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Mandy Zuo

Trade growth between China and Russia has continued to slow after a year of rapid expansion, as settlement becomes a bigger obstacle amid secondary sanctions from the United States over Russia’s war in Ukraine.
In the first eight months of the year, trade volume between the two countries was US$158.5 billion, a year-on-year increase of 1.9 per cent, according to data released by China Customs this month.
The slowing pace has occurred as some Chinese financial institutions signalled plans to limit their connections with Russia amid pressure from Washington, which alleges that China is helping Russia in its war through their closer trade ties.
Since Russia was cut off from the Swift financial messaging system in February 2022 following its invasion of Ukraine, trade with China and the Chinese yuan have become crucial for its economy.
However, in contrast to a boom last year, China’s exports to Russia were valued at US$71.91 billion in the first eight months of the year – a slight increase of 0.4 per cent from the same period in 2023.
And the value of its imports from Russia was US$86.56 billion, up 3.2 per cent.
It’s not about relations between China and Russia, but rather settlement challenges due to the US’ long-arm jurisdiction
Chen Fengying, think tank researcher
The slowing growth was mainly the result of issues in payment amid sanctions from the United States over Russia’s war in Ukraine, said Chen Fengying, a researcher with the China Institutes of Contemporary International Relations (CICIR) – a think tank with ties to the Ministry of State Security.
“It’s not about relations between China and Russia, but rather settlement challenges due to the US’ long-arm jurisdiction,” she said.
China is Russia’s largest trading partner, accounting for a third of Russia’s foreign trade last year. China also offers a lucrative market for many Russian exports, from oil and gas to agricultural products.
The total trade value last year hit US$240 billion, marking a historic increase of 26.3 per cent from a year earlier.
However, energy trade, which accounts for the bulk of their bilateral transactions, started to slow this year.
Imports of crude oil, the most important part of China-Russia trade, saw a year-on-year decline for three months in a row, from May to July, compared with double-digit growth in most of the year prior to May, customs figures showed.
China imported about 7.46 million tonnes of the product from Russia in July, marking a drop of 7.47 per cent from a year earlier, following a slump of 19.66 per cent in June.


Exports of transport equipment, including vehicles that have comprised China’s major goods sold to its northern neighbour, declined by 11.32 per cent in July from the prior year and marked the year’s third month that saw negative growth. That came after three-digit surges during most months in the second half of last year.
China has been under pressure from the US for its enlarging trade volume with Russia, with Washington alleging that the trade involves dual-use goods that have both civilian and military applications and could be helping Russia in its war.
Chinese banks were warned in June by US officials at a meeting of G7 leaders in Italy that they could receive secondary sanctions for facilitating payments.
Prior to that, major banks, including the Bank of China, the Industrial and Commercial Bank of China, and two Chinese-led development banks – the New Development Bank and the Asian Infrastructure Investment Bank – had all reportedly reduced Russia’s access to their funding.
Chen said the drop so far this year was “quite significant”, and she expected total trade volume between the two countries to return to US$200 billion this year.


“A volume of US$200 billion would be a normal level, and it’s quite impossible to go below that unless [former US president Donald] Trump wins the [November presidential] election and resolves the Ukraine war,” she said.
If that happens, it could lead to a normalisation of economic ties between Russia and European nations, and the broader trade of Russian oil could resume, offsetting its dependence on China.
“It’s certain that Russia will go west if the US cuts it some slack,” she said.
He Zhenwei, head of the China Overseas Development Association, agreed that settlement problems between Russia and China were largely responsible for the lost momentum in their trade.
Despite the US’ targets moving to smaller Chinese banks, there are still several local small and medium-sized enterprise banks operating to facilitate transactions, he was quoted as saying in an interview with Russian news agency Sputnik in June.
The increase in trade between the two nations, albeit smaller, still proves that settlements are continuing, and there are more channels to push it forward, he said.


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After a historic rise in trade between China and Russia last year, their energy exchanges keep slowing, and analysts point to settlement challenges


After a historic rise in trade between China and Russia last year, their energy exchanges keep slowing, and analysts point to settlement challenges.
