Exporting to China Means Strengthening Russia’s Military-Industrial Complex

15:41, 02.05.2024

Twenty days before the full-scale invasion of Ukraine on February 4, 2022, during their meeting, Putin and Xi Jinping made a joint statement declaring that the "China-Russian friendship knows no bounds" and there are "no forbidden areas" for cooperation. 

Since the onset of the full-scale invasion, China has become the largest supplier of critical technologies to Russia. However, external factors such as the sanctions policy of the United States and European countries, which was imposed due to Russian aggression, have affected the friendly relations between the two dictators. 

"According to Chinese customs data, exports from China to Russia fell by nearly 16% in March 2024 compared to the previous year. This became possible because Russia finds it increasingly difficult to conduct international payments, amidst the heightened risk of secondary U.S. sanctions against banks and companies accused of cooperating with Moscow", Bloomberg reports. 

According to statistics published by the General Administration of Customs of the People's Republic of China (GACC) in April 2024, a significant decrease in supplies to Russia was observed in automobiles, equipment (including electrical), machinery, their parts, and additional accessories. 

President Biden's executive order signed in December significantly expanded the powers of the U.S. government and allowed for swift imposition of sanctions on financial institutions cooperating with Russians in the procurement of equipment necessary for the military-industrial complex (MIC). This action was prompted by a substantial increase in trade between Russia and China in 2023, reaching a record $240 billion. 

According to experts of the ESCU, the decrease in exports from China to Russia does not mean that the Russian MIC will not receive all the necessary resources and tools. Reuters writes that it has become significantly more challenging for electronics manufacturers from southern China to supply their products to Russia because major Chinese banks indeed restrict payments for such transactions due to the threat of U.S. sanctions, but China uses bypass channels. For example, some Chinese companies turn to small banking institutions and underground financing channels, such as currency brokers and cryptocurrency.