China, Russia Trade Turnover Grew 38.7% in Q1 2023, China Briefing, April 20, 2023.
Russia could be on track to replace the US as China’s largest trade partner if current trends continue
Data released by the Chinese General Administration of Customs last week show that the bilateral trade turnover between China and Russia in the first quarter of this year amounted to US$53.84 billion, 38.7% more than in the same period in 2022.
China’s overall foreign trade fell 2.9% to US$1.43 trillion, while trade with the United States fell by 13.1% to US$161.59 billion. This means that China’s trade with Russia is equivalent to about 30% of its trade with the United States, but rising while the US share is declining.
Song Kui, the President of the Contemporary China-Russia Regional Economy Research Institute quoted in the Global Times as saying “The strong growth momentum is within market expectations as the top leaders of the two countries have clarified bilateral cooperation direction. Pragmatic economic cooperation has become an unstoppable trend.”
Some analysts believe that if the geopolitical situation between Beijing and Washington is not improved, Russia may overtake the United States as China’s leading trade partner by 2030 if current growth and retrenchment trends continue.
Exports from China to Russia amounted to US$24.07 billion, up 47.1% from last year. Imports from Russia grew to US$29.77 billion (+32.6%).
If annualized, and projected over the entire year, China-Russia 2023 trade would reach about US$215 billion.
In March this year, the bilateral trade volume amounted to over US$20 billion, up 23% compared to February. China mainly imports oil, natural gas, and coal from Russia, as well as copper, copper ore, timber, fuel, and seafood. A significant share of exports to Russia includes smartphones, industrial and specialized equipment, toys, shoes, vehicles, air conditioners, and computers.
In 2022, bilateral trade between China and Russia grew by almost 30% against the backdrop of a reorientation of Russian exports and imports to the East. Following the talks between Chinese President Xi Jinping and Russian President Vladimir Putin in Moscow, (analysis here) both parties agreed to increase trade and optimize their bilateral trade structures, including infrastructure, logistics, and increasing financial cooperation such as using Ruble and RMB in settlements. This has the effect of maintaining this extraordinary growth rate.
China’s exports of mechanical and electrical products, automobiles, and auto parts to Russia all grew substantially. China has been Russia’s largest trading partner for 13 consecutive years, and the two countries have continued deepening their energy cooperation and made solid progress in strategic projects.
Energy
Russia is now China’s leading energy supplier, with the two countries expanding their ties in the sector from pure commodity trading of oil and natural gas to industrial cooperation in oil and gas exploration and refining, said Liu Qian, an executive deputy director of the Center for Russian and Central Asian Studies at the China University of Petroleum (Beijing).
China purchased more than 6.5 million tons of liquefied natural gas and 86.25 million tons of crude oil from Russia in 2022, official data showed. “The huge capacity and trade flexibility of the Chinese market could absorb a large part of Russia’s energy and ensure the steady progress of large-scale energy cooperation projects,” said Liu.
Russia’s natural gas supply to China will continue to grow. Besides, with the global energy transformation and China’s “dual carbon” goals in place, there is also much room for cooperation in renewable, hydrogen, and nuclear energy and in the clean and efficient use of energy, he explained. “As bilateral trade grows, the Chinese yuan is gaining popularity in Russia, and local currency settlement by discarding the US dollar is going from strength to strength.”
Cheap energy supplies are also significant for both economies as bring production costs down making both more competitive. This may also eat into US-based manufacturing and exports in China trade.
Trade Finance
According to a report from the Bank of Russia, the country’s central bank, the share of the RMB Yuan/Roble pair trading on the Russian exchange market reached a new high of 39% in March. During the same period, the share of the US Dollar/Rouble pairing fell to 34%, the lowest for many years. In February, the RMB Yuan surpassed the US Dollarhttps://www.russia-briefing.com/news/china-s-rmb-yuan-usage-spreads-across-russia-s-financial-portfolios.html/ in trading volumes on the Russian MOEX currency exchange.
China Total Q1 2023
China’s total exports globally increased by 0.5%, to US$821.83 billion, while imports decreased by 7.1%, to US$617.12 billion. In US trade, China’s exports dropped by 17%, reaching US$115.23 billion. US imports decreased less significantly by 1.7%, to US$46.35 billion.
China also experienced higher-than-expected GDP growth of 4.5% in Q1, further signaling a move away from US trade is being absorbed and the impact minimized.