It is the result of Putin’s aggression against Ukraine. The Chinese are buying oil and gas at discounted prices. Investments under the Belt and Road were suspended. Due to its own economic difficulties, Beijing does not want to incur secondary sanctions from the West. Neither arms nor ammunition for Moscow.
Beijing () – A commodity supermarket where you should not invest. This is how China sees Russia after the attack on Ukraine. The Chinese help the Kremlin, but according to their own interests, which do not coincide much with those of Moscow despite the joint declarations of “unlimited” friendship in anti-Western terms.
China has increased purchases of gas, oil and coal from Russia at discounted prices. To circumvent Western sanctions, Beijing is increasingly using its own currency to pay for Russian supplies. On October 3, on the Moscow Stock Exchange, the yuan became the most traded currency with the ruble, surpassing the dollar.
It is certainly not a challenge to the dollar-based global financial system, one of the stakes in the power struggle between China and the United States. According to the international payment system SWIFT, the yuan ranked fifth in global transactions in August, with a share of 2.3%. Similar is the level as a reserve currency (2.9%), according to the International Monetary Fund.
These values are far from those of the dollar, which is stronger than ever in decades. High inflation, fueled by rising energy prices and the geopolitical chaos created by Vladimir Putin, are pushing big investors to take refuge in the US currency.
In the first eight months of 2022, Sino-Russian bilateral trade grew by 31.4% year-on-year to reach €118.6 billion. However, the increase does not compensate for the loss of the European market for the Kremlin. In 2021, trade between Russia and the European Union reached 257.5 billion euros (almost 149 billion dollars between Russians and Chinese).
While more than 1,200 Western companies left Russia or limited their business, at least 41 Chinese companies remained in the country, reports Investment Monitor. However, some Chinese banks, such as the Commercial Bank of China, have had to close their operations in Russian territory since Moscow has been left out of the world banking system.
The Chinese are supplied with Russian raw materials, but they do not support Putin with investments and credits. Chinese funds directed to Russia under the banner of the Belt and Road have been reduced to zero this year: between 2013, the year in which Xi Jinping launched the “new Silk Roads”, and December 2021 they had exceeded 17,000 million of euros.
The Chinese president does not like Putin’s warlike adventurism. Beijing assures tepid political support for the Kremlin war without wanting to draw too much attention: the Chinese fear incurring secondary sanctions from the West, which would damage their already battered economy.
Chinese caution is evident at the military level. The Russians have ammunition problems and do not appear to be receiving supplies from China, as Washington has repeatedly pointed out. As an alternative, the Russian military is turning to Iranian drones and North Korean munitions, as well as being forced to use the old S-300 air and missile defense systems for offensive operations.
