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LeMonde (fr), sept16)
China's cautious and self-serving support for the Russian economy
Trade between the two countries has grown strongly since January, especially in the energy sector. Fear of sanctions, however, has convinced China's main banks to limit their financing for the purchase of Russian goods.
How far is Chinese President Xi Jinping prepared to go to support his "old friend" Vladimir Putin, whom he met for an exceptional tête-à-tête on Thursday 15 September in Samarkand, Uzbekistan? The communist leader assured that China "was willing to work with Russia to assume its role as a great power". In concrete terms, this means that since the summer, trade between the two countries has risen sharply, at a time when international sanctions are affecting the Russian economy. But Beijing's support remains marked by great caution.
China imported $72.9 billion (the equivalent in euros) worth of Russian products, mostly hydrocarbons, between January and August: a 50% increase compared to the same period in 2021. In the other direction, "according to Chinese customs, exports to Russia, which were already on an almost vertical curve before the war, have continued to increase, and they accelerated in July-August," says François Godement, advisor for Asia at the Montaigne Institute in Paris. Between January and August, they increased by 9.4% compared to the same period in 2021, for a total of 44.2 billion dollars. The decline in the first few weeks of the war in Ukraine has been forgotten: Chinese exports have returned to their level before the Russian invasion on 24 February.
"China is being pragmatically opportunistic. It is providing what it can to keep its close systemic partner afloat, while not exposing itself to further economic turbulence because its domestic situation is difficult," summarises François Chimits, a researcher at the Mercator Institute for China Studies in Berlin.
According to François Godement, it was in May that bilateral physical and monetary exchanges accelerated, at a time when Beijing had also radicalised its discourse against the United States. On the Moscow foreign exchange market, rouble-renminbi [yuan, the Chinese currency] exchanges exploded, a sign that things are happening on the trade front," he notes. However, the mixture of opportunism and caution is a characteristic feature of the Chinese attitude towards sanctions, which it condemns in principle. In this area, US pressure is strong: when the US added 25 Chinese companies to its own sanctions list in June, it included five electronic goods companies that traded with Russia.
Beijing's bargain
Energy remains at the heart of the asymmetric trade in this bilateral trade. In June, at the St Petersburg Economic Forum, the two countries signed an agreement to increase the volume of Russian gas transiting through the Power of Siberia 1 pipeline. The actual construction of a second infrastructure of this type remains pending. "China pragmatically refuses to be placed in competition with Europe by Russia," emphasises François Godement. But Beijing is buying more gas and building up oil reserves. And it pays half in roubles and half in yuans, without doing Moscow any favours.
The price at which Beijing buys these hydrocarbons is not known precisely, but observers mention discounts ranging from 20% to 50%. Gazprom is said to be supplying China at the lowest rates of all its customers, except for Belarus. "The agreement between the two countries is very much to China's advantage, and Russia has thus become its leading supplier of oil," comments François Godement. Beijing has also made a good deal by selling some of its Russian gas to Europe, this time at a high price, by means of some fifty tankers of liquefied gas.
"China is therefore filling the gaps created by the OECD [Organisation for Economic Co-operation and Development] or G7 sanctions against Russia on its own terms," notes François Chimits. Since the summer, we have seen "an explosion in the export of Chinese goods, in a phenomenon of substitution: trucks, cars, semi-conductors, agricultural equipment, aluminium, steel". In the crucial field of semiconductors, Chinese exports exploded between March and August, according to Merics: + 340%.
Moscow had to turn to Beijing after the end of American supplies, adapting the motherboards of its industrial equipment to the less efficient Chinese chips. Although slower and more energy-consuming than their Intel or AMD counterparts, they are sufficient for basic web browsing and office work," say Merics experts. However, Chinese exports remain insufficient to cover Russian needs, leading Moscow to extract chips from consumer products for reuse in its weapons systems.
"Under the US radar”
Chinese conglomerates such as SMIC have denied selling their products. "But smaller producers are doing so, either because they are under the US radar or because they are less dependent on demand from OECD countries," explains François Chimits.
For Europeans or Americans, controls are very difficult. An American NGO, the Center for Advanced Defense Studies, illustrated this in a study published in July: between 2014 and 2022, it found, China Poly Group, a company under sanctions, shipped 268 shipments of chips for aircraft, radar or laboratory equipment to Russia's largest defence company, Almaz-Antei.
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If China "does offer a form of compensation for the sanctions, it remains of a magnitude and quality that are difficult to assess," notes François Chimits. Beijing is very reluctant to directly finance or invest in Russian companies. In its September report, the Valdai Club, a circle of employers and experts close to the Kremlin, does not hide its concerns about the Chinese retreat in the country, even if it affirms that the anti-Russian front in the West will not undermine the bilateral strategic partnership and that "the Russian market remains attractive for Chinese industrial companies.
According to the Valdai Club, the fear of sanctions has convinced China's main banks - including the Industrial and Commercial Bank of China and the Bank of China - to limit their financing for the purchase of Russian goods. The wider context is one of a downturn in investment in the "New Silk Roads", President Xi's political as well as economic project around the world - in the first half of the year, Russia was one of the countries that saw a complete halt to these commitments.
Chinese private sector malaise
Few Chinese companies have withdrawn from Russia altogether, as have Western groups. Only DJI, the manufacturer of civilian drones popular with the military, has declared that it will no longer sell aircraft to either Moscow or Kiev, illustrating the unease of the Chinese private sector.
The Valdai Club nevertheless regrets the reduced presence of tech companies like Huawei, Xiaomi, Honor and Lenovo. "Information technology and finance are the most affected sectors, with car production and the oil sector suffering collateral damage," the report says. "The reduction in car imports from China has also come as a nasty surprise," it says, with such purchases falling from $191 million before the invasion of Ukraine to $32 million.
On several occasions in recent months, Vladimir Putin has called on Xi Jinping to help him more: he may feel that Beijing's economic support for its strategic partner is not on a par with the "boundless" friendship the two authoritarian leaders promised each other in February.
This aid should nevertheless last, according to observers. For, analyses François Godement, China wants "to take advantage of the support for Russia to gain ground on the Taiwan question and to harden the ideological content of its foreign policy in the run-up to the Chinese Communist Party congress. The Kremlin is now trying to strongly support this reading and is not stingy with its support for Beijing on Taiwan”. /deepl
