Western sanctions do not scare Chinese investors in Russia. Writes Paul Antonopoulos
Despite the West’s highly aggressive sanctions against Russia, they are proving not to dissuade Chinese investors. Despite the fact that global stock markets are in a state of flux due to events in Ukraine, which even saw Shanghai’s CSI 300 Index fall by more than 3% in the past week, shares of Chinese companies with trade ties to Russia, whether indirectly or directly, remain bullish.
In fact, some of the business activities of the Port of Jinzhou, Xinjiang Tianshun Supply Chain, Jiangsu Lianyungang Port and other companies are not exactly related to Russia directly. For example, investors of the Port of Jinzhou are optimistic about the port’s geographical proximity to Russia, believing that in the face of western sanctions and the rift in business relations between Russia and many foreign companies, Moscow will push ahead with its eastward pivot.
In this likely scenario, cooperation between Russian and Chinese companies will grow rapidly.
None-the-less, the Port of Jinzhou are still concerned about the hype surrounding its stocks, and noted that underlying economic indicators remain the same. On the other hand, there is logic to the thinking of investors, especially as they want to enter the market early to take advantage of the new economic environment that emerged after Russia became the most sanctioned country in the world.
Russia’s eastward focus is nothing new, albeit it has rolled on slowly despite major ambitions. Although Russia has been sanctioned since uniting with Crimea in 2014, the sanctions were primarily aimed against specific targets and had no serious impact on the development of Russia’s trade relations with Western countries.
However, the situation has changed and Western governments are actively putting pressure on traders, creating artificially inflated risks. Under these circumstances, companies naturally want to minimise risks and are likely to wait until the situation becomes clearer, thus limiting operations in the Russian market.
However, China does not support the West’s sanctions policy and will not participate in restrictive measures against Russia, according to the chairman of the China Banking and Insurance Regulatory Commission, Guo Shuqing. According to him, for China itself, the risk of sanctions is minimal.
By the end of 2021, trade turnover between China and Russia rose 35.9% to $146 billion. In this way, China remains Russia’s largest trading partner. The two countries have the ambition to boost trade to $250 billion by 2025.
In late February, when the West called on China to increase pressure on Russia over its “special military operation” in Ukraine, Beijing instead took steps to stimulate bilateral trade with Russia. For example, China has lifted the entire ban on wheat imported from Russia.
There is little doubt that Beijing is motivated to secure a strategic partnership with Moscow now that both countries face simultaneous pressures from the same source – the West. Washington has the intention of creating a wedge between Russia and China in order to prevent the formation of a united front against the US.
In this regard, Washington’s long-term strategy remains unchanged – to constantly increase efforts to deter and contain Russia’s and China’s development, as well as their cooperation. However, this will prove to be a near impossible task.
Russia remains the second largest oil supplier to China and the third largest supplier of natural gas. Moreover, China’s demand for gas is expected to continue to grow in the coming years, especially as last year’s energy crisis showed that it is too early to rely solely on new energy sources. For this reason, natural gas could be the right solution for a sustainable energy transition in the coming years.
So far, the Russian-Chinese trade balance has not been reached as there’s a Russian surplus. However, at a time when Western countries are refusing to cooperate with Russia, China has good prospects for increasing the supply of high-value-added products, which in turn could not only strike a trade balance, but even shift it in the East Asian country’s favour.
The trade expansion is in line with China’s national goal, according to the government’s work report submitted to the 5th Session of the 13th Chinese People’s Political Consultative Conference (CPPCC) held on March 5 in Beijing. The report stated that China will expand multilateral and bilateral economic and trade cooperation, and is ready to strengthen mutually beneficial cooperation with all countries.
It appears that Russia will be one of the benefitors of this initiative, something that will help the country’s economy survive the immense pressure of Western sanctions. In addition, it will also consolidate the two country’s relationship amidst American efforts to create a wedge between them.
Paul Antonopoulos, independent geopolitical analyst
