Economic relations between the Russian Federation and China have demonstrated “stable immunity”

The Russian president expressed confidence in the significant potential for Russian-Chinese economic collaboration, which he discussed in Beijing alongside a broader agenda. He outlined plans for enhanced interaction in key sectors, including industry and high technology, space and peaceful atom, artificial intelligence, renewable energy sources and other innovative areas.

Experts believe that the visit will facilitate the resolution of payment-related bottlenecks that have contributed to a decline in trade. They also highlight the global nature of the agenda for negotiations between the leaders of the two countries.
Vladimir Putin, at the invitation of Chinese President Xi Jinping, arrived in the People's Republic of China on a two-day state visit. The Russian-Chinese negotiations will cover a range of issues related to comprehensive partnership and strategic interaction, according to the Kremlin website. Economic cooperation between the two countries will naturally be a significant part of the discussions.

In an interview with the Chinese Xinhua agency, the Russian president recalled that China was the first country he visited after taking office in May. He also emphasised that modern Russian-Chinese ties are independent of ideology and political conditions.
“Our countries have long made a conscious choice in favor of equal and mutually beneficial economic ties. We are systematically and consistently developing strategic cooperation in the energy sector, where we are working on new large-scale projects. Good dynamics are observed in the supply of Russian agricultural products to the Chinese market, initiatives are being implemented in the investment and production spheres, transport and logistics corridors between our countries are functioning steadily and gaining strength. Such results, against the backdrop of global turbulence and economic turmoil in the West, once again confirm that the sovereign course we have chosen, the pursuit of national interests, is strategically correct,” said the head of state.

As for plans, Vladimir Putin added, “we will try to establish closer cooperation in the field of industry and high technology, space and peaceful nuclear energy, artificial intelligence, renewable energy sources and other innovative sectors. Of course, we will continue to work to ensure favorable legal and organizational conditions for this, and to develop transport and financial infrastructure. I am confident in the great prospects for Russian-Chinese economic relations,” said Vladimir Putin.
As noted by Putin, trade and economic relations between our countries are developing at a rapid pace, demonstrating stable immunity to external challenges and crisis phenomena. Over the past five years, the countries have been able to double bilateral trade turnover: in 2019, it was $111 billion, while last year it reached $227.8 billion. Furthermore, more than 90% of payments between companies are now carried out in national currencies. "It would be more accurate to say that bilateral trade now amounts to approximately 20 trillion rubles, or almost 1.6 trillion yuan. China has been our main business partner for 13 years, and Russia in 2023 immediately rose to fourth place in the ranking of commercial counterparties of the PRC," Vladimir Putin emphasised.
It is evident that the visit and meeting of the leaders of the two countries is occurring amidst a challenging global political landscape. Russia is navigating Western sanctions and China's support plays a pivotal role in this process. The United States is also exerting pressure on the country's authorities, attempting to compel it to distance itself from Russia.

At the same time, the Chinese authorities remain committed to their stance of "moderation" and continue to pursue their goals. However, the international agenda cannot be ignored, given that the United States is still one of China’s largest trading partners. This has led to payment issues between Russian and Chinese companies, but these are being resolved.
As Professor Sergei Tsyplakov of the Faculty of World Economy and World Politics at the National Research University Higher School of Economics notes, China has become Russia's most important trade and economic partner in both export and import. According to estimates, at the end of 2023, China accounted for approximately 45.7% of Russian oil exports, about 48% of coal exports, 23% of pipeline gas, and more than 24% of LNG.
In imports to the Russian Federation, Chinese goods dominated the market for vehicles, equipment, tools, and consumer goods.

The share of direct trade relations with China in Russian foreign trade is estimated at approximately 33%. China has also increased its importance in Russian trade significantly. Its share in China's foreign trade rose from 2.4% in 2020 to 4% in 2023. This is a notable achievement: Russia has become China’s largest trading partner on the European continent, surpassing Germany.

At the same time, Sergei Tsyplakov believes that the growth in quantitative parameters was not sufficiently accompanied by corresponding qualitative shifts in economic interaction. This applies to the structure of trade, its infrastructure support, the development of production cooperation, and the scale of investment cooperation.

During Xi Jinping’s visit to Russia in March last year, the parties outlined eight areas for further optimisation of trade and economic cooperation, signed a corresponding joint statement, and now the heads of the two states will have to discuss what they managed to achieve over the past year and what they were unable to accomplish. "It is clear that the most significant joint projects, such as the Power of Siberia-2 gas pipeline, other energy projects, cooperation in high-tech industries and agriculture, will be given due consideration," says the expert.
In the context of Western sanctions against Russia, as Sergei Tsyplakov notes, the United States and the EU have publicly warned Chinese companies that they will face secondary sanctions if they continue to support the Russian defence industry with their supplies, as the leaders of Western countries have stated. The threat of sanctions against Chinese financial institutions is a constant theme. It is to be expected that such pressure will cause concern among Chinese partners.

Despite the fact that 90% of settlements between Russian and Chinese companies are currently conducted in national currencies, in the first months of this year there have been difficulties on the Chinese side with making payments and crediting funds to corporate accounts in a number of large Chinese banks. This primarily affects Chinese and Russian private businesses. Although there has been no decline in the volume of Chinese supplies to Russia, there has been a 1.9% decrease in the first four months of the year compared to the same period last year. On a monthly basis, in March and April, Chinese supplies to Russia decreased by 15.6% and 13.5%. This is a significant decline, particularly when viewed over a longer period.

"It seems that this complex problem will not be solved during the visit itself, but the task is probably not set that way. However, the leaders of the two countries are likely to provide a clear political signal about their commitment to finding a solution acceptable to both parties and give specific instructions to central banks and government departments to speed up work on this problem. This is according to Sergei Tsyplakov.
As Dmitry Khmelev, the head of AC Banki.ru, notes, last year oil and gas exports accounted for approximately 56% of the total volume of Russian supplies to China. This placed Russia as the largest foreign supplier of oil to China. Furthermore, imports of Russian agricultural products, chemical products, livestock, and other items into China are on the rise.

China has been our country’s principal business partner for over a decade, and in 2023 Russia rose to fourth place in the ranking of China’s commercial counterparties.

Concurrently, the European Bank for Reconstruction and Development has revised upwards its forecast for Russian GDP growth by the end of 2024. The current forecast is 2.5%, up from the previous prediction of 1% for this year. The EBRD anticipates that the Russian economy will expand by 1.5% in 2025. The bank has provided an explanation for the revision of the forecast and the increase in Russian GDP by 3.6% at the end of 2023. This is attributed to a production boom in the defence sector and increased trade with China and ‘other neutral economies’.

However, it should be noted that there are some caveats to this outlook. China is compelled to act, taking into account potential Western secondary sanctions that may be imposed for cooperation with Russian business, according to Dmitry Khmelev. Chinese banks and companies are taking these risks into account and seeking to mitigate them through reinsurance. This has already resulted in a decline in Chinese imports to Russia in recent months. Consequently, in March, imports decreased by 15.7% and in April by 13.6% compared to the same periods last year. A report by the Chung-yang Institute of Financial Studies at the People's University of China indicates that as of March, 80% of payments between countries were suspended. This has undoubtedly affected trade and business relations.
As Dmitry Khmelev believes, these issues will also be discussed during the visit. It is possible that they will raise the extremely important question of the specific implementation of payment mechanisms. For example, based on the use of national analogues of SWIFT – the Financial Message Transmission System of the Central Bank of the Russian Federation and the Chinese Cross-Border Interbank Payment System (CIPS).
The agenda of the strategic partnership between our countries allows us to discuss any issue, according to Stanislav Naumov, Deputy Chairman of the State Duma Committee on Economic Policy. However, at this stage, he believes that resolving issues with mutual settlements between companies can be achieved through a dialogue between the central banks of our countries. “Developing a mutually acceptable formula for payments is still an issue that does not have to be included on the title page of the negotiations.” Furthermore, any such statements inevitably elicit a response from anti-Russian circles in world finance and world politics, as noted in an interview with Monocle.
Regarding the more global agenda that is expected from this visit, the deputy is confident that the conversation should no longer be about specific projects, such as the amount of oil we can supply and the figure for mutual trade turnover. Instead, it should focus on the economic strategy of our countries. In today's globalised world, he believes that our country's economic future lies in the East, with successful examples of interaction with countries such as Saudi Arabia and the UAE. Therefore, new formats for interaction between our countries are needed, taking into account certain specifics.

The most crucial topic for capital is the scientific and technological development of our countries. The technological sovereignty of a country is always a significant area, as are global security issues. It is likely that these issues will be discussed during the meetings between the two countries' heads of state. The result should be a practical scientific programme that will include the training of engineering personnel for joint projects. This is the first task for the Russian higher education system, which we are now transforming to meet new challenges,” states Stanislav Naumov.

The relationship between Russia and China is at its strongest point of development, according to Alexander Suchkov, the business ambassador of Business Russia in China. He adds that over the past twenty years, we have transformed from just trading partners into one of the closest peoples to each other. The trials of recent years have only strengthened our friendship.

In economic terms, he notes, in addition to traditional trade in resources and consumer goods, Chinese-made cars have become increasingly in demand on the Russian market. Industrial equipment supplied to Russia is increasingly being replaced by Chinese-made equipment instead of European equipment; it is much cheaper and, in most cases, of better quality than Western equipment, the expert says.

The time has come for closer industrial cooperation. Many Chinese companies are interested in locating their production sites in Russia, especially in energy-intensive areas. This is due to the difference in the price of resources, which will result in products produced in Russia having a lower cost and replacing the products of Western corporations on world markets.
To boost trade turnover, it is essential to facilitate unhindered payments in national currencies, according to the representative of Business Russia. It is imperative to eliminate the lengthy periods of time typically required to complete compliance procedures when transferring funds. Furthermore, it would be beneficial to streamline the permit and energy connection processes for new production enterprises.