is absolutely not interested in the collapse of the Russian economy.
At the same time, a number of external circumstances and challenges remain, which may significantly complicate the further development of Russian-Chinese cooperation.
The first challenge is related to the fact that the COVID-19 epidemic has not yet ended and the Chinese leadership is forced to maintain a high level of restrictions that negatively affect the expansion of business ties. And this seriously hinders the development of cooperation in the short term.
The second challenge is more significant and is related to the fact that Chinese businesses, especially large ones, are afraid of secondary sanctions from the US leadership in case of violations of American, European and other sanctions. This primarily concerns the supply of goods and technologies to Russia that China produces under American licenses. And also in the case of mutual settlements in US dollars or euros between Chinese and Russian companies that are under the above sanctions.
Nevertheless, there is every reason to believe that China, where medicine is at a high level today, will be able to radically solve the problem of the COVID-19 epidemic and the Chinese authorities will cancel the strict restrictions that are still in effect in this country in the near future.
As for secondary sanctions by the United States and its allies, they are unlikely to cause significant damage to the development of trade and economic cooperation between the Russian Federation and China. These sanctions do not apply to those goods and technologies that China produces under its own licenses. And there are more and more of them.
Financial sanctions will also not affect Russian-Chinese cooperation if transactions are carried out in yuan and rubles, which are not controlled by the US financial authorities. Moreover, recently the legislative authorities of the PRC and the Russian Federation have been actively transforming their own legislation in order to protect Chinese and Russian companies from the impact of Western sanctions.
Therefore, in the short and medium term, the risk of secondary sanctions will remain, but in the long term, the development and implementation of new mechanisms for financial settlements, as well as the creation of new market niches that are not related to Western technologies, create better opportunities for cooperation.
In addition to the objective challenges affecting the development of the Russian-Chinese partnership, there are a number of subjective problems, without solving which this partnership will be difficult. These include, for example, the need for the parties to have a good knowledge of Chinese and Russian, respectively, culture and law. The lack of such knowledge on the Russian side limits the ability of Russian business to enter the Chinese markets, attract Chinese investments into the Russian economy and effectively conduct business negotiations with Chinese partners. Chinese businessmen face similar problems. It would seem that the presence of such linguistic and cultural competencies is not as important as the creation of the necessary financial infrastructure, the development of new transport and logistics corridors, etc., but without them it is impossible to count on the successful development of business relations in the long term.
Traditionally, for China and Russia, personal relations between the leaders of these countries play an important role in strengthening their cooperation. To date, Xi Jinping and Vladimir Putin have held almost 40 personal meetings, not counting numerous telephone conversations. Therefore, it can be argued that a friendly personal contact has formed between them, which allows them to promptly resolve any issues that arise. The trusting relationship between the leaders of the two countries is undoubtedly a significant advantage that guarantees the successful development of Russian-Chinese relations both in politics and in the economy.
On February 4, 2022, following the talks between Xi Jinping and Vladimir Putin in Beijing, they signed a Joint Statement of the Russian Federation and China on international relations in a new era and global sustainable development. In this statement, the parties noted that “no State can and should ensure its security in isolation from the security of the whole world and at the expense of the security of other states.” Russia and China once again stressed that they stand for the formation of a new type of relations between the world powers, which should be based on mutual respect, peaceful coexistence and partnership cooperation.
The Statement also stressed that the friendship between the two states has no borders, and the strengthening of their bilateral strategic cooperation is not directed against third countries, is not affected by the changing international environment. According to V. Putin, thanks to these principles of building the Russian-Chinese partnership, the relations between our countries are “a model of efficiency, responsibility, aspiration for the future.” And, as the subsequent events of February 2022 showed, it was with these relations that the world entered a new era.
The reaction of the Chinese leadership to the events around Ukraine, which basely stated that Western sanctions against Russia contradict international law and provoke a global economic crisis and that this conflict should be resolved through peaceful negotiations, fully corresponds to Russia’s position. And on June 15, 2022, in a telephone conversation between Vladimir Putin and Xi Jinping, the Chinese President noted that despite any changes in the world arena, Russian-Chinese relations continue to develop successfully. He also reiterated that China has its own position on the Ukrainian problem.
On June 17, 2022, speaking at the planning meeting of the St. Petersburg International Economic Forum (SPIEF), Russian President Vladimir Putin noted that for Russia “cooperation with China is interesting and important, but this does not mean that Beijing should support Moscow in everything: China has its own interests, and we must respect them.” In turn, Xi Jinping, in a video message to the forum participants, noted that: “Today, cooperation between China and Russia in all spheres is developing along an upward trajectory … and this indicates high stress tolerance and the internal potential of Sino-Russian cooperation.”
Within the framework of this forum, a business dialogue “Russia – China” was held, moderated by the heads of the Union of Chinese Entrepreneurs in Russia and the Institute of the Far East of the Russian Academy of Sciences, which was attended by representatives of more than 40 Chinese companies. As a result of this meeting, it was decided to establish a “Coordinating Council for China” in Russia, which included representatives of leading Russian scientific centers. This council will be supported by the Administration of the President of the Russian Federation, the Government of the Russian Federation and the Security Council of the Russian Federation.
Thus, according to the results of the SPIEF-2022, it can be stated that Russian-Chinese business cooperation continues its progressive development due to the fact that political agreements and joint statements of the leaders of the two countries are successfully transformed into economic results. China is becoming a key consumer of Russian energy resources, and the governments of the two countries continue to conduct intensive negotiations on the creation of new routes for their transportation to China. On the other hand, after the completion of the SPIEF, it was announced the resumption of supplies from China to the Russian Federation of spare parts for civil aircraft, the establishment of closer cooperation in the automotive industry. Chinese smartphones Xiaomi, Huawei, Vivo and others in 2022 came out on top in the Russian market, displacing the iPhone and Samsung, which for many years completely dominated it.
Global cooperation between Russia and China has found expression in their close positions in relation to the development of various international integration associations with their participation. In particular, at the last XIV BRICS Summit held in Beijing on June 22-24, 2022 and the Business Forum held within its framework, the leaders of the two countries once again expressed interest in further strengthening Russian-Chinese relations. Currently, 45% of the world’s population lives in the BRICS member countries, and in the near future these countries will be able to overtake the Group of Seven countries in terms of their combined share in world GDP. This further strengthens the role and influence of BRICS, and it is no coincidence that in addition to Brazil, China, India, Russia and South Africa, 13 other countries (the so-called BRICS+) took part in this summit. Official applications for joining the BRICS this year were submitted by Argentina, Algeria and Iran, and Egypt, Saudi Arabia and Turkey, according to the President of the international forum of BRICS countries P. Anand, expressed their desire to become members of BRICS. As the heads of China and the Russian Federation stated in their speeches at this summit, the BRICS member countries are making joint efforts to protect peace and stability throughout the world, therefore they enjoy the support of a large number of Asian, African and Latin American states, strive to pursue an independent policy, and actively contribute to the formation of a fair system of interstate relations based on the norms of international law and the basic principles of the UN Charter.