Why Chinese exports to Russia are declining?

The threat imposed by the United States of secondary sanctions against enablers of Russian sanctions-busting, especially China, is showing signs of crimping the Russian economy. 

US Secretary of State Antony Blinken began a three-day visit to China on April 24 with a stern warning for Beijing: the Biden Administration is ready to play hardball to prevent the continuing supply of equipment to Russia that aids the Kremlin’s war effort. 

China has denied accusations that it is supplying arms to Russia. Nevertheless, Beijing appears to be taking preventative steps to assuage US concerns. The Russian media outlet Izvestia reported earlier that some major Chinese banks have imposed restrictions on Russian wire payments.

“The situation with payments from Russia to China deteriorated sharply at the end of March. About 80 percent of transactions were returned,” Izvestia reported, citing a “business community” source. 

“Today sending yuan to China is a big problem. Because of this, importing equipment in April was very difficult, and this will continue in May,” the outlet cited the source as saying.

Chinese exports to Russia in March of this year were down 15.7 percent compared to the same month in 2023, Bloomberg reported. Russian imports from all sources fell by 18 percent this March. 

Other nations are taking note of the secondary sanctions threat, Russian bankers say, adding it is becoming much harder for Russians to move money around. “The situation is developing dynamically and, unfortunately, is not very encouraging,” the Russian media outlet RBC quoted Andrei Kostin, the head of VTB bank, who himself is the subject of US sanctions, as saying. “The number of foreign banks that are ready to continue working with us is constantly decreasing.”

At least one Chinese expert is voicing doubt about the Kremlin’s ability to maintain its war effort and achieve its goals in Ukraine. The Moscow Times published on April 15 a summary of an interview with Feng Yujun, the director of the Center for Russian and Central Asian Studies at Fudan University in Shanghai, who said multiple factors were working against Russia’s war effort. Among the factors listed by Feng were: the cohesiveness of Ukrainian society in maintaining its war effort; ongoing Western support for Ukraine; Russia’s difficulties with command and control of military operations; flaws in Russian intelligence gathering; and an information bubble in the Kremlin that hinders sound decision-making.

The Moscow Times goes on to cite Feng as saying that Russia at present is “fertile ground for ‘all kinds of black swans,’ that is, various unpredictable events that the Russian government has already faced and will continue to face.”