August , 2023
A new trade regime: Russia-China cooperation
11:30 am

Kuntala Sarkar

The ongoing conflict between Ukraine and Russia has set in motion a significant shift in the global trade landscape, with Russia and China forging a stronger economic alliance. This burgeoning trade relationship between Russia and China has not only altered global political dynamics but also impacted trade relations between China and other countries.

In recent years, there has been a notable decline in China’s trade relations with several countries, a trend that has only intensified following the Ukraine-Russia war. Major economies such as Taiwan, South Korea, New Zealand, and the US have experienced a shrink in their trade ties with China. For instance, the US-China trade has witnessed a decline of approximately 12.3%, and Taiwan’s trade with China has decreased by more than 25%. However, amidst these changes, China has taken measures to bolster Russia’s economy, while Western countries, including the US and major European nations, have imposed unprecedented sanctions on Russia, leading to the departure of many Western manufacturers from the country.

Russia and China have strategically coordinated their efforts to bolster bilateral trade. This collaboration has resulted in a substantial increase in Russia’s total trade values and total exports. The two countries’ bilateral trade turnover surged by 29.3% YoY, reaching a remarkable US$190.27 billion by the end of 2022. Moreover, from January to May 2023, Russia-China bilateral trade recorded a staggering 40.7% gain compared to the same period in the previous year, amounting to over US$93.8 billion. Notably, for the first time, Russia has become one of China’s top 10 trade partners, while China has risen as Russia’s primary trade partner.

In particular, Russia’s imports from China have seen a significant increase, reaching $42.96 billion since January 2023, marking a remarkable 75.6% gain compared to 2022. China is now purchasing Russian raw materials at a discounted rate of US$10-12/barrel, enjoying a 20-30% concession. Furthermore, China’s imports of Russian coal have surged by approximately 60%. Russian Prime Minister Mikhail Mishustin has expressed his expectation that trade with China will surpass $200 billion in 2023. He also emphasized the “coordinate effort” between Beijing and the Kremlin to implement trade agreements, highlighting their determination to elevate their economic partnership to a “supreme level.”

As this Russia-China economic alliance strengthens, there are concerns among G7 countries, which include Canada, France, Germany, Italy, Japan, the UK, the US, and the European Union. British Prime Minister Rishi Sunak has voiced apprehensions about China’s growing influence, describing it as “the greatest challenge of our age” concerning global security and prosperity. He accused China of displaying increasing authoritarianism both domestically and internationally. In response to potential trade boycotts by China and Russia for political reasons, the G7 countries have contemplated forming a new body to address “economic coercion.”

China’s recent punitive tariffs on Australia and trade halts with Lithuania have further raised concerns among the G7 countries. Additionally, the G7 countries are wary of Russia’s control over European gas supplies, prompting calls for diversifying energy sources. With the combined GDP figure of G7 countries declining from 50% to below 30% over the past three decades, there is a growing recognition for the need to engage with more financially influential and supportive states. Notably, Ukraine’s President, Volodymyr Zelenskyy, was invited to a recent G7 meeting, indicating potential strategic support for Ukraine and a firm stance against the Russia-China alliance.

In conclusion, the evolving trade dynamics between Russia and China are reshaping global economic and political relations, generating concerns among the G7 countries regarding their own economic interests and geopolitical influence. The evolving situation calls for careful monitoring and strategic decision-making to navigate potential challenges and oppor-tunities that may arise in the changing trade landscape. 

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