"Impact of US Additional Sanctions" China-Russia Trade Surge Has Slowed Down

Last Year Sino-Russian Trade $240 Billion
"This Year Expected to Reach Only $200 Billion"

Trade between China and Russia has continued to slow down after a sharp increase last year, according to a report by the Hong Kong South China Morning Post (SCMP) on the 19th. This is attributed to sanctions imposed by the United States citing the Ukraine war as the reason.

According to data recently released by the General Administration of Customs of China, the trade volume between China and Russia from January to August this year reached $158.5 billion, a 1.9% increase compared to the previous year.

[Image source=Reuters Yonhap News]

Specifically, from January to August this year, China's exports to Russia amounted to $71.91 billion, marking only a 0.4% increase compared to the same period last year. During the same period, China's imports from Russia were $86.56 billion, up 3.2% year-on-year.

Accordingly, there are forecasts that the trade volume between the two countries this year will reach only $200 billion. This contrasts with last year’s trade volume of about $240 billion, which was a 26.3% increase compared to the previous year.

The SCMP stated that the main cause is the sanctions imposed by the United States on Chinese financial institutions known to be supporting Russia's war.

Since Russia's invasion of Ukraine in February 2022, it has been excluded from the international financial messaging system SWIFT, and since then, trade with China has grown in importance within the Russian economy. Last year, China accounted for one-third of Russia's foreign trade. In June last year, the United States added more than 300 individuals and entities to its sanctions list for helping Russia sustain the Ukraine war, allowing secondary sanctions on foreign financial institutions that transact with sanctioned parties.

Chen Fengying, a researcher at the China Institute of Contemporary International Relations (CICIR), a government-affiliated think tank under the Ministry of State Security of China, said, "This is due to payment issues arising from U.S. sanctions on Russia," adding, "It is not a problem between China and Russia but is largely related to the U.S.'s expanded jurisdiction."

However, energy trade, which accounts for most transactions between the two countries, began to slow down this year. According to the General Administration of Customs, imports of Russian crude oil decreased year-on-year for three consecutive months from May to July. China's exports of transportation equipment to Russia fell by 11.32% in July, due to U.S. pressure on dual-use goods exports.

At the G7 summit held in Italy last June, the U.S. warned that Chinese banks facilitating payments to Russia could face secondary sanctions. The SCMP reported that major Chinese commercial banks such as Bank of China and Industrial and Commercial Bank of China, as well as China-led global development banks like the New Development Bank (NDB) and the Asian Infrastructure Investment Bank (AIIB), have all reportedly reduced financial support to Russia.

Researcher Chen predicted, "It is highly likely that the trade volume between the two countries this year will significantly decrease to around $200 billion compared to last year."