China Russia: 4 ways China is quietly making things difficult for Russia

Now, as the Russian economy is being hit by sanctions from around the world, there is mounting evidence that China’s willingness and ability to help its northern neighbor may be limited. Beijing has refused to condemn Russia’s attack on Ukraine but wants to avoid the impact of sanctions, which it has repeatedly condemned as an ineffective way to resolve the crisis.
“China is not a party [Ukraine] crisis and does not want sanctions to affect China,” Foreign Minister Wang Yi said. said On Tuesday during a telephone conversation with his Spanish colleague.

Beijing also fully supported Wednesday’s comments made earlier this week by China’s ambassador to Ukraine. “China will never attack Ukraine. We will help, especially economically,” Fan Xianrong said in a press release from the government of the Lviv region.

Fears that Chinese companies could face US sanctions over ties to Russia have fueled an epic sell-off in Chinese stocks. last days. That slowdown was reversed on Wednesday when Beijing promised it would pursue policies to support its ailing economy and keep financial markets stable.

U.S. officials told CNN on Monday they have information indicating that China has expressed some willingness to provide Russia with the requested military and financial assistance. China called it “disinformation”.
Analysts say that China is trying to find a “delicate balance” between rhetorically supporting Russia and no further opposition to the United States.

Beijing and Moscow share a strategic interest in challenging the West. However, Chinese banks cannot afford to lose access to US dollars, and many Chinese businesses cannot afford be deprived of American technology.

While China is Russia’s No. 1 trading partner, Beijing has other priorities. Trade between the two countries accounted for only 2% of China’s total trade. According to Chinese customs statistics last year, the share of the European Union and the United States is much larger.

Here are some of the measures Beijing has taken over the past few weeks to distance itself from isolated and crumbling Russian economy.

Let the ruble fall

China’s currency, the yuan, does not trade completely freely, but moves within limits set by People’s Bank of China (PBOC) officials. Last week, they doubled the size of the ruble’s trading range, allowing the Russian currency to fall faster.

The ruble has already lost more than 20% its value against the dollar and euro since the beginning of the war in Ukraine. By allowing the Russian currency to fall against the yuan, Beijing is doing Moscow no favors.

Russians will have to pay more in rubles for Chinese imports such as smartphones and cars. Chinese phone brands such as Xiaomi and Huawei are very popular in Russia and compete with an Apple (AAPL) as well as Samsung (SSNLF) for market leadership before the war.
Chinese car manufacturers such as Great Wall Motor and Geely Auto, occupy 7% of the Russian market, having sold more than 115,000 vehicles last year. Great Wall Motor has stopped deliveries of new cars to dealers in Russia due to currency fluctuations.
Expanding the trading band will allow the yuan to keep up with the sharp fluctuations of the ruble so that Chinese companies can “better understand the magnitude or trend of future exchange rate fluctuations and mitigate currency risks using hedging techniques such as derivatives.” state chinese business network reported last week.
Currently, about $25 billion of trade between China and Russia is carried out in yuan. Chinese state media reported.

Sitting on reserves

The most significant help China could offer Russia is Moscow’s $90 billion in yuan reserves, Alicia Garcia-Herrero, Natixis’ chief Asia-Pacific economist, wrote in a research report on Tuesday.

The sanctions froze about $315 billion in Russian reserves – or about half of the total – as Western countries banned dealing with the Russian central bank.

Russian Finance Minister Anton Siluanov said this week that the country wanted to draw on yuan reserves after Moscow was blocked from accessing US dollars and euros. Russian state media.

The NBK has not yet commented on its position on these reserves.

If China allowed Moscow to convert its yuan reserves into US dollars or euros, “it would certainly help Russia get out of the current impasse,” Garcia-Herrero said. However, “the reputational risk of a potential violation of Western sanctions would be a huge move for the People’s Bank of China and therefore makes it highly unlikely,” she said.

“The long-term benefits of a rapprochement with Russia may not be comparable to the impact of a sudden loss of Western investor interest in China,” she added.

Retention of aircraft parts

Sanctions imposed by the United States and the European Union mean that the world’s two largest aircraft manufacturers, Boeing (bachelor) as well as Airbus (EADSF), can no longer supply spare parts or provide maintenance to Russian airlines. The same applies to jet engine manufacturers.

This means that Russian airlines may run out of spare parts within a few weeks or fly aircraft without changing equipment as often as is recommended for safe operation.

Why China won't risk its economy to save Putin

Earlier this month, a senior Russian official said China refused to send aircraft parts to Russia as Moscow seeks alternative sources of supply.

Valery Kudinov, head of aircraft airworthiness at the Russian Air Transport Agency, told the Russian state news agency TASS that Russia will be looking to source parts from countries including Turkey and India after failing to get them from China.

“As far as I know… China refused,” Kudinov said.

In response to a CNN request for comment, China’s foreign ministry reaffirmed Beijing’s position. opponent of the sanctions, adding that China and Russia will maintain “normal economic and trade cooperation.”

In 2017, China and Russia formed a civil aviation joint venture to build a new long-haul, wide-body passenger aircraft in an effort to compete with the Boeing and Airbus duopoly. Production of CR929 has begun, but disagreements over suppliers caused delays. The aircraft was originally expected to be offered to customers in 2024. But Russia has postponed the deadline from 2028 to 2029.

Freezing investment in infrastructure

The World Bank suspended all of its programs in Russia and Belarus after the invasion of Ukraine. He has not approved any new loans or investments in Russia since 2014 and none in Belarus since 2020.

Perhaps even more surprising is the decision by the Beijing-based Asian Infrastructure Investment Bank to do the same. In a statement earlier this month, he said he was suspending all of his activities related to Russia and Belarus “as the war unfolds in Ukraine.” He added that the move was “in the interest” of the bank.

Frustrated by the relative lack of influence in the World Bank (based in Washington, DC) and the Asian Development Bank (where Japan is the main power), China began AIIB in 2016. In addition to hosting the headquarters, China provides a bank president and has 26.5% of the vote. India and Russia have 7.6% and 6% respectively.
AIIB’s decision to suspend operations in Russia means $1.1 billion approved or proposed loan aimed at improving the country’s road and rail networks, is currently on hold.

– CNN’s Beijing Bureau and Hannah Ritchie in Sydney contributed to this article.

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