China rejects Western sanctions against Russia. But the economically internationally networked country has not yet backed down. In the end, Beijing is about one thing: itself.
Beijing/Munich – China* has already made one thing clear several times. It rejects the international sanctions against Russia in the Ukraine war*. “The sanctions in question are damaging the world’s economic recovery,” said Prime Minister Li Keqiang* on Friday at the end of the National People’s Congress.
The rejection isn’t just about Beijing’s partnership with Moscow. China is much more internationally networked than Russia and fears secondary effects on its own foreign trade. There is great concern in China, among other things, about imported inflation due to the rapidly increasing commodity prices. China is the world’s largest importer of oil and gas*, which it purchases from a variety of countries. In order to reduce its dependence on geopolitical rivals such as Australia or the USA for imports, Beijing only started to rely more heavily on Russia a few years ago.
From groups of participants at the recent video summit of Head of State Xi Jinping with Chancellor Olaf Scholz and French President Emmanuel Macron*, the great concern of the Chinese side became clear that the conflict could have a major impact on the global economy. “The sanctions in question are having an impact on finance, energy, transportation and supply chain stability worldwide, and are dragging down the global economy suffering from the pandemic to the detriment of everyone,” Xi said at the online meeting, according to Chinese state television.
China: Ukraine war is a balancing act for Beijing, even with sanctions
So far, China has performed the same balancing act with sanctions as with the political assessment of the Ukraine war. Publicly, it is supposedly firmly on Moscow’s side. “China and Russia* will continue their normal trade relations in the spirit of mutual respect, equality and mutual benefit,” Foreign Ministry spokesman Wang Wenbin said recently.
Nevertheless, Beijing has already reacted to the unloved sanctions. It thus sent out signals that China is publicly committed to Russia – but is far from wanting to circumvent all sanctions. The government of US President Joe Biden * gave after a report by the South China Morning Post on Wednesday to understand that China has so far largely complied with the economic sanctions imposed by the US and other nations. The US State Department had previously threatened China with unspecified countermeasures if it undermined US punitive measures against Russia.
–For example, it was announced on Thursday that China would no longer deliver aircraft parts to Russia*. Russian airlines mainly own western aircraft from Airbus or Boeing, which have stopped all business – including maintenance and spare parts – because of the invasion of Ukraine. China could have stepped in: Boeing and Airbus planes also fly in China. Airbus even operates a factory in China.
China: Banks restrict Russia business over Swift ban
Already at the end of February limited noisy Bloomberg two of the largest state banks, the Bank of China and the Industrial and Commercial Bank of China, financed Russian raw material imports into the People’s Republic – and thus before the Russian banks were excluded from the Swift system. China later also restricted imports of Russian coal: Most trade contracts are drawn up in US dollars and are therefore affected by the Swift exclusion. It was initially unclear how long the measures would apply. Because so far not even Europe has boycotted the import of oil and gas from Russia.
In addition, Chinese banks in Singapore were among the first to stop issuing letters of credit for business with Russia, according to Jörg Wuttke, President of the European Chamber of Commerce in China. “You couldn’t see how the banks behaved in compliance with the sanctions and shut everything down so quickly,” says Wuttke. “Behind it is the fear of the Americans,” a senior Chinese source told him. China will not circumvent the sanctions, Wuttke believes: “Like good students, the Chinese will do everything possible to ensure that their companies know exactly what they are doing when they get involved with the Russians.”
According to Professor Shi Yinhong from Beijing People’s University, China will adhere to the sanctions so as not to alienate the West – or even become the target of punitive measures itself. “China’s banks have a close relationship with the world financial system, which is very important for China,” Shi said. Beijing will not take any risks for its own banking system.
China: Vulnerable in commodities and goods exports
The most difficult topic, as in Germany, is the raw materials for energy production. China gets around 15 percent of its coal imports from Russia, making it the second largest supplier after Indonesia in 2021. China is Russia’s largest coal buyer: in 2021, the People’s Republic moved into loud Reuters more than 50 million tons of coal worth $7.4 billion from eastern Russia. Beijing has therefore already instructed government authorities to ensure the supply of energy and raw materials even during the war, writes Bloomberg. According to this, state buyers should increasingly open up international markets for raw materials such as oil and gas, iron ore and grain. But new markets are always more expensive at first.
In addition to coal, China also purchases gas, oil and industrial materials such as nickel and aluminum from Russia. How this will continue is still open. In addition, Ukraine is an important grain supplier for the People’s Republic. But the harvest in the country is likely to fail due to hostilities this summer. Also, the Ukrainian ports are currently blocked by Russia.
China: E-commerce with Russia also affected by Swift sanctions
But China wouldn’t be China if it didn’t also export goods to Russia. The so-called “Russian Market” in the center of Beijing* is famous and has been a kind of wholesale market for small traders with Russia and the CIS countries for many years. Physical border trade between the two countries is already suffering from the corona pandemic as the crossings are closed. But now Chinese e-commerce retailers are also worried about their business with Russia. Exporters and online sellers are worried, according to a report by the South China Morning Post because of the Swift sanctions to receive payments from their Russian customers for shipments already shipped.
Business is also collapsing. “The markets in Russia and Ukraine have basically come to a standstill,” the newspaper quoted Wang Xin, executive chairwoman of the Shenzhen* Cross-Border E-Commerce Association in the southern metropolis of the same name. AliExpress, the global marketplace of the giant online retailer Alibaba Group, is particularly affected. Russia is a big market for the dealers on the platform, which is also active in Germany.
It is not yet known how China’s car exports to Russia will continue. The country is an important market for cheap Chinese brands. With many western manufacturers currently pulling out of Russia, an opportunity could arise for China. But the question of financial settlement arises again.
China: So far no comprehensive assistance to Russia
In any case, so far it does not look as if China is using all possibilities to provide assistance to Russia. It cannot be ruled out that both countries could use channels in the background, for example on gray markets or through intermediate stations, but nothing is known about this so far.
One way to circumvent the Swift sanctions would be to have deliveries from Russia paid for in the Chinese currency, the yuan. Some commodity traders are, according to Reuters already in negotiations with Russian exporters. The Chinese interbank system CIPS (Cross-Borger Interbank Payment System) would be used, which China created in 2015 for its New Silk Road initiative – also to promote the use of the yuan as an international currency and to reduce dependence on the dollar. However, Cips does not have the capacity to replace Swift, not least because the yuan is not freely convertible.
How much Beijing would offend internationally is unclear – since Europe continues to buy Russian oil and gas*. In general, Beijing will be careful not to jeopardize its long-term interests through its relationship with Russia. It will probably continue to drive on sight for the time being. (ck/dpa) * Merkur.de is an offer from IPPEN.MEDIA.
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