How China Benefits from Trade with Russia – The New

How China Benefits from Trade with Russia – The New York Times

On China's snowy border with Russia, a truck dealer was able to double its sales last year thanks to Russian customers. China's exports to its neighbor are so strong that Chinese construction workers built warehouses and 20-story office towers on the border this summer.

The border city of Heihe is a microcosm of China's increasingly close economic ties with Russia. China is benefiting from Russia's invasion of Ukraine, which has led to Russia switching from the West to China to buy everything from cars to computer chips.

Russia, in turn, has sold oil and natural gas to China at deep discounts. Russian chocolate, sausages and other consumer goods are now available in abundance in Chinese supermarkets. Trade between Russia and China exceeded $200 billion in the first 11 months of this year, a level the countries had not expected to reach until 2024.

Russia's war in Ukraine has also received an image boost from China. State media constantly spreads Russian propaganda in China and around the world. Russia is so popular in China that social media influencers are flocking to Harbin, the capital of China's northernmost eastern province of Heilongjiang, to pose in Russian robes in front of a former Russian cathedral.

Xi Jinping, China's supreme leader, and Russian President Vladimir V. Putin have demonstrated the two nations' close ties in numerous public demonstrations. Mr. Xi visited Harbin in early September and declared Heilongjiang the “Gateway to the North” of China. China's exports to Russia rose 69 percent in the first 11 months of this year compared to the same period in 2021, before the invasion of Ukraine.

“Maintaining and developing China-Russia relations well is a strategic decision of both sides based on the fundamental interests of both peoples,” Mr. Xi said during his meeting in Beijing on Wednesday with Russian Prime Minister Mikhail Mishustin.

China has filled a critical import need for Russia that many European and American companies had avoided after Putin launched his war in February 2022. China has continued its role as a substitute supplier of goods even as it has jeopardized its close economic ties with many European nations.

Before the invasion of Ukraine, leaders of Germany, France and other European countries largely put aside differences with China over issues such as human rights and instead emphasized trade. Chinese officials, for their part, insist that they should not be forced to choose between Europe and Russia and that China should be free to do business with both countries.

For China, the biggest winners from the upswing in trade with Russia were vehicle manufacturers.

On a recent afternoon in Heihe, lines of diesel freight trucks with stickers of growling bears, a symbol of Russia, on the driver's doors waited to be driven across an Amur bridge into Russia. The bridge is new, as are the trucks that wore Genlyon badges, a brand owned by the state-owned Shanghai Automotive Industry Corporation. The company, known as SAIC, also makes car brands acquired from Britain such as MG.

The sales helped China overtake Japan as the world's largest car exporter this year. German manufacturers such as Mercedes-Benz and BMW used to be strong sellers in Russia, but they have pulled back in response to sanctions against the country by Europe, the United States and their allies.

Sales of luxury cars in Russia have plummeted, leading to a decline in the overall size of the country's car market, which is now less than half the size of Germany's. According to Alexander Gabuev, director of the Carnegie Russia Eurasia Center, lower-middle-class and poor Russian families, whose members make up the bulk of soldiers fighting in the war, have increased purchases of affordable Chinese cars.

One reason, Mr. Gabuev said, is the death and disability payments that the Russian government and insurers pay to families of Russian soldiers – up to $90,000 in the event of death.

Russia has not disclosed the number of its dead and wounded, but the United States estimates the total at 315,000.

Russians almost exclusively buy cars with internal combustion engines. China has a surplus of them because its consumers have quickly switched to electric cars.

And the land border means China can transport cars to Russia by rail, an important factor since China does not have its own fleet of overseas transport ships for vehicle exports.

The result? According to GlobalData Automotive, Chinese car manufacturers have captured 55 percent of the Russian market. They came to 8 percent in 2021.

“Never before have we seen automakers from a single country gobble up so much market share so quickly – the Chinese got a lucky break,” said Michael Dunne, an Asia auto consultant in San Diego.

The United States has strongly warned China not to send weapons to Russia and has so far found no evidence that the country is doing so. But some civilian equipment China sells to Russia, such as drones and trucks, also have military uses.

Beijing's embrace of Russia has also brought a modest but timely boon to China's construction industry. The economy is struggling to recover from the scars left by nearly three years of strict “zero Covid” measures.

The real estate market across China is in crisis. Tens of millions of homes sit empty or unfinished, and new projects have stalled – depriving the construction sector of work that has long created jobs.

“Many buildings have been built, but no one lives in them,” said Zhang Yan, a wooden door seller in Heihe.

But some workers are finding work along Russia's 2,600-mile border, which until this year lacked truck stops, customs processing centers, train stations, pipelines and other infrastructure. In cities like Heihe, construction progressed quickly in the summer, although it was interrupted by the cold winter.

Pipelines are needed for one of the most important trade goods between the two countries: energy.

Cheap Russian energy that skirts Western-imposed sanctions has helped Chinese factories compete in global markets even as their manufacturing rivals elsewhere, particularly in Germany, have faced significantly higher energy costs for much of the past two years.

Russia has expanded natural gas deliveries to China via its Power of Siberia pipeline and is negotiating to build a second pipeline to transport gas from fields that supplied Europe before the Ukraine war. China and Russia also agreed less than three weeks before the Ukraine war to build a third, smaller pipeline to carry gas from the easternmost part of Russia to northeastern China, and construction on that project is progressing quickly.

The newest pipeline will traverse land that Russia confiscated from China in the late 1850s and never returned. As late as the 1960s, China and the Soviet Union argued over the location of their border and there were skirmishes between their troops. In a village near Heihe, a larger-than-life statue of an imperial Chinese general still shines over the Amur River.

Today, Russia and China are building bridges and pipelines that cross the country.

Li You and Olivia Wang contributed to the research.