The fall in China's trade with the USA benefits Russia

By Rhod Mackenzie
The export of goods from China to the United States fell by 16.4%, while imports fell by 6%. This data, is based on the results of first three quarters of 2023, were published by the General Administration of Customs of the People's Republic of China. What is the explanation for the sharp decline in the volume of trade and whether this trend will affect China's trade turnover with Russia and other countries.
Negative dynamics
Trade between China and the United States fell by 14% year-on-year in the first three quarters of 2023. The General Administration of Customs of the People's Republic of China reported a turnover of $495.9 billion. In particular, exports of Chinese goods to the United States fell by 16.4% to $372.2 billion compared with the first nine months of 2022. Imports of goods from the United States also fell by 6% - to $123.7 billion. Let's recall that at the end of 2022, trade turnover increased by 0.6% and amounted to $759.427 billion. At the same time, the United States remains China's largest trading partner, together with the ASEAN countries and the EU.
On almost all fronts
In September, trade between Russia and China amounted to $21.1bn: Russia shipped $11.5 billion worth of goods to China, while China shipped $9.6 billion to the Russian Federation. According to Chinese statistics, China significantly increased its imports of energy resources in September, which benefited Russian exporters of oil, oil products and coal. China's purchases of crude oil rose by almost 14%, imports of oil products by almost 85% and imports of coal by 27.5%.
In September, prices for Russian export oil reached their highest level since the beginning of the year (according to the Ministry of Finance, the average price of Urals was $83.08 per barrel), which should also have contributed to an increase in the value of Russian energy exports to China.

However, the situation could be worse for metallurgists - China has reduced imports of copper by 5.8% and steel products by 28%. Among the significant changes in the structure of non-commodity trade turnover, we note that in September 2023, China lifted the ban on pork imports from Russia; Russian farmers have been doing this for about 10 years.
Following the departure of Western companies, China is increasingly filling the niches left vacant in Russia, notes Olga Belenkaya, head of macroeconomic analysis at the Finam financial group.

"This applies to a wide range of products, but is probably most noticeable in the automotive market. According to the Federal Customs Service, the share of cars from China in Russia's total car imports rose to 92% at the end of the first eight months of 2023. By comparison, at the end of the first half of 2023 it was 70%, and in 2021 it was only 10%, the expert cites as an example.
Until 2022, the EU was Russia's largest foreign trade partner. Now, due to sanctions, the departure of European companies, financial and logistical restrictions, the volume of exports and imports has fallen sharply. According to Eurostat, the value of EU exports to Russia fell by 61% between February 2022 and June 2023, while imports from Russia to the EU fell by 84% in the same period.

However, Olga Belenkaya suggested that some European products continue to enter Russia through the parallel import mechanism via friendly and neutral countries.
The place won't be empty
A decline in trade turnover between China and the United States will play into Russia's hands. And this trend is already evident. According to the General Administration of Customs of the People's Republic of China, trade turnover between Russia and China has increased against the backdrop of declining figures for the United States.

In the first three quarters, the figure rose by 29.5% and reached $176.4 billion. The Russian Federation imported $81.4 billion worth of goods, 56.9% more than in the same period last year, and exported $94.9 billion worth of goods to China, 12.7% more than in the first three quarters of 2012.
The decline in export and import indicators in the US-China pair means that the Chinese will satisfy their need for goods somewhere else, in particular in Russia," says Alexander Shneiderman, Head of Sales and Customer Service Department at Alfa-Forex.

• Logistics between our countries is very well developed, there are various ways of delivering goods by sea, air and land (rail, road), as well as mixed options. All other things being equal, a businessman will choose the most accessible partner for the same product," he says.

At the same time, the data provided by the PRC customs service itself may be inaccurate, and imports into Russia are much higher than the official figures. The reason for this is the prosperity of grey shipments, or cargo. Individuals buy small quantities of goods and send boxes by post or through their own channels, bypassing the official paperwork.
"This is illegal and deprives the budgets of both countries of part of the taxes and duties. And Russian businessmen get into trouble with banks (due to cash payments) and other government agencies - for example, they cannot explain how the goods got to them," complains Ekaterina Kosareva, managing partner of the analytical agency VMT Consult.
For Russia, China remains a key partner with which relations are reaching a new level, emphasises BitRiver financial analyst Vladislav Antonov.

"For example, the leaders of Russia and China previously set the task of doubling the trade turnover between the two states to $200 billion by 2024," the expert said.
New routes
At the end of the first half of the year, the growth in trade turnover between Russia and China amounted to 40.6% (compared to the same period last year).

The indicators for both exports and imports will grow, predicts Artem Tuzov, Director of the Corporate Finance Department at IVA Partners.

Due to the reorientation of the economy towards the East, all export sectors now look promising: if capacity is full in both directions, transport becomes profitable. The EU has lost the prospect of exports from the Russian Federation in the medium term. Trade turnover with the European Union and the United States is falling.
As a result, trade relations with the East, Asia and South America will develop. Russia's main trading partners are China, Turkey and India. Based on the results of 2023, South Korea and Kazakhstan should be included in the top 5 countries - trading partners of the Russian Federation. Turkey is the first contender for the status of the main trade hub between the Russian Federation and the EU.

Tuzov is certain that the attempt by Western countries to limit exports to Russia has failed.

"However," he cautions, "the options for exerting pressure on both the Russian Federation and its partners remain open.