Why does China respect Western sanctions and what it means for Russia? Veronika Sušová-Salminen has noticed some of the nuances of current relations between China and Russia.
The war in Ukraine (and about Ukraine) has changed the dynamics of Russian-Chinese relations. On the one hand, China has become an even more important partner for Russia, which only reinforces the asymmetric nature of their relationship. China is far stronger than Russia, and Moscow’s dependence on Beijing has only been strengthened on a number of issues. For China, Russia is now playing the role of a “battering ram” that could help it “break” a window into a “new world order” that would no longer be based on the unchallenged domination of the US and the West.
Unfortunately for everyone, this “punching through” is being done by the old and familiar methods – the proxy war in Ukraine and also by increasingly teetering on the edge of a world war without any serious attempts at a diplomatic solution.
The BRICS summit in June confirmed that both Russia and China have an interest in a different power arrangement in the world and that their anti-Western policies represent a common agenda.
China, on the other hand, is a global economic power with economic interests on every continent, as well as in Europe and the US. The degree of Chinese integration is high and is part of the Chinese recipe for economic success, in which it differs greatly from Russia.
It is thus evident that Chinese policy towards Russia today has two distinct dimensions: political and economical.
In the political sphere, China has taken a neutral stance on the conflict in Ukraine, supporting Russia in its views on NATO and its expansion, as well as in its principled criticism of sanctions. However, it continues to support Ukraine’s sovereignty and to call for a diplomatic solution, i.e. an end to hostilities. Beijing has not sided with Russia as an ally and is seeking to continue to protect its economic relations with Ukraine and not only with it. Even the White House recently acknowledged that China has not yet supported Russia militarily.
Even (some) Chinese companies are leaving Russia
We hear about Western companies leaving Russia in large numbers every day. At first, these were gestures of solidarity with Ukraine and expressions of disapproval of Russia’s attack on a sovereign state. Today, these are entirely pragmatic steps, because in the new conditions of sanctions, difficult logistics and Russia’s cut-off from the global financial system, doing business in Russia is becoming increasingly difficult.
It is now often cheaper for large and even smaller multinationals to leave the Russian market than to stay. But the fact is that many Chinese companies are also quietly leaving the Russian market, either by quietly exiting the market or by stopping exports of their goods to Russia.
Their reasons, however, are somewhat different. This situation, for example, concerns technology giants such as Huawei, Xiami, Honor, Lenovo or drone manufacturer SZ DJI, to mention just a few Chinese companies and brands.
These moves come at a time when Russia will need China not only as an outlet for its commodities (gas and oil) but also as a potential supplier of advanced technologies. Russia, with some exceptions, still lags behind in this domain or has relied on globalisation, i.e. imported many important components. This was the situation in the electronics, automotive, IT and other sectors.
According to the Global Times (China’s state-run English-language tabloid), while imports from Russia to China grew in the first five months (January to May), Chinese exports to Russia experienced much slower momentum. Statistics show a reduction in imports of IT products such as laptops and smartphones. Most of these products and companies are global in scope and would be economically threatened by US secondary sanctions in the context of the global production chains and dependencies they form.
For China, the Russian market is far behind the Western one. In 2019, China exported 2.02% of all exports to Russia (and 3.63% of all imports, about 70% of which were raw materials). Thus, in this area, Russia will have to rely not on direct cooperation but on so-called parallel imports through members of the Eurasian Economic Union, Turkey and certainly China where possible.
More significant, however, is the newly emerging situation around strategic cooperation, which both countries promise to ‘strengthen’. For example, the Chinese oil firm Sinopec has suspended talks on cooperation with Russia, including potential investments in Russia to the tune of $500 million. While China buys cheap Russian oil, it does not want to invest in Russia now.
The war has also affected the financial cooperation between the two countries, which has taken on a new meaning for Russia.
Meanwhile, China’s global payment system UnionPay, which Russian banks under sanctions have relied on as an alternative, does not seem to be getting it anytime soon. UnionPay has suspended all talks with Russian partners.
The Asian Infrastructure and Investment Bank has followed a similar path, also suspending its activities and operations in Russia and Belarus (back in March), with the understanding that it will re-evaluate them. There are also indications that China has begun to focus on those parts of the “one belt and one road” infrastructure that do not concern Russia and, presumably, Ukraine. Some talk of Putin “killing” the land portion of this China-Europe megaproject. All this suggests Chinese caution, reluctance to take greater risks and a wait-and-see strategy.
Russia’s political support with some question marks
There are also some signs that not everyone in the Chinese nomenklatura is at all sure that the war in Ukraine and Russia’s support for it is beneficial to China. For some, the war has also become a reason to doubt Russia itself in terms of its strength (military potential).
Former Chinese ambassador to Ukraine Gao Yusheng spoke at an internal seminar of the China International Finance Forum and the Faculty of International Studies of the Chinese Academy of Social Sciences, where he assessed the Russian invasion of Ukraine. In May 2022, the diplomat noted that “Russia’s stance in this war is becoming more and more passive and unfavorable and shows signs of defeat,” and went on to refer to Russia as a country in long-term decline, suggesting that Russia’s economic and financial power is “extremely disproportionate” to its status as a nuclear power and that every day of warfare is a financial burden for Russia.
Gao Yusheng also spoke of how the signs of the Russian military’s defeat in Ukraine are related to what he characterized as Russia’s “decline … in its economic, military, scientific and technological, political, social and other fields.” His text also includes the following formulation:
“The core and primary direction of the Putin regime’s foreign policy is to regard the former Soviet Union as its exclusive sphere of influence and to rebuild the empire by relying on the integration mechanism in the various Russian-dominated areas. To this end, Russia has been duplicitous, breaking its promises and never truly recognising the independence, sovereignty and territorial integrity of other former Soviet states, often violating their territories and sovereignty. This is the greatest threat to peace, security and stability in the Eurasian region.”
This view is obviously far from representative of China’s official policy towards Russia, but it is nevertheless worthy of attention and hardly in the Western mainstream.
Another Chinese international relations specialist, Yan Xuetong, criticised the war in Ukraine as something that China will not benefit from; on the contrary, he said the war “accelerated” geopolitical trends that will weaken China’s position in Central and Eastern Europe, for example, but also strengthen its confrontation with the US. Moreover, he stressed that this is another flouting of international rules – war is itself a violation of the rules, and so are sanctions. This argument is important because it works openly with Chinese interests.
Yan also admitted that he did not expect Russia to go to such a war: “I did not expect Russia to decide to go to this war, and Russia will pay a huge price for it.” This Chinese expert then went on to talk about how the war would lead to a reduction in Russia’s global influence: “The war has made it harder for Russia to have a future global influence.” Thus, the assessment of the war is not clear-cut even in China, and it would be exceedingly interesting to know what Beijing thinks of Putin’s actions in terms of the quality of decision-making, calculation and weighing of risks. It would be even more interesting to know how Beijing actually perceives the potential and strength of contemporary Russia.
But there is another factor to consider. China’s current leader Xi Jinping will be running for his presidency again in a few months in the context of serious economic problems and discontent with, for example, the zero-Covid policy. Xi Jinping does not seem to afford policy mistakes that would lead to further sanctions by the US and the West, this time against China, even though two months (sic) after the start of the conflict he has bet on an anti-Western interpretation of the war as a fight against US hegemony and a Western strategy as an effort to weaken Russia and contain China. This relatively long delay may mean that “intra-party opposition has strengthened”, as Indian China specialist Jayadeva Ranade believes. However, the foot-dragging may also have been related to the fact that Putin’s move may have caught Beijing relatively unprepared and caused some “embarrassment”. Some then see it as a not-so-positive sign that Xi turned down Putin’s invitation to Russia (arguing that the reason was the pandemic), which they see as an effort to distance himself from Russia and its war. But both the Kremlin and Beijing rejected that interpretation, and Dmitry Peskov then said that Xi would be going to Moscow as soon as “the situation allows.”
Optimism or realism?
Optimists see great potential for Russian-Chinese cooperation or even alliance in the new environment. In their imagination, China will help and support Russia not only in its efforts to break through the window of a multipolar and more sensitive to the non-Western world than the current one, but also economically. Both countries thus represent for them a “block of change” in international relations. The West then plays the role of protector of the status quo that suits it. Realists are aware of the existing obstacles, the different capabilities and interests of the two countries, including China’s desire not to damage its economic interests and global integration oriented systematically towards itself.
Among other things (ideology, economics), China differs from Russia on one fundamental point: it does not take risks and does not want to jeopardize its real rise. Russia will thus have to rely on itself for many things, and given that it has missed opportunities to modernise its economy and state in many respects, there are legitimate doubts about its future development.
In many respects it will have to rely on the parallel imports already mentioned, rather than on domestic production and independence, or on direct support from China, despite the official rhetoric about ‘import substitution’ and ‘borderless’ partnerships.
Unfortunately, Russia’s trade with China still follows the formula of a peripheral economy: raw materials for technology and finished goods, which shows that even Russia’s new orientation towards China does not imply the necessary structural changes.
Russia wants to change international relations without changing its own economy, which is one of the reasons for its position in the world.
Its strengthened relations with China over the past decades have not brought much new in this regard, just as its military campaign in Ukraine has relied on old methods. But realists also understand that current Western policy, and specifically U.S. policy, is conducive to pragmatic and situational political cooperation or coordination between Moscow and Beijing, for whom a defeat or collapse of Russia would be a problem.
Nothing fundamental is likely to change this reality in the short term. In the long run, however, things are much less certain…