Amidst Chinese Pledges Of Support For Russia In The Face Of Western Sanctions, Some Russians Question Depth Of Chinese Support

The Russian press played up the Chinese authorities pledge to increase support for Russia in the face of tougher Western sanctions on Russia. On April 26, 2021, Chinese Foreign Ministry spokesman Wang Wenbin said the following:

“We are resolutely opposed to the use of unilateral sanctions…China and Russia maintain relations of comprehensive partnership with each other. In matters of protecting state sovereignty, the PRC and Russia will support each other.” [1]The strongly conservative headlined the statement as “A Friend Is Recognized at Times of Sanctions”.[2] It is understandable that the Russian government would like to demonstrate to the public that Russia is far from isolated economically. However, some reservations have appeared about the depth of Chinese friendship. If Russia is being subjected to economic pain, the best thing China can do is to help the Russian economy grow. This would count for more than declarations of solidarity and joint condemnations of the American sanctions weapon

MEMRI’s report follows below:

The business newspaper Konkurent, that is published in the Russian Far East, a region that is traditionally warier of the powerful Chinese neighbor, was significantly less upbeat about what it called Chinese smiles and waves at Russia in the statement by the Chinese foreign ministry.

“Hitherto, the ‘protest’ by the Chinese side consisted purely in the distribution of promises and declarations of partnership with the Russian Federation. There is no need to talk about real steps – on the contrary, the Chinese are diligently paving the ‘paths of retreat.’

It was necessary to look at the actual trade figures to get the true picture.

In the first three quarters of 2020, China’s direct investment in Russia fell by 52%, from $ 3.735 to $ 1.83 billion. That is, Chinese investors took away every second dollar invested in the Russian Federation’s real sector. Investments in the capital of Russian business fell fivefold, from $ 2.28 billion to $ 480 million. Investments in “debt instruments” also fell: from $ 1.45 to $ 1.35 billion. These indicators are the lowest for China for the entire period under observation.”

China’s blockage of Russian fisheries exports to China is another sore point. “The supply of Russian fish products to the ports of the PRC is seriously limited. They have not been able to solve the problem [China’s claim that Russian fisheries do not meet local health standards] since the fall of last year.”

Konkurent charged that for all the talk about fighting the sanctions, the Chinese were dragging their feet in terms of making trade less dependent on the dollar:

“Negotiations on the transition to settlements in national currencies were also not crowned with success. The calls of Foreign Minister Sergei Lavrov went unheeded. The Eastern partners are not interested in abandoning Western payment systems, and in the five years that the Russian alternative to SWIFT exists, only one Chinese bank has joined it.[3]

Aleksey Maslov, Acting Director of the Russian Academy of Sciences Institute for Far Eastern Studies, in interviews to two highly diverse outlets – the Communist, and the liberal, sought to present things more dispassionately but reached similar conclusions.

Direct Chinese financial assistance would not be forthcoming, and in any case it would prove demeaning for Russia: “China has never provided economic support to Russia in the way that it provides, for example, to third countries. And for Russia it would be somewhat humiliating.”[4]

Russia wanted trade not aid, but while Maslow, as opposed to Konkurent did not paint such a bleak picture of trade relations, especially considering the coronavirus crisis that dampened trade figures, he still believed that there was room for improvement: “Further, I think, there will certainly be an issue between Russia and China on expanding the forms of trade and economic interaction. Although last year we had very good cooperation – over $ 107 billion in trade. And this is even in the difficult year of 2020. But we are talking about expanding the list of goods, expanding the admission of Russian products to the Chinese market, and new large-scale projects. In general, this is a whole range of measures. Because today one of the paradoxes is that, despite serious contradictions, the European Union and the United States are China’s main trading partners, not Russia.”[5]

“Beijing Is an Ally of Moscow but Only in Words” is the way that chose to headline its interview with Maslov, conducted by the outlet’s columnist Alexander Zhelenin. He claimed that there was a disconnect between the political arena where Moscow and Beijing were essentially on the same page and the economic realm where Chinese actions have not matched the political declarations.

— In your opinion, could the words of the Chinese Foreign Ministry spokesman about the country’s readiness to “support Russia” be a sort of ritual statement? Is there more substance behind them?

— I believe that to a certain extent it was a reply to the proposal of Russian Foreign Minister Sergei Lavrov, which was put forward at a meeting with Chinese Foreign Minister Wang Yi. During his recent visit to China, Lavrov effectively proposed there the creation of a broad coalition of countries opposed to [Western] sanctions. So, this statement was an official answer. China supported this initiative. Also, Beijing most actively supports Moscow’s position at the UN Security Council. Probably, there would be nothing new in this regard.

The main issue is that Russia and the PRC [People’s Republic of China] have distinctly intensified their policy of establishing partnership relations with many countries. Last month China began to advance towards the Middle East. The PRC Foreign Minister’s visits and negotiations in Iran, Saudi Arabia and Oman speaks to that conclusion. In turn, to put it bluntly Lavrov “intrudes” into a foreign policy direction, which is considered to be the Chinese traditional sphere of influence, namely India and Pakistan.

It can be said that Russia and China are beginning to form a wide alliance of countries which, in one way or another, dread the [Western] sanctions.

— By what actions can China actually support Russia?

— If one were to look closely, he would have discovered that no noticeable activities took place in this regard. If we take the trade relations between the two countries, they are developing normally. However, there were no significant changes in them, neither for the better nor for the worse. Trade balance of Russia and China reached $ 107 billion in 2020. This indicator slightly exceeded 110 billion USD in 2019. But 2020 was a very difficult year. That is, there was a small decrease in a mutual trade balance. However, China’s trade turnover with the US and Europe despite all their quarrels is still five or six times greater than that with Russia.

— As far as I remember, the PRC has a bigger trade balance with South Korea than with Russia …

— Yes, China has a bigger trade turnover both with the АSEАN countries [Association of South East Asian Nations] and even more so with Japan. So, it is not very clear how a breakthrough in this sphere can be achieved. We can just slowly increase a mutual trade turnover by supplying new types of agricultural products or increase gas exports. But we will be unable to achieve a critical breakthrough.

Of course, there is also a possibility for expanding infrastructure projects. For example, the Russian railways can be used for the transportation of Chinese goods, primarily the Trans-Siberian Railway. However, the problem is that the capacity of this railway is insufficient for this task. Strictly speaking, it can no longer meet even Russian demand alone. Today, the Trans-Siberian Railway capacity is about 540-560 thousand containers per year. However China needs a million containers per year. This means that even if would stop all Russian transportation through this railway, then it still would not be enough the Chinese.

— So it seems that we [Russia] need to invest into the development of Trans-Siberian Railway, isn’t it?

— In that case we will be absolutely dependent on the transportation of Chinese goods. And the most unpleasant part, is that in such a case we may emulate the scenario of Chinese-European trade, when almost a third of all containers return [from Europe] to China empty. Because from Europe they have nothing to supply to China.

— If not mutual trade or transportation, then what else?

— There are also projects in the sphere of digital currency, a common electronic payment system, and so on. This system is being designed as an alternative to the dollar, and could be created. The electronic payment system has already been developed in China and is being tested. In Russia the Central Bank and PJSC “Sberbank” are working on this. The harmonization under the state control of different sovereign electronic payment systems, of course, turns such a payment system into something different than classic crypto currencies, because the origins of this system are known. Nevertheless, this is a new step in the development of world payment systems.

— Are the Chinese also interested in a new electronic payment system?

— The PRC also depends on the dollar. And we can cooperate in [dealing with] this problem. But the work has not yet been done; this is an issue for decades to come.

— Will the Beijing’s economic support for Moscow lead to Russia’s dependence on China?

— If, by moving away from accounting in dollars, we will switch to yuan, then naturally our dependence on China will increase. Furthermore, in 2020 for the first time, the use of the dollar in accounting with China was reduced below 50%. But at the same time, settlements in euros (and most notably in yuan) have increased. The accounting in rubles has also increased slightly, but today they account for only 7% in Russo-Chinese trade. This indicator hasn’t changed for two years. Thus, essentially, we are not so much increasing accounting in rubles as decreasing that in dollars. Therefore, it is possible to get rid of the dollar and switch to another electronic currency (even the Chinese one) but it won’t solve Russian problems.

— Considering all the above, is it possible that Russia or China will be disconnected from the SWIFT international system of inter-bank transactions?

— China is the country least prepared for the disconnection from SWIFT, because the PRC wants to work in the “dollar zone”. Unlike Russia, China does not suffer from the presence of American currency.[6]

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