China Rapidly Tightening Its Stranglehold On Russia

The war in Ukraine may soon reduce Russia’s position in the world as a mere storehouse of commodities for China. The data from Chinese customs administration show that the Russian economy is fast becoming dependent on trade with China to remain afloat.

It is well known how after the Russian invasion of Ukraine in 2022, the west cut off Russia from the global financial system and stopped importing its oil and gas, thereby prompting Moscow to make some strategic adaptations, and thus finding an important ally for itself in China.

The total value of trade between Russia and China reached more than US$ 240 billion in 2023, far exceeding the target of US$200 billion set by two countries in the bilateral meetings held a year before. Most importantly, this marks a massive 64% jump in the total Russia-China trade in last two years.

Russia likes to present its growing trade with China as an evidence of an expanding strategic-partnership, and it does make sense because growth of trade between two countries leads to economic interdependence, which was lacking in the Sino-Russian alliance until recent years.  

Chinese President Xi Jinping with Russian President Vladimir Putin  Source:Wikimedia

However, upon closer examination of the trade statistics between these two countries, we find growing imbalance in this trade relationship with Chinese exports to Russia growing at a much faster rate than its imports from the latter.

For instance, the Chinese customs data for the year 2023 shows that Russian exports to China reached US$ 129.13 billion, which amounts to 13.13% increase from the previous year. Whereas, China exported US$ 110.97 billion worth of goods to Russia in 2023, which is a whopping 45.78% increase from last year.

Also, Russian goods accounted for only about 5% of China’s imports in 2023 and the share of Chinese exports destined for Russia was even lesser, merely about 3%. While Chinese goods constituted 38% of Russian imports and the share of Russian exports to China was about 30%.

This represents a continuation of the trend observed in 2022 following the Russian invasion of Ukraine, wherein China is said to have accounted for nearly 30% of Russian exports and 40% of its imports.

On the other hand, Russian goods accounted for only about 4% of China’s imports in 2022 and the Russian share of Chinese exports was even more insignificant, barely exceeding 2%.

In fact, majority of China’s exports in 2022 as well as in 2023 went to the countries with which it has very tense bilateral relationships such as the US, which has been the largest importer of Chinese goods so far, followed by, Japan, South Korea, Vietnam and India, etc.

This indicates that while trade with China is critical for Russia to weather the Western sanctions and sustain its war effort in Ukraine, China has to be mindful that economic cooperation with Russia does not affect its other trade interests in the West and the Indo-Pacific which is more important for its export driven economy.

If this trend continues, Russia’s dependence on trade with China could increase to the extent that Beijing would be in a position to dominate Russian foreign and security policy. Experts contend that once Russia’s imports and exports to and from China reach 50%, it could effectively become a vassal state of the latter.

Also, China has built up a tremendous industrial capacity over the past two decades by transforming itself from a mass producer of cheap, low-end goods to the producer of sophisticated, high-tech products. Whereas, Russian economy runs mainly on the export of energy products and raw materials. All other Russian industries and services remain underdeveloped, except its armament sector.

Therefore, majority of Russian exports to China comprise crude oil, natural gas, coal, and precious metals, whereas China has been sending massive amounts of manufactured, processed, and industrial goods to Russia.

After the western manufacturers withdrew from Russia, Chinese car manufacturers, consumer-electronics producers and other manufacturing enterprises have been left with a near monopoly over the Russian market.

Chinese car brands have been outselling local Russian-made vehicles despite being relatively expensive, with prices usually ranging above 2.5 million roubles (US$ 29,950), whereas Russian cars are generally worth only up to about 1.5 million roubles (US$ 23,961). In 2023, Chinese automakers sold a total of 553,000 cars in Russia, accounting for 49% of Russian auto market.

Overall, vehicles, aircraft, ships and transport equipment constituted about 21% of total Chinese exports to Russia, and machinery, mechanical appliances, and electrical equipment accounted for about 38% of China’s exports to Russia in 2023, as per the data from Chinese customs administration.

This means that almost 60% of Chinese exports to Russia were vehicles, aircraft, ships, transport equipment and various types of industrial goods, and all of this accounted for approximately 23% of total Russian imports in 2023, up from just 8-9% in 2021.

Selling of manufactured goods contributes significantly to China’s GDP and provides high-value jobs to its economy. Going ahead, this trend is poised to widen the economic asymmetry between the two countries, as Russia will be reduced to a resource colony for China’s industrial growth and will become more reliant on Chinese technology.

Furthermore, imports from China have also been crucial to sustaining Russia’s war effort in Ukraine. For instance, a Financial Times article in January reported tenfoldincrease in imports of high-precision CNC (computer numerical control) machine tools from China to Russia since the latter’s invasion of Ukraine in February 2022.  

CNC machines are indispensable to defense manufacturing, as they provide consistent precision and accuracy in cutting of metals and other rigid materials required in producing complex weapon components. Some of the major Chinese companies supplying these CNC machines to Russia are reportedly linked to China’s People’s Liberation Army (PLA).

Other than that, imports of Chinese-made vehicles like trucks and buggies have reportedly enabled the Russian military in Ukraine to maintain its combat capabilities and logistical lines despite suffering heavy losses of military equipment, especially during the initial weeks of its offensive in Ukraine.

Furthermore, China has also been indirectly facilitating the import of dual-use Western-made components like semiconductor chips into Russia, thereby enabling the Russian military industry to continue producing precision-guided munitions.

As Russia’s dependence on China increases, Beijing could leverage it to obtain access to sensitive Russian military technology through joint development programs, which could bolster China’s military power and its defense industry significantly.

For instance, China’s People’s Liberation Army (PLA) Navy has historically been very poor in undersea warfare due to its noisy submarines, and could benefit from increased access to Russian submarine technology entailing advanced quieting technology, acoustic systems and nuclear propulsion.

Destroyer Jinan from Chinese navy (front) and cruiser Varyag from Russian navy sail in formation after a joint naval exercise, Joint Sea 2022, in the East China Sea on Dec. 27, 2022.  Source: Xinhua

Besides, the Russian defense industry is under strain due to the war in Ukraine, and is struggling to produce and sell equipment because of Western sanctions which has resulted into declining demand for Russian arms globally.

Therefore, in the long run, access to advanced Russian military technology could also put China in a position to overtake Russia in global arms trade, as it could enable the Chinese defense firms with an opportunity to seek out customers in those markets that have been dominated by Russian arms manufacturers so far.

In fact, there have already been indications of Russians accommodating China in their military research and development programs which they were reluctant to do until recently.

Shortly after Russia’s invasion of Ukraine in 2022, the Bauman Moscow State Technical University (MSTU) signed a Memorandum of Scientific and Educational Cooperation with the Russian-Chinese university in Shenzhen, a joint venture, wherein Russia is represented by Moscow State University (MSU) and China by the Beijing Institute of Technology.

As part of the agreement, the engineering faculty of MSTU will impart training to Chinese engineers. The MSTU is said to be the best engineering university in Russia which has been deeply involved in Russian military research and development programs ranging from missile systems and tanks to surveillance technologies.

For years, the Chinese have been trying to obtain such kind of access to Russian engineering institutions, particularly the technical faculty at these institutions, similar to the access they have enjoyed at educational institutions in the US. However, the Russians weren’t playing ball until their multi-pronged offensive in Ukraine faltered.

With reduced leverage, Kremlin may have to accommodate Chinese demands in other areas of its security and foreign policy, such as, accept Chinese naval presence in the Arctic. This may seem far-fetched at present but the two countries already seem to be moving in that direction.

In March 2023, during the Chinese President Xi Jinping’s visit to Russia, President Vladimir Putin announced that he is ready to create a joint Chinese-Russian working group to develop the Northern Sea Route (NSR), which runs along the Arctic coast of Russia.

This is a major turning point, given the fact that Russia until recently had been opposing Beijing’s plans to explore the Arctic region through the NSR, as some of its most sensitive and highly strategic military assets, like ballistic missile submarines, strategic test sites, missile defense systems, and advanced radar arrays, as present along this route.

Furthermore, Russia had also initially opposed China’s efforts to become an observer state of the Arctic Council but the war in Ukraine has forced Moscow to adjust to the new realities wherein the remaining members of the Arctic Council have shunned Russia and China has yet again come to its rescue by having refused to recognize the council without Russia’s participation.

Experts suggest that President Putin was hopeful of increased imports of Russian natural gas by China, while announcing the prospects of joint Sino-Russian development of NSR but Beijing is not said to have reciprocated in that regard.

The NSR is expected to become the main maritime highway connecting Asia and Europe, as it saves one to 3,000 miles over the Straits of Malacca and the Suez Canal, and while currently Russia can only maintain NSR traffic for about nine months, Moscow has stated goals to facilitate year-round access by 2024.

The development of the commercial use of NSR could increase the income for Russia from escorting ships along this route, and allow it to expand its exports of Arctic resources, however the Western sanctions now threaten these Russian ambitions.

This has created an opening for China who has its own economic and strategic interests in the Arctic, and possesses the wherewithal to fund any joint Sino-Russian development program for the NSR.

That said, Russia must exercise caution while deepening its ties with China, otherewise what seems to be a Chinese embrace at present could end up becoming a noose around its neck.