Rhetorically, China is fully in line with Russia, and the Kremlin’s propaganda is being adopted almost unfiltered. But cooperation knows its limits: several Chinese companies are reducing their business in Russia for fear of Western sanctions.
After the attack on Ukraine, many people in Europe want all economic ties to Russia to be severed. The populations of other nations are less sensitive: In South America, opinion is divided, many Asian states want to keep their deals with Moscow in any case, according to a global survey by the Alliance for Democracy.
China also welcomes Russia with open arms. No surprise, says Tim Rühlig. The People’s Republic is rhetorically and politically on the Russian line, says the China analyst of the German Society for Foreign Relations (DGAP) in the ntv podcast “Learned again”. Russian propaganda is spread unfiltered in the country almost every day.
Autocracies stick together. Because for the Chinese President Xi Jinping, the Russian head of state Vladimir Putin is the “best friend”, as he revealed a few years ago. Economically, the states have been moving ever closer together for several years. The People’s Republic mainly exports clothing, electronic goods and machines to Russia. Conversely, China is primarily interested in Russian energy: coal, oil and gas imports have more than doubled since 2010.
According to Bloomberg, Beijing is now also considering replenishing its strategic reserves with cheap oil from Russia. State-owned oil giants like Sinopec have also started tapping into Russia’s bargain market, Reuters reports. A new course, because in the first weeks after the start of the war they had reduced purchases and imports.
“On February 4, Xi Jinping and Vladimir Putin concluded a very comprehensive agreement that reads like a new alliance between the two great autocracies of our time,” says China analyst Rühlig. Nevertheless, the Russian attack on Ukraine is not in China’s interest, because Beijing hates uncertainties and risks – especially in years when a party congress is taking place like this one.
But time cannot be turned back, which is why the new motto in Beijing for the past few weeks has apparently been: explore what is economically possible without offending the West. In other words: in contrast to the EU, buy cheap Russian energy and make the Kremlin dependent on Chinese companies. The real enemy of China is the USA. You need allies for this dispute, but Beijing doesn’t have that many really powerful ones, says DGAP expert Rühlig. Geopolitically, Russia is a key player that China could use as a junior partner. “But you have to give the Russians something for that.”
A stable order situation for Russian energy companies, which puts money into the state coffers, makes the Kremlin docile. But surprisingly, support seems to be exclusively limited to this sector. There is no military aid, and Chinese limits are also clearly visible in the financial industry or in the important technology sector.
For example, the former smartphone giant Huawei added the Russian payment service Mir to its app store shortly after the start of the war, but ditched it just a month later. At that point, it had been a long time since the apps of several sanctioned Russian banks could be installed on the smartphones of the stricken company.
Almost at the same time, the “Wall Street Journal” reported that Xiaomi, the second Chinese smartphone giant, would temporarily stop its deliveries to Russia – as would computer manufacturer Lenovo from Hong Kong. And Unionpay, the Chinese answer to Visa and Mastercard credit cards, told Sberbank and other Russian banks that they are not currently interested in working together, according to the Moscow Times.
“There’s a lot to suggest that Beijing initially thought they had to send a signal of support,” says Tim Rühlig. With each additional package of sanctions, however, one sensed that the West was serious and decided that it was better not to take any risks.
Not only did European and American technology exports to Russia collapse in March, Chinese companies also delivered 40 percent fewer laptops and around two-thirds fewer smartphones than in February, according to trade data from the Chinese government – although officially only four major Chinese banks and the drone manufacturer DJI have completely left the Russian market, according to a listing by the US Yale University.
Actually, it would have been six, because transport service provider Didi also wanted to withdraw from Russia. However, after a public shitstorm, the once multi-billion dollar company began to withdraw from the retreat. The Chinese population took the farewell as a sign of weakness.
Xi Jinping has to dare a balancing act on the Russia question: Slowly cut the People’s Republic off the West without endangering common trade. Hence the withdrawal of the four major banks. Thus, while they lose revenue they would have received as a payment service provider for Russian companies, they also do not risk intentionally or accidentally violating Western sanctions.
Because if it comes to that, there is a threat of powerful secondary sanctions from the USA and the EU. A catastrophe for financial institutions that are interwoven with the international financial system and also for the state leadership in Beijing. Life without dollars, euros, western chips and semiconductors is still unimaginable. The USA and Europe still control and dominate the financial markets and the technological cutting-edge area. Especially as long as the People’s Republic is struggling with blocked ports and other aftermath of its zero-Covid policy.
