A Decadal Review of Russia-China Economic Relations

Introduction

The year 2024 marks the 75th anniversary of Russia-China relations, with Beijing emerging as a critical partner for Moscow in trade, commerce, energy, and defence. Bilateral trade reached US$240 billion in 2023—a 26.3 percent increase from 2022.^[1] Russia-China relations are getting stronger with escalating tensions between Russia and the West as well as between China and the West. At present, Beijing and Moscow share complementary goals in the international system, challenging the Western rules-based order led by the United States (US), both geopolitically and geoeconomically. They support each other’s geopolitical claims^[2] and manifest their worldviews through non-Western multilateral platforms such as BRICS (comprising Brazil, Russia, India, China, and South Africa), the Shanghai Cooperation Organisation (SCO), the Eurasian Economic Union (EAEU), and the Belt and Road Initiative (BRI). Economically, both nations aim—albeit to varying extents—to create a new geoeconomic order by accelerating de-dollarisation to mitigate economic shocks and sanction risks in global trade. China’s growing importance in Moscow’s strategic calculus is evident in Russia’s foreign policy documents,^[3] where deepening ties with China is a clear priority.

In the weeks leading up to Russia’s invasion of Ukraine in 2022, Russian President Vladimir Putin and Chinese Premier Xi Jinping declared a “no limits” partnership between the two states.^[4] However, following the invasion on 24 February 2022, this phrase was redacted from the foreign policy discourse. Beijing refrained from fully endorsing Moscow’s invasion of Ukraine, and the post-invasion use of “no limits” implied a strategic alignment rather than absolute solidarity.

Indeed, the Sino-Russian relationship is complex. On the one hand, there is robust engagement in trade, commerce, military cooperation, and people-to-people ties. Conversely, a growing asymmetry between the two nations has introduced uncertainty and unease about the partnership’s future trajectory. This paper examines the economic aspect of Russia-China relations, focusing on the political-economic dynamics since the last decade. It explores shared interests, points of contention, and the evolution of their bilateral relations.

Economic Synergy Between Russia and China in the 21st Century

In 2012, Russia formally announced its “pivot to the East” at the Asia Pacific Economic Cooperation (APEC) summit in Vladivostok, unveiling plans to reorient its supply chains to the East.^[5] However, the strategic groundwork for this pivot had been laid in the late 1990s and was amplified by the early 2000s. Russia’s frustration with the post-Cold War European security architecture, particularly the North Atlantic Treaty Organization’s expansions in 1997 and 2004, fuelled its desire for a multipolar world order, making stronger ties with China an important objective. Russia-China relations have been slowly rebuilding since the dissolution of the Union of Soviet Socialist Republics in 1991, though they were initially marked by domestic scepticism, especially in Russian regions bordering China. The “Yellow Peril”^[a] narrative persisted in some quarters, with regional governors at times stoking anti-China sentiment and introducing restrictions, such as permits for Chinese boats navigating the Amur River,^[6] to score political points. By 1995, however, Moscow began adopting a more balanced approach. President Boris Yeltsin, during a visit to China, said, “The future of Russia depends on how successfully we cooperate with China. Relations with China are extremely important for us in global politics.”

The economic partnership between Russia and China struggled to gain momentum in the 1990s, hindered by Russia’s domestic economic turmoil. Despite these challenges, in the 1990s, Russia constructed the Lianyungang nuclear power plant in Jiangsu province, a venture estimated at US$3 billion.^[7] During this period, bilateral trade remained balanced, with Russia exporting industrial products.

At the turn of the century, trade ties improved, reaching US$8 billion.^[8] However, this growth coincided with a shift in trade dynamics. Russia’s exports of machinery, equipment, and high-value-added products to China declined,^[9] replaced by energy and raw materials. This shift reflected Beijing’s growing manufacturing capabilities and competitive pressures on Russia from Western manufacturers seeking joint ventures with China.

In 2001, both nations concluded a 20-year treaty of Good Neighbourliness and Friendly Cooperation, establishing a framework of mutual respect, non-aggression, and collaboration across various sectors to strengthen bilateral ties and promote regional and global stability.^[10] This treaty marked a new chapter in Russia-China relations, reflecting shared perspectives on the international system. Throughout the 2000s, bilateral trade processes improved, with trade volumes growing by an average of 30 percent between 2001 and 2008,^[11] supported by enhanced cooperation between customs and law enforcement agencies. Although the 2008 financial crisis impacted bilateral trade, it remained steady in the following year. By 2010, both nations had begun settling payments in national currencies and had opened a bilateral swap line in 2014.^[12]  Trade surged in 2011, growing by 42 percent to US$79.2 billion, with the balance of trade favouring Russia.

However, Russia’s exports to China lacked diversification, with raw materials such as oil, timber, fertiliser, fish, metals, pulp, and ores dominating, in contrast to the industrial products and machinery exported in the previous decade. By 2015, trade plummeted as oil prices dropped from US$114 in 2014 to US$44 a barrel.^[13] This highlighted a new pattern in Russia-China trade, where commodity price fluctuations strongly influenced trade volumes. Meanwhile, Western sanctions against Russia increased Moscow’s reliance on Chinese technology, machinery, and industrial tools.

Key Economic Projects and Macro-Economic Trends in Russia-China Trade

Following Russia’s annexation of Crimea in 2014, tensions with the European Union escalated. Simultaneously, Russia-China relations strengthened as Beijing’s role in the Russian economy grew. Anticipating potential Western sanctions on its energy projects, Russia sought to reorient its energy supply chains towards China as part of its “pivot to the East,” paving the way for a deeper cross-sectoral bilateral partnership. In the same year, China emerged as a crucial energy partner for Russia, with both nations signing a 30-year, US$400 billion gas deal.^[14] The following year, Moscow joined the BRI, which led to the later link with the EAEU.^[15] China also signed a free trade agreement (FTA) with the EAEU the same year. Under the BRI, cooperation along the China-Russia-Mongolia corridor and the Eurasian land bridge emerged as avenues for collaboration.

Russia and China’s shared vision of Eurasia paved the way for enhanced economic cooperation between the two countries. In 2017, both countries outlined a list of projects under the BRI. Furthermore, the bilateral intergovernmental commission on the cooperation and development of the Russian Far East, Baikal region, and Northeast China convened for the first time that year.^[16] The commission focused on projects in infrastructure, mining, chemical industry, agriculture, and mechanical engineering. In 2018, the two countries established a US$750 million Russia-China Regional Development Fund^[17] aimed at financing projects that aligned with both China’s BRI and Russia’s EAEU.

Before the invasion, in January 2022, Chinese investments in Russia stood at US$12.8 billion,^[18] with Chinese foreign direct investment (FDI) primarily directed at the Russian financial sector, real estate, mining, manufacturing, and construction. One of the biggest Chinese investment projects was the Yamal LNG project, where Chinese companies, including CNPC and Sinopec, purchased 10 percent of Sibur, a major petrochemical company; other projects were Arctic LNG-2, OJSC Udmurtneft, JSC VCNG, Baltic Pearl, Great Wall, Greenwood, Hauming Park, Alabuga, and the construction of the Nizhneleninskoye cross-border bridge.^[19] Additionally, major gas projects such as Power of Siberia 1, 2, and 3 were key areas of collaboration.

China has become a major partner in the Russian Arctic, playing a crucial role in several upstream and downstream components of the energy supply chain. As Russia’s mainland hydrocarbon deposits deplete, the country is increasingly turning to Arctic reserves for oil and natural gas. However, the equipment, technology, and software needed for deep drilling are not available domestically and cannot be sourced from countries that have sanctioned Russia.^[20] As a result, China has emerged as one of the few markets capable of providing the necessary machinery and goods to support Russia’s Arctic energy operations.

Along with the prospects of increasing bilateral trade, the melting Arctic allows Russia to establish maritime linkages with China through the Northern Sea Route. This would streamline trade and reduce transit times. Russia’s dependence on China’s shipping industry and container services has also increased rapidly.

The Evolution of Russia-China Economic Ties Amid the Ukraine Conflict

In 2021, Russia and China renewed the Treaty of Good Neighbourliness and Friendly Cooperation for an additional five years.^[21] On 4 February 2022, Putin visited China on 4 February 2022, where the leaders of both countries declared their bilateral ties to be “superior to political and military alliances of the Cold War era” and that both countries were in a “no-limits partnership.”^[22]

Weeks later, Russia invaded Ukraine. While Beijing abstained from condemning Russia at the United Nations, it emphasised the importance of respecting the sovereignty and territorial integrity of a country. China also criticised the sanctions imposed against Russia.^[23] As US and EU sanctions intensified after 24 February 2022, resulting in Russia’s exclusion from the Western-backed SWIFT payment system and restrictions on Russian banks’ ability to trade in dollars, China’s role in Moscow’s strategic calculus grew. In 2022, China’s import of Russian goods increased by 43 percent, reaching a value of US$114 billion^[24] (see Figure 1).

Figure 1: Russia-China and Russia-European Union Trade, 2014-2023 (in US$ Billion)

Source: Rosstat, UN Comtrade, Chinese Customs Database^[25]

The market vacuum created by the exit of over 6,200 foreign-affiliated entities in 2022^[26] led to Chinese exporters filling the gap. In 2021, Russia-China bilateral trade stood at US$147 billion, and by the end of 2022, trade had grown by 29 percent, reaching US$190 billion (see Figure 1). In 2023, trade surpassed the bilateral target of US$200 billion early, posting an all-time high of US$240 billion.^[27]

A year before Russia’s invasion of Ukraine, Moscow’s trade with “friendly countries”—those not imposing sanctions on Russia and maintaining cordial relations—accounted for 60 percent of its non-raw materials and non-energy exports. By 2023, this figure had risen to 80 percent,^[28] with China playing a major role in this growth.

As the conflict in Ukraine intensified, Russia’s relations with other Asian nations, particularly South Korea and Japan, was impacted. Both countries, key US allies, had considerable stakes in Russia’s energy and Arctic hydrocarbon exploration and extraction projects. In 2021, bilateral trade between Russia and South Korea and Japan was valued at US$33 billion and US$19 billion.^[29] With both nations joining the sanctions regime against Russia, Moscow’s trading markets contracted further, increasing China’s presence across sectors of the Russian economy.

China became a major exporter of electronics, mobile phones, engineering products, furniture, toys, textiles, and automobiles to Russia. The mass exodus of Western firms was particularly reflected in the automobile sector, where manufacturers like Geely, Jac Motors, Haval, Omoda, Chery, and Changan filled the void.^[30] In 2023, China exported US$4.6 billion worth of cars to Russia, marking a 543 percent increase compared to 2022.^[31] By May 2024, the share of Chinese car exports to Moscow had risen from 9 percent in 2022 to 56.7 percent.^[32]

Key Factors of Collaboration

Increasing Share of Energy in Bilateral Trade: The majority of Russia’s trade is concentrated in the energy sector. In 2022, Russia exported 64 million tonnes of coal, 86 million tonnes of oil, 6.5 million tonnes of LNG, and 15.5 billion cubic meters of natural gas.^[33] In the same year, Gazprom and PetroChina signed a long-term contract to export 10 Bcm of gas annually via the East-Line pipeline.^[34] As Russian energy supply and value chains^[b] shifted away from Europe towards China, energy trade between the two nations surged. The following year, energy trade further increased (see Figures 2 and 3). In the first half of 2024, Russia’s energy exports to China reached US$46 billion, marking a 4 percent increase from the previous year.^[35] Additionally, Russia has requested Beijing’s assistance to build an LNG plant in Ust-Luga, in the Leningrad region, which can produce 13 million tonnes of LNG per year.

Beijing has also shown interest in building a factory at the Pavlovsk zinc-lead deposit in Novaya Zemlya. Additionally, Rosatom signed a Memorandum of Understanding (MoU) with a Chinese company to act as a contractor for several non-ferrous mining projects.^[36] In April 2024, Vladimir Potanin, the CEO of Russian nickel and palladium giant Norilsk Nickel, announced plans to move the company’s copper smelting capacities from Norilsk to China by 2027. This move aims to mitigate losses and bypass sanctions affecting the import and trade of Russian metals.^[37]

Agriculture: Since Russia’s invasion of Ukraine, agriculture has emerged as an important area of cooperation. In 2022, the Russian-backed New Land Grain Corridor (NLGC) group of companies and China’s Chengtong International Investment signed an agreement to develop agro-infrastructure^[38] and supply chains to ramp up the production of grains, oil seeds, and legumes from the South Urals to the Far East, targeting an export increase of US$19.6 billion.^[39] The NLGC connects the countries of the EAEU (Kazakhstan, Russia, Belarus, Kyrgyzstan, and Armenia) to China.^[40] In 2023, Moscow announced plans to export agricultural goods via the NLGC and signed a US$25 billion grain supply contract.^[41] Under this agreement, Russia will supply China with 70 million tonnes of Russian grain, legumes, and oilseeds to China.^[42]

Historically, Russia’s agro-exports to China were limited, but there has been a surge in supply in recent years, resulting in logistical challenges such as delays caused by differing rail gauges in Russia and China. To address this issue, Russia constructed a grain terminal in Zabaikalsk,^[43] near the Chinese border in Inner Mongolia, to maximise the loading capacity. Additionally, the China-Russia Heihe-Blagoveshchensk highway bridge^[44] and the Tongjiang Railway Bridge—the first railway bridge connecting the two countries—were inaugurated.^[45]

These infrastructure developments have opened new channels for agricultural trade facilitation between the two countries. The growing economic integration between Russia and China is expected to further boost railway traffic. In 2022, 120 million tonnes of cargo were transported between Russia and China, increasing to 136 million tonnes^[46] in 2023, driven by rising agricultural trade.

In March 2023, during Xi’s state visit to Moscow, both nations adopted a joint statement outlining a development plan for key areas of Russia-China economic cooperation until 2030.^[47] The document identified eight areas: boosting trade and investment, developing interconnected logistics, expanding the use of national currencies in trade, strengthening energy cooperation, developing supply chains, improving industrial cooperation, and harmonising industrial standards. 

Figure 2: Russia’s Exports to China Since 2022

Source: Chinese customs data^[48]

Figure 3: Russia’s Imports from China Since 2022

Source: Chinese customs data^[49]

Investment: Despite the increase in overall Russian-Chinese economic cooperation, investment collaboration has gradually declined. In 2019, 11 projects were announced,^[50] but this number has since decreased. As of July 2024, the Russia-China Commission for Investment Cooperation includes 86 major projects and 23 prospective projects, amounting to 18 trillion rubles (approximately US$173 billion) in raw materials, gas chemical industries, the automotive industry, and transport, logistics, construction, and the production of household appliances.^[51]

In 2024, 50 major investment projects^[52] were implemented, but the overall state of Russia-China investment cooperation remains insufficient. According to the Russian Central Bank, in 2022, Chinese FDI in Russia amounted to US$3 billion, accounting for just 0.7 percent of Russia’s accumulated FDI. Meanwhile, Russian FDI in China amounted to US$10 billion, making up 0.4 percent^[53] of China’s total accumulated FDI. Notably, since the invasion of Ukraine, no new projects under the BRI have been announced.

Russia-China Cooperation in Focus: Arctic and the Russian Far East

The majority of Chinese investments in the Russian Far East are concentrated in the southern regions, such as Primorsky Krai, the Amur region, and the Jewish Autonomous region. These investments primarily focus on forestry, agriculture, construction, mining, and services. However, investments in processing industries like metalmaking, woodworking, footwear and clothing are minimal. Before the conflict in Ukraine, South Korea was the leading export partner for the Russian Far East, holding a 28 percent share of total exports in 2020, with China in second place at 23 percent.^[54] Regarding imports, China was the largest importer, accounting for 45 percent of the share.^[55] Since the war, China’s share in trade with the Far Eastern Federal District (FEFD) has increased. In 2023, trade turnover between the regions of the FEFD increased by 10 percent to US$47 billion. Approximately 6 percent of bilateral trade crosses the Russian Far East, highlighting the region’s characteristics in Russia-China trade.

Since 2015, Russia’s pivot to the East has gained traction domestically, necessitating the establishment of new logistical nodes and improved supply chain resilience to connect with the markets in the Asia-Pacific region. Key infrastructure development includes the Primorsky International Transport Corridor, with two major routes: Primorye 1, connecting Harbin, Mundanjiang, Suifenhe, Grotikovo, Ussurysk, and Vladivostok port; and Primorye 2, connecting Changchun, Jilin, Hunchun, Kraskino, and Zarubino port. These corridors were crucial for enhancing trade with Asia. However, since the war in Ukraine, Russia’s cooperation along these shipping corridors with South Korea and Japan has been hindered.

Figure 4: Map of Primorsky International Transport Corridor

Source: Science Direct^[56]

With supply chain constraints in freight shipping via the Suez Canal and the Red Sea to China, the Northern Sea Route (NSR) through the Russian Arctic offers a promising alternative. The NSR spans 13,000 km, reducing shipping time by 10-14 days^[57] compared to the 21,500 km^[58] route via the Suez Canal. The melting of Arctic ice makes shipping more feasible.^[59] The further development of nuclear-powered icebreakers and ice-class vessels will enable year-round operation along the NSR, including in winter months. A joint Russia-China venture aims to develop five ice-class container ships for NSR operations.^[60] Further, a trilateral agreement was concluded between the Arkhangelsk regional government, the Chinese NewNew Shipping line, and Solikamskbumprom to ship pulp and paper products from Arkhangelsk to Chinese ports via the NSR. As a result, Arkhangelsk and other Arctic ports are becoming the new centres of international maritime trade for Russia.^[61]

Over the years, maritime transit along the NSR has increased (see Figure 5 and Table 1). In 2024, Russian companies increased oil supplies across the NSR by 30 percent.^[62] This trend is expected to continue in the coming years, with President Putin expressing confidence that cargo turnover along the NSR will exceed 100 million tonnes by 2023.^[63] As Russia’s economic integration with Beijing deepens, plans are in place to connect the northern ports of Russia to Shanghai via Vladivostok. In 2023, during President Xi’s visit to Moscow, both nations declared their willingness to cooperate in the development of NSR. The following year, both nations created a commission for the development of the Northern Sea Route.^[64]

Figure 5: Transit Voyages Through the NSR (2010-2024)

Source: Centre for High North Logistics^[65]

Table 1: Number of Voyages Between Russia and China Along the NSR in 2024 (January-November)

*Note: 1% of the cargo along the NSR consists of domestic voyages in Russia.

Source: Centre for High North Logistics^[66]

Russia-China Relations and Sanctions

The 2022 sanctions led to Russia’s exclusion from the SWIFT payment messaging system, effectively isolating it from the international financial system. However, Russia had anticipated the possibility of such sanctions even before the conflict, preparing for contingencies by introducing the System for Transfer of Financial Messages (SPFS) in 2014,^[67] an alternative payment system to SWIFT. By 2017, over 400 institutions had been part of this network.^[68] Additionally, over 23 Russian banks signed up for the Chinese alternative to SWIFT, the China International Payments System (CIPS). In 2022, the overall transactions conducted through CIPS surged to US$14.14 trillion. While this figure remains modest compared to SWIFT’s US$7.5 trillion daily transactions, it marks significant progress since CIPS’s launch in 2015, when it processed only US$6 trillion.^[69]

Sanctions have fostered increased bilateral cooperation following the exit of Western firms but also act as a barrier to relations. Since late 2023, Chinese banks have become more cautious in processing ruble transactions, with some rejecting payment orders from Russian entities.^[70] This is due to secondary sanctions on financial institutions tied to Russia’s defence sector, including Ping An Bank, China Guanfa Bank, Dongguan Rural Commercial Bank, Industrial Bank, China Zheshang Bank, and Bank of Ningbo. The number of banks suspending operations with Russia has increased, and by June 2024, the Bank of China stopped processing transactions from Russia. By August 2024, 98 percent of Chinese banks have stopped accepting direct payments from Russia.^[71]

Previously, foreign credit institutions were restricted from opening branches in Russia, requiring them to establish subsidiary banks or representative offices. In September 2024, the Russian State Duma passed a law allowing foreign banks to open branches in Russia to protect them from sanctions, simplifying cross-border settlements. Another law approved the use of cryptocurrencies for such payments. However, despite these changes, opening bank accounts with Chinese banks remains challenging.

Despite being Moscow’s core market for technological trade, Chinese tech firms have started reducing exports to Russia. This trend was evident in the early months of the conflict, when Huawei stopped fulfilling its supply contracts with Russia.^[72] In December 2022, Beijing prohibited the sale of semiconductor chips to Russia,^[73] and tightening secondary sanctions expanded the list of restricted goods. By July 2024, the scope included software, aviation engines, space exploration technologies, and technologies for gas turbine production. By December, IT equipment components and servers were also restricted. Further, Chinese companies exporting dual-use goods faced a 25 percent tax.^[74] To avoid sanctions, several Chinese suppliers have begun exporting goods to Russia via third countries. Since August 2024, Russian buyers of Chinese critical technology and drones must prove that these goods will not be used for military purposes.

Sanctions have impacted Beijing’s connectivity with Europe, as Russia was a critical node connecting to Europe. In 2022, 78 railway lines connected China with Europe via Russia, a figure that has doubled since 2017.^[75] Before the war, the number of trips had risen sharply, from 1,900 in 2016 to 14,000 visits in 2021.^[76] However, since February 2022, logistics and shipping companies have avoided routes crossing Russia due to EU sanctions. Although the routes remain operational, traffic and trade volumes have drastically declined. If Russia remains sanctioned by the West, the development of alternative transport corridors such as the Middle Corridor—which bypasses Russia—is expected to accelerate. This shift could result in Chinese goods entering Europe predominantly via the Middle Corridor.

“Yuanisation” of the Russian Economy

Since 2022, Russia has increasingly settled some of its foreign trade in the Chinese yuan.^[77] By December 2023, 35.8 percent of its foreign trade was conducted in yuan,^[78] a sharp increase from just 0.4 percent before the war. In 2023, the dollar’s share in Russian reserves fell from 52 percent to 34 percent, while the euro’s share fell from 35 percent to 19 percent by mid-2024.^[79] By then, Western currencies collectively accounted for less than 20 percent of Russia’s reserves. The war has bolstered China’s efforts to position the yuan as a global currency, with 4.6 percent of global transactions conducted in yuan by 2024.^[80] While Russia uses other currencies like the Kazakh tenge, Indian rupee, and UAE dirhams for trade, their combined importance remains marginal compared to the yuan’s growing dominance in the Russian economy.

Before sanctions, the yuan accounted for 54 percent of transactions at the Moscow Stock Exchange (MSE). Due to intensified sanctions, this figure rose to 99.6 percent by May 2024.^[c],[81] The increased demand for yuan among Russian businesses stems primarily from reduced transaction costs when converting the currency back to rubles. Additionally, the disparity in interest rates has further fuelled this demand. Amid the Ukraine war, the Russian Central Bank maintained a high interest rate of 17.17 percent for business loans in rubles, compared to just 7.11 percent^[82] for loans in yuan. This surge in demand has triggered a liquidity crisis, with the yuan repo rate spiking to 212 percent in a single day.^[83]

In September, Sberbank CEO German Gref informed Vladimir Putin that liquidity issues had slowed lending.^[84] Following sanctions on the MSE, the National Clearing Centre (NCC), and the National Settlement Depositary,^[85] Chinese banks halted transaction processing. This increased dependence on the yuan raises concerns for Moscow, as shifts in China’s domestic political economy could have ripple effects. Despite these risks, Russia has little alternative and remains dependent on the yuan. While there is no outright ban on yuan transactions, associated costs have risen considerably.^[86]

Challenges in Russia-China Economic Relations

Despite the growing bilateral economic interaction since 2014, which has spurred considerable activity across all sectors, several issues have prevailed in the economic partnership. Along with concerns over the increasing yuanisation of the Russian economy and challenges in cross-border payment settlements, these issues can be divided into two main categories. The first relates to trade facilitation problems influenced by external factors, while the second is the structural aspects of economic cooperation, supporting the view that the Russia-China relationship is not one of “no limits”.

Logistical Concerns

In addition to cross-border payment issues, logistical challenges persist in Russia-China economic relations, driven by geopolitical instability in the Red Sea. Russia’s rising imports from China have led to a buildup of empty containers at the port of Vladivostok, increasing shipping costs by US$4,500 by rail and US$8,000 by sea. Delays are mainly due to longer shipping times via the Red Sea, causing empty containers to accumulate in Far Eastern ports. The shortage of suitable platforms and gondola cars further exacerbates the situation. The unprecedented trade volume has resulted in severe traffic congestion at the Russia-China border.

Rising tariffs for sea and rail transportation are another concern, with rates increasing by two to four times since 2013. Russian railways have been modernising the Eastern railway polygon, which includes the Trans-Siberian Railway and the Baikal-Amur Mainline. This infrastructure overhaul and increasing trade with China have led to increased traffic. Companies such as Kolmar have struggled with storage capacity for additional coal. Despite the rise in agro-trade, Moscow and Beijing have been contesting over agricultural cooperation. Moscow seeks to open its market for agro-trade, while Beijing aims to set up agricultural infrastructure in Russia, exporting Chinese equipment, seeds and labour. Additionally, Russia’s trade rules, tariffs, and market protection are often arbitrary,  further complicating trade facilitation.

Asymmetry in bilateral trade

Although the trade balance is generally favourable for Russia, the composition of exports tells a different story. Russia’s exports to China are primarily hydrocarbons, timber, and minerals, while Chinese exports to Russia are primarily finished goods, such as machinery, consumer electronics, technology, and automobiles. China does not import finished or manufactured goods from Russia, raising long-term concerns for Russia, which faces limited demand for its manufactured goods abroad. Another challenge in the Russia-China economic partnership is within the nature of the partnership: Russia is a price-taker, increasingly unable to influence the prices at which it sells its goods, while China, as a price-maker and one of the largest importers of Russian goods, has numerous alternatives to a sanctioned Russian market. Therefore, Beijing is gaining substantial leverage over Moscow.

Investment Challenges

This is reflected in China’s disinterest in long-term investments with Moscow.^[d] While China shows interest in Russia’s Far East, this is mainly driven by trade, not investment or cooperation. Beijing prefers to engage with large cities such as Moscow, St. Petersburg, Sochi, and Krasnodar and prefers investing in big-stakes infrastructure projects.^[87] Concerns also exist regarding technology transfers from China. According to Sinologist Alexei Chigadayev, China is not keen on sharing technology with Russia,^[88] especially on projects that it is not interested in. Further, structural factors hinder the completion of various deals.

While Moscow welcomes Chinese investments in Russia’s Arctic and the NSR, there are concerns about granting China a stake in these projects. Russia aspires to diversify foreign investment in the Arctic and NSR, while China restricts its investments to LNG projects, factoring in the potential threat of secondary sanctions affecting its economic interests. Despite perceptions that China is dominating the Russian economy, the reality is that China’s involvement is primarily aimed at keeping Russia’s economy afloat while expanding its influence. This also ensures that China’s business interests in the West remain unaffected. Some experts, such as Dimitry Polusurov, Vice President of the Russian Direct Investment Fund, are concerned about Russia’s growing economic dependence on China and the possibility that Beijing may eventually comply with Western sanctions.^[89]

For Russia-China relations to evolve into a “no-limits” partnership or an alliance-like configuration, Beijing must forgo its economic interests in the Western markets, challenge the global financial system by creating alternative markets, and assert technological sovereignty. However, this scenario seems unlikely in the short to medium term.

Asymmetry or Junior Partnership?

China is Russia’s largest trading partner, while Russia ranks as China’s ninth largest. This is reflected in bilateral trade data, where Russian exports to China account for 30 percent of Moscow’s total exports,^[90] while Chinese exports to Moscow constituted only 3 percent of its total exports.^[91]  In terms of imports, Russian imports from China constitute 36 percent of Russia’s total imports, while Chinese imports of Russian goods account for just 5 percent^[92] of its total imports. This disparity places Russia at a significant disadvantage as its dependence on Beijing increases. Such economic integration could make Russia vulnerable to shocks in the Chinese economy or changes in Chinese legislation.

In the recent Chinese budget announcement, Zheng Shanjie, chairman of the National Development and Reform Commission, revealed that 200 billion yuan would be allocated for strategically important investment projects next year.^[93] This is a concern for Moscow, as Russia’s export basket primarily consists of raw materials. With China shifting towards fiscal conservatism, major infrastructure projects may not be announced soon, which could lead to a significant decline in the import of raw resources from Moscow. These incidents reflect the growing economic interdependence between the two nations.

Beijing’s geoeconomic influence in Central Asia^[94] and the Caucasus has increased considerably. While trade volumes between Moscow and these countries have remained unchanged, Beijing’s role in their economies has increased. The impact of China’s increased presence in what has traditionally been considered Moscow’s sphere of influence remains uncertain. Still, China’s growing involvement, particularly in infrastructure development through the BRI, will likely prompt Moscow to make increased efforts to maintain its relevance in the region.^[95]

Nations rarely want to be seen as junior partners, even when the asymmetry is apparent. At present, both Russia and China have complementary interests in the international system and share similar grievances towards the Western-led order. However, this does not equate to a strategic alliance. China continues to engage with the Western-led international system and maintains business ties with the European Union and the US. Beijing is also a major trading partner for over 120 countries worldwide.^[96] Despite shared concerns about the current rules-based order, China benefits from it. Conversely, Russia aims to lead the Global South and strengthen ties with non-Western middle powers and regional powers such as Turkey, Saudi Arabia, UAE, India, South Africa, Ethiopia, and Iran.

The long-term feasibility of a Russia-China alliance seems unlikely, as unresolved tensions between the two nations, dating back to the mid-19^th century, remain. These tensions, stemming from a Chinese loss of territory, are embedded in national memory as a humiliation.^[97] If current patterns of interaction persist, Beijing could dominate the economic partnership with Russia and leverage Moscow into seeking better deals in strategically important regions.

Implications for India

Moscow is wary of depending on a single partner for its economic needs. Since the invasion began, India has emerged as Russia’s second-largest trading partner,^[98] with trade surging from US$12 billion in 2021 to US$49 billion at the end of 2022,^[99] primarily driven by India’s imports of discounted Russian crude. While India’s relations with China have improved slightly, with agreements on patrolling arrangements along the Line of Actual Control in October,^[100] concerns about growing Russian-Chinese relations have been temporarily set aside. However, New Delhi remains apprehensive that China may leverage its position within the Russian political economy, potentially influencing Moscow to prioritise Chinese defence deliveries over India’s needs.

Despite these concerns, there is optimism. Russia’s search for new markets has increased India’s importance in its strategic calculations. This is reflected in Russia’s decision to collaborate with India on building ice-class vessels for the NSR.^[101] Further, India has expressed interest in investing in the Russian Far East. While India’s involvement might not significantly impact China’s market share in the region, Moscow views India’s growing interest in Russian projects and its economy positively.

Trump and Russia-China Relations

Donald Trump’s victory in the 2024 US elections raises two key concerns. First, there is the possibility that Trump could create a divide in the growing Russia-China partnership by offering Russia more agency in the European security architecture, potentially through a resolution to the Ukraine conflict. Second, if the Ukraine conflict persists despite efforts for a ceasefire, the US is likely to remain actively involved in the European and Indo-Pacific regions. Should tariff wars from the first Trump administration continue, this could spur further Russia-China cooperation. A geoeconomic order that does not favour China could lead Beijing to adopt a more revisionist economic stance, possibly relaxing export controls and sanctions in trade with Moscow. Therefore, with the new power shift in the White House, Washington, Beijing, and Moscow will likely engage in a delicate balancing act.

Conclusion

As the Chinese-Russian partnership rapidly evolves within the international system, supplemented by shared interests in global geopolitics and geoeconomics, there remains a persistent tendency to misinterpret their strategic partnership as a formal alliance aimed at countering the West. However, structural factors continue to undermine the growth of a true Russia-China alliance. The growing asymmetry in their bilateral economic partnership is evident, with China’s economic influence expanding swiftly in Russia. China has become a major Russian export destination, particularly for energy resources and raw materials, with more than a third of Russia’s exports directed to Chinese markets. Conversely, since 2022, Russia—facing fewer export destinations—has become increasingly dependent on industrial and manufactured goods from China, positioning itself as a price-taker. The rising economic dominance of China in Russia exposes Moscow to the market forces of China’s domestic political economy.

Further, due to the threat of Western secondary sanctions, Beijing has reduced its critical technology transfers to Moscow. Alongside this, most Chinese banks have not only ceased ruble transfers but also stopped processing yuan transactions from Russia since 2024.

Moscow, taking note of the growing Chinese influence in the Russian economy and its direct limitations, has been incentivised Moscow to maximise its bilateral partnerships in the non-Western world. This includes improving relations with Southeast Asian countries, West Asia, India, and African countries, not only as an avenue to project Russia’s influence but also building alternative channels that redirect Western trade to Russia.

However, despite the limitations in the Russia-China economic partnership and the limited likelihood of a formal alliance anytime soon, the bilateral partnership is at its peak. Trade with China remains a critical factor in understanding the health of the Russian economy, as Russia would have suffered had China joined the sanctions regime against it. Even with China observing certain sanctions and export control mechanisms, the 2024 bilateral trade from January to November was at US$222.77 billion, likely to cross the 2023 trade turnover of US$240 billion. Thus, China’s role in powering the Russian economy has been pivotal.

Endnotes