XI TO RUSSIAN PM: MOSCOW HAS FIRM SUPPORT OF CHINA
President says nations should explore potential new economic, trade and investment links, but it is not known if the war in Ukraine was discussed
Beijing will continue to provide firm support for Moscow’s issues of core interest, President Xi Jinping told visiting Russian Prime Minister Mikhail Mishustin yesterday.
Xi made the remarks during their meeting in Beijing – the latest show of solidarity between the two neighbours that are both under growing pressure from the West.
He said that in addition to strengthening cooperation in multilateral platforms such as the United Nations, the Shanghai Cooperation Organisation and the Group of 20, China and Russia should explore potential new economic, trade and investment links.
“We hope that the two sides will continue to take advantage of … the strong momentum of Sino-Russian cooperation, elevate cooperation in various fields … and continuously enrich the content of the comprehensive strategic cooperative partnership between our two countries in the new era,” Xi told Mishustin, according to Xinhua.
“China is ready to work with Russia and countries of the Eurasian Economic Union to promote and connect the Belt and Road Initiative with the union in order to develop and establish a bigger regional market, ensure a more stable and robust global supply chain so [we can] bring real and tangible benefits to the countries in the region,” Xi was quoted as saying, referring to his signature belt and road infrastructure plan.
In response, Mishustin said Russia was “ready to work with China to promote multi-polarisation in the world and consolidate the international order based on international law”, according to the Xinhua report.
A foreign ministry readout did not say whether Xi and Mishustin discussed the war in Ukraine.
Mishustin, who took office in January 2020, is the most senior Moscow official to visit China since Russia invaded Ukraine 15 months ago.
The trip comes as Russia is seeking to boost trade ties with China to offset economic isolation from Western-led sanctions.
Beijing has refused to condemn Moscow’s aggression against Ukraine and has rejected joining what it calls “unilateral sanctions” against Russia, insisting that its trade with Russia is normal and should not be “subjected to inference or coercion by third parties”.
It also comes as China’s peace envoy Li Hui is in Europe, on Tuesday meeting Frederic Mondoloni, director general of political and security affairs at the French foreign ministry in Paris.
According to the Chinese readout, Li – China’s special representative for Eurasian affairs – told his hosts that China and France had “a lot in common” over the war in Ukraine. Li also reiterated Beijing’s support for Europe’s “strategic autonomy” to build what he called “a balanced, effective and sustainable security architecture”.
However, a French government statement said Mondoloni had stressed to Li “Russia’s full responsibility for the outbreak and continuation of the war”. He also urged China to play “a constructive role in achieving a return to a just and sustainable peace in Europe, in accordance with international law, particularly the sovereignty and territorial integrity of Ukraine”.
In Beijing earlier yesterday, Premier Li Qiang welcomed his Russian counterpart with a ceremony at the Great Hall of the People. During their meeting, Mishustin said bilateral ties between the two neighbours were “at an all-time high”.
The Russian prime minister said 70 per cent of cross-border settlements between Russia and China were already being made in roubles and yuan, according to Russian news agency Sputnik.
Mishustin also reportedly called for joint efforts with Beijing to address “new challenges posed by increased international volatility and illegal sanctions pressure from the West”.
Mishustin visited Shanghai on Tuesday, where he told more than 1,300 business representatives and diplomats at a forum that China and Russia would expand cooperation – particularly in areas such as energy and agriculture, as well as in digital and the hi-tech industry.
With Russia’s energy exports to China projected to increase by 40 per cent this year, Mishustin was optimistic about bilateral trade, saying he expected it to reach a record US$200 billion by the end of 2023 – a year ahead of a target set by Xi and Russian President Vladimir Putin in 2019.
We hope that the two sides will continue to … elevate cooperation in various fields
PRESIDENT XI JINPING
While Russia is likely to increase its use of the yuan and also sell more oil to China, overall energy trade between the two may be reaching a plateau, according to analysts.
Russian Prime Minister Mikhail Mishustin, who expects bilateral trade to reach US$200 billion this year, hailed relations with China as being “at an unprecedented high level” after signing a set of agreements during a meeting with Premier Li Qiang in Beijing yesterday.
Li added that China and Russia’s “practical cooperation” had continued to develop steadily, with the bilateral trade volume having increased by more than 40 per cent this year.
Overall trade between China and Russia rose by nearly 30 per cent in 2022 to US$190 billion, according to Chinese customs data, but the room for significant growth in energy could be limited, according to analysts.
“It is likely that Russia’s energy exports to China have now reached a plateau after booming last year. Beijing is careful not to become overly dependent on a single energy supplier,” said Agathe Demarais, global forecasting director at the Economist Intelligence Unit and author of Backfire, a book on US sanctions.
“The picture is the same for gas: China is reluctant to build a new pipeline, Power of Siberia 2, which would boost gas supplies from Russia, also for fear of becoming overly dependent on Russian hydrocarbons.”
Beijing has yet to make a commitment to the Power of Siberia 2 project, which plans to deliver 50 billion cubic metres of natural gas per year from Russia’s Yamal Peninsula in western Siberia to China via Mongolia.
Energy, especially crude oil, has accounted for a significant proportion for bilateral trade, and natural resources consultancy Wood Mackenzie forecasts that China is likely to import around 2.3 million barrels a day of crude oil from Russia this year out of its total imports of 10.6 million barrels a day. Last year China imported 1.75 million barrels per day from its neighbour.
Other analysts also see growth in energy trade this year.
“For natural gas, we do see a significant increase of pipeline gas imports by China from Russia in 2023 through Power of Siberia. [Liquefied natural gas] imports from Russia will also be notably higher in 2023 versus 2022,” said Kang Wu, head of macro, demand & Asia analytics at S&P Global Commodity Insights.
In March, President Xi Jinping and Russian President Vladimir Putin pledged to “significantly increase” trade by 2030.
Xi and Putin also promised “smooth settlement” between economic entities, as well as “supporting the expansion of the use of local currency in bilateral trade, investment, credit and other economic and trade activities”.
China’s yuan is now a reserve currency for Russia, which has been under sweeping sanctions from the US and its allies since its invasion of Ukraine last year.
Russia’s central bank has been blocked from accessing its foreign reserves, and several Russian banks have been banned from the Swift international payments network.
Herman Gref, chief executive of Russia’s largest lender, Sberbank, told a Russia-China forum in Shanghai on Tuesday that the yuan was the “undisputed leader” for its clients.
“In 2023, we expect a tenfold increase in the number of transactions in yuan compared to last year [at Sherbank],” said Gref, who has also since been added to the list of individuals sanctioned by the US Treasury.
“Over the year, the share of the yuan increased from 2 per cent to 18 per cent in Russia’s export operations, and from 5 per cent to 27 per cent in its imports, which is an impressive trend.”
But Liu Huaqin, a researcher with China’s Ministry of Commerce, said one of the key hurdles in China’s trade with Russia had been the lack of diversification beyond energy.
Energy accounted for 74.5 per cent of Russia’s total exports to China in 2022, up from 68 per cent in 2021, according to Liu.
“Over the years, the two sides have been promoting the diversification of the trade in commodity, striving to increase the trade share of high value-added commodities and expand trade in agricultural products etc, but the reality is farther away from this goal,” Liu said in a journal published by Heilongjiang University last month.
Russia’s trade barriers and restrictions on certain farm goods have been on the rise since last year following its invasion of Ukraine, making products such as sunflower oil and soybean more costly for importers.
“The Russian soybean export tariff is 20 per cent. This policy directly affects the implementation of the soybean supply plan between China and Russia,” added Liu.
“Changing tariff policies are making the trade environment between the two sides more complicated, which is not conducive to the stable development of trade.”
China’s trade deficit with Russia reached a record US$38 billion last year, according to Liu.
“From the perspective of trade balance, the quality of trade from China’s side has declined, which is not conducive to the sustainable development of bilateral trade,” Liu added.
In September 2019, China and Russia agreed to increase trade to US$200 billion by 2024 from US$107 billion in 2018.
Russia Minister of Economic Development Maxim Reshetnikov told Chinese state media CGTN in March that the two countries were “ahead of schedule” in meeting the target in 2023.
China’s exports to Russia soared by 153.1 per cent in April, year on year, to US$9.62 billion, and by 6 per cent month on month, according to Chinese customs data
But China’s imports from Russia grew by just 8 per cent in April, year on year, to US$9.61 billion, while dropping by 12 per cent from a month earlier.