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4 ways for China to quietly withdraw from Russia

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(CNN Business) –– China is quietly distancing itself from Russia’s economy Attacked by obstacles.

The two countries announced last month that their friendship had “no limits”, but that was before Moscow Began its war in Ukraine.

Now, Russia’s economy is suffering from sanctions around the world, and there are more and more Further proof of will and ability Assistance to China’s neighbors in the north may be limited. Beijing has refused to condemn Russia’s attack on Ukraine. But he still wants to avoid being hit by sanctions, which, on repeated occasions, have been denounced as an ineffective way to resolve the crisis.

“China is not part of the crisis [de Ucrania] And sanctions do not want to affect it, “he said on Tuesday Foreign Minister Wang Yi During a phone call with his partner from Spain.

Why was China not involved in the Ukraine war? 1:27

Beijing on Wednesday fully endorsed the comments made by the Chinese ambassador to Ukraine earlier this week. “China will never attack Ukraine. We will help, especially economically,” Fan Xiang Elviv was quoted as saying in a statement by the regional government.

Fears that Chinese companies could face US sanctions due to ties with Russia have pushed the stock out in recent days. The downturn was reversed on Wednesday when Beijing pledged to pursue policies to boost its economy and keep financial markets stable.

U.S. officials told CNN on Monday that they had information about China Has shown some openness in providing military assistance to Russia And the financial information you requested. However, China dismissed such data as “misinformation”.

The Analysts They say China is trying to strike a “subtle balance” between verbal support for Russia, but no more hostility to the United States.

Beijing and Moscow share a strategic interest in challenging the West. However, Chinese banks cannot afford to lose access to the US dollar. And many Chinese businesses can not snatch American technology.

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Although China is Russia’s first trade partner, Beijing has other priorities. Trade between the two countries accounts for just 2% of China’s total trade. The European Union and the United States accounted for the largest share, according to the country’s tariffs last year.

These are the four steps Beijing has taken in recent weeks to distance itself from the isolated and destabilizing Russian economy.

Let the ruble fail

Alternative to Bitcoin Ruble ?, Analysis of Serbia 2:25

The yuan, China’s currency, is not traded freely, but moves within groups formed by officials of the People’s Bank of China (PBOC). Last week, they doubled the size of the ruble’s trading limit, allowing Russia’s currency to fall sharply.

The ruble has already lost more than 20% of its value against the dollar and the euro since the start of the war in Ukraine. By allowing the Russian currency to fall against the yuan, Beijing did nothing to help Moscow.

The Russians have to pay more in rubles for Chinese imports, such as smartphones and cars. Chinese phone brands like Xiaomi and Huawei are very popular in Russia. They even competed with Apple and Samsung for market leadership before the war.

Chinese automakers, such as Great Wall Motor and Jelly Auto Occupies 7% of the Russian market. In that category, they sold more than 115,000 vehicles last year. Great Wall Motor has stopped distributing new cars in Russia due to fluctuations in the exchange rate.

Expansion of the trading group will allow the yuan to keep pace with the sharp fluctuations of the ruble. Chinese companies can therefore “better understand the magnitude or trend of future exchange rate fluctuations and reduce currency risks by using hedging methods such as derivatives”. State broadcaster China Business reported last week.

Russian stocks fell and the ruble fell to an all-time low 0:49

Currently, about $ 25 billion worth of trade between China and Russia is taking place in the yuan, they said. Chinese state media.

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Russian reserves in China

Alicia Garcia-Herrero, chief EN economist for the Asia-Pacific region in Natixis, wrote in a research report on Tuesday that China’s $ 90 billion yuan in reserves could be the most important aid China can provide to Russia.

Russia’s reserves of about $ 315 billion – or about half the total – have been blocked by Western countries blocking transactions with Russia’s central bank.

Russian Finance Minister Anton Silvanov said this week that he would like to use the yuan reserves, following Moscow’s blockade of the US dollar and the euro. According to the Russian state media.

The PBOC has not yet stated its position on these reservations.

China has the largest reserves of gold and cash 0:53

Garcia-Herrero noted that if China allowed Moscow to convert its yuan reserves into US dollars or euros, “it would clearly help Russia’s current stalemate.” However he acknowledged that their numbers were not enough to defeat PBOC’s reputation for violating Western sanctions.

“The long-term benefits of reaching out to Russia may not be matched by the impact of the sudden loss of interest in China by Western investors,” he added.

Stop aircraft parts from Russia

Sanctions imposed by the United States and the European Union could not provide spare parts or maintenance support to Russia’s airlines, the world’s two largest aircraft manufacturers, Boeing and Airbus. The same goes for jet engine manufacturers.

That means Russian airlines will run out of parts in a few weeks … or let the planes fly without changing equipment at the frequency recommended for safe operation.

Earlier this month, a senior Russian official said China had refused to ship the aircraft parts, while Moscow was looking for alternatives.

Valery Gudinov, head of aviation qualification for Russia’s aviation authority, said Moscow was looking for options after a failed attempt to procure raw materials from China, including from countries including Turkey and India, according to the state – run Tass news agency.

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

Can China and Russia be allies in the invasion of Ukraine? 2:37

In response to CNN’s request for comment, the Chinese Foreign Ministry reiterated Beijing’s opposition to sanctions. He said China and Russia would maintain “normal economic and trade cooperation”.

China and Russia developed a new long-range wide-body aircraft in a joint venture in 2017. It can compete with both Boeing and Airbus. Production of the CR929 already Started, But disagreements over suppliers caused delays. Initially, the aircraft was expected to be delivered to customers in 2024. But Russia has pushed back the schedule from 2028 to 2029.

Disable infrastructure investment

The World Bank has suspended all its projects in Russia and Belarus since the occupation of Ukraine. It has not approved new loans or investments to Russia since 2014. And nothing for Belarus since 2020.

It may come as a surprise that the Beijing-based Asian Infrastructure Investment Bank (AIIB) has decided to do the same. In a statement earlier this month, he said he would suspend all activities related to Russia and Belarus “when war breaks out in Ukraine.” He added that the move was in the “best interest” of the bank.

Frustrated by the relative lack of influence at the World Bank (based in Washington) and the Asian Development Bank (Japan is a major power), China launched AIIB in 2016. In addition to running the headquarters, China Bank and has 26.5% of the vote. India and Russia are 7.6% and 6%, respectively.

Chinese investors are betting on Russia 0:59

It marks the end of AIIB’s decision to suspend operations in Russia $ 1.1 billion loan approved or proposed Improving the country’s road and rail network is now suspended.

– Hannah Richie of CNN Beijing Bureau and Sydney contributed to this report.

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