China's trade with the US down as trade with Russia is up in 2023

By Rhod Mackenzie

The export of goods from China to the United States decreased by 16.4%, and its imports from there decreased by 6% according to data published by the General Customs Administration of the People's Republic of China based on the results of the first three quarters of 2023. What is the explanation for the sharp drop in the trade volume and the possible impact of this trend on China's trade turnover with Russia and other nations.

This represents a negative trend.
Trade between China and the United States declined by 14% YoY during the initial three-quarters of 2023. The General Administration of Customs of the People's Republic of China notified a trade value of £495.9 billion. Specifically, exports of Chinese goods to the United States dipped by 16.4%, to £372.2 billion, in contrast to the first nine months of 2022. The imports of goods from the United States also fell by 6% - to £123.7 billion. Let us recall that trade turnover rose by 0.6% and reached £759.427 billion at the end of 2022. The United States, together with the ASEAN countries and the EU, continues to be China's leading trade partner.

In September, the trade between Russia and China amounted to $21.1 billion. Russia supplied goods worth $11.5 billion to China, while China supplied $9.6 billion worth of goods to the Russian Federation. Chinese statistics indicate that imports of energy resources increased significantly in September, which benefited Russian exporters of oil, petroleum products and coal. Thus, China's buying of crude oil rose by almost 14%, imports of petroleum products surged by nearly 85%, and imports of coal increased by 27.5%.
In September, prices for Russian export oil reached their highest levels since the beginning of the year. According to the Ministry of Finance, the average price of Urals was $83.01 per barrel, which heightened the value of Russian energy exports to China.

However, the situation may be more challenging for metallurgists as China decreased its imports of copper by 5.8% and steel products by 28%. Among the noteworthy alterations in the structure of non-commodity trade, we observe that China lifted the prohibition on pork imports from Russia in September 2023, something that Russian pig producers have been trying to accomplish for approximately a decade.

After Western companies left Russia China is filling the void, noted by Olga Belenkaya, the head of macroeconomic analysis at Financial Group Finam.

This trend spans various products, yet it is most evident within the car market. The Federal Customs Service reports that the proportion of Chinese cars in total Russian car imports rose to 92% by the end of the first eight months in 2023. For comparison, the analyst provides an example wherein the percentage was at 70% by the end of the first half of 2023, while in 2021 it was only 10%.
Until 2022, the EU was Russia's primary trading partner abroad. However, sanctions, the exit of European companies, plus the financial and logistics limitations have caused a significant decline in both exports and imports. Eurostat reports that from February 2022 to June 2023, EU exports to Russia diminished by 61%, and imports from Russia to the EU plummeted by 84% during that same period.

However, Olga Belenkaya has suggested that some European products continue to enter Russia through the parallel import system via friendly and neutral countries.

The situation will not be vacant.
A decline in trade between China and the United States will be advantageous for Russia. This trend is already apparent. According to the General Administration of Customs of the People's Republic of China, amidst decreasing statistics for the US, the trade between Russia and China has grown.

During the past three quarters, this figure has risen by 29.5% to reach £176.4 billion. The Russian Federation imported goods valued at £81.4 billion, representing a 56.9% increase from last year. Additionally, there was a 12.7% uptick in exports to China, amounting to £94.9 billion, compared to the first three quarters of 2022.
The decrease in export and import indicators between the US and China implies that the Chinese will seek alternative sources for their goods, with a possible focus on Russia, according to Alexander Shneiderman, head of Alfa-Forex's sales and customer support department.

The logistics between our nations are well developed, allowing for diverse delivery options via sea, air, land (rail and road transport), or a combination thereof. "If all else is equal, an entrepreneur tends to favour the most accessible partner for the same product," he remarks.

However, the PRC customs department's data may contain inaccuracies, and imports to Russia are significantly higher than the official figures suggest. This situation results from the abundance of grey delivery or cargo, where individuals buy small quantities of goods and send them in boxes via regular mail or their own channels, sidestepping official paperwork.

"This practice is illegal and it reduces the tax revenues for both countries. Moreover, Russian entrepreneurs face difficulties with banks and other government agencies due to cash payments. For instance, they are unable to account for how they acquired the goods," complains Ekaterina Kosareva, managing partner at the analytical agency VMT Consult.
Russia considers China to be a fundamental ally, and their partnership is advancing to a higher level, according to Vladislav Antonov, a financial analyst at BitRiver.

"The leaders of Russia and China have previously established the objective of increasing bilateral trade to $200 billion by 2024," remarked Antonov.

New routes
The trade turnover between Russia and China grew by 40.6% at the end of the first half of this year in comparison to the same period in the previous year, according to Artem Tuzov, Director of the Corporate Finance Department at IVA Partners.
With the economy reorienting towards the East, all export sectors have become promising. Profitable transportation becomes possible as capacity is utilized in both directions. The possibility of exporting goods from the Russian Federation to the European Union has been lost for the foreseeable future. Moreover, the trade volume between the United States and the European Union is declining.
Trade relations with East Asia and South America are set to develop as a result. Among Russia's top trading partners are China, India, and Turkey. By the end of 2023, South Korea and Kazakhstan are predicted to join the ranks of the Russian Federation's five foremost trading partners. Turkey seems likely to become the primary trade hub between the Russian Federation and the European Union.
Tuzov is convinced that Western countries' attempts to restrict exports to Russia are not successful.
“Nevertheless,” he qualifies, “there are still avenues for exerting pressure on both the Russian Federation and its partners.”