Now, with the Russian economy being hit by sanctions from around the world, there is growing evidence that China 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 being influenced by the sanctions, which it has repeatedly denounced as an ineffective way to resolve the crisis.
“China is not a party to [Ukraine] Crisis, and do not want sanctions to affect China,” Foreign Minister Wang Yi He said Tuesday, during a telephone conversation with his Spanish counterpart.
Beijing also expressed its full support on Wednesday for comments made earlier this week by China’s ambassador to Ukraine. “China will never attack Ukraine. We will help, especially economically,” Fan Xianrong was quoted as saying in a press release from the Lviv regional government.
Concerns that Chinese companies might face US sanctions over ties with Russia have contributed to an epic sell-off in Chinese stocks the last days. That slump was reversed on Wednesday when Beijing promised that it would pursue policies to bolster its faltering economy and keep financial markets stable.
US officials told CNN on Monday that they have information indicating that China has Express some openness To provide Russia with the required military and financial assistance. China dismissed this as “disinformation”.
Analysts Say China is trying to strike a “delicate balance” between supporting Russia rhetorically but without further antagonizing the United States.
Beijing and Moscow share a strategic interest in defying the West. However, Chinese banks cannot afford to lose access to the US dollar, and many Chinese industries cannot afford it To be deprived of American technology.
While China is Russia’s number one trading partner, Beijing has other priorities. Trade between the two countries accounted for only 2% of the total volume of Chinese trade. The European Union and the United States have much larger shares, according to Chinese customs statistics for the past year.
Here are some of the measures Beijing has taken in the past few weeks to distance itself From isolated and falls apart Russian economy.
Let the ruble drop
China’s currency, the yuan, does not trade completely freely, and instead moves within ranges set by officials at the People’s Bank of China (PBOC). Last week, they doubled the size of the ruble’s trading band, which allowed the Russian currency to depreciate even faster.
The ruble has already lost more than 20%. of its value against both the dollar and the euro since the beginning of the war in Ukraine. By allowing the Russian currency to depreciate 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 have been competing with them an Apple (AAPL) And the Samsung (SSNLF) To lead the market before the war.
Chinese automakers, such as Great Wall Motor and Geely Auto, It occupies 7% of the Russian marketLast year, more than 115,000 cars were sold. Great Wall Motor Company has stopped supplying new cars to dealers in Russia due to exchange rate fluctuations.
Expanding the trading range will allow the yuan to keep pace with the wild fluctuations of the ruble, so that Chinese companies can “better understand the magnitude or direction of future exchange rate fluctuations and reduce exchange risk using hedging methods, such as derivatives.” Chinese state-owned business network I reported last week.
Currently, about $25 billion of trade between China and Russia is conducted in yuan, Chinese state media mentioned.
Sit on reserves
The most significant help China can provide to Russia is through the $90 billion reserves Moscow holds in yuan, Alicia Garcia-Herrero, chief Asia-Pacific economist at Natixis, wrote in a research report Tuesday.
The sanctions have frozen $315 billion in Russia’s reserves – or nearly half of the total – as Western countries have banned the Russian Central Bank.
Russian Finance Minister Anton Siluanov said this week that his country wants to use the yuan’s reserves after Moscow was denied access to the US dollar and the euro, according to the Russian state media.
The People’s Bank of China (PBOC) has not yet commented on its position on these reserves.
Garcia Herrero noted that if China allowed Moscow to convert its yuan reserves into US dollars or euros, “it would obviously help Russia in the current impasse.” However, she said, “the discrediting risk of a potential breach of Western sanctions would be a huge step for the People’s Bank of China (PBOC) to take, and thus make it highly unlikely.”
“The long-term gains of getting closer to Russia may not be commensurate with the effect of Western investors suddenly losing interest in China,” she added.
Withholding aircraft spare parts
Sanctions imposed by the United States and the European Union mean that the world’s two largest aircraft makers, Boeing (Bachelor’s) And the Airbus (EADSF), can no longer provide spare parts or provide maintenance support to Russian airlines. The same is true of jet engine makers.
This means Russian airlines could run out of spare parts in a matter of weeks, or fly planes without replacing equipment as frequently as recommended to operate safely.
Earlier this month, a senior Russian official said China refused to send aircraft parts to Russia while Moscow searches for alternative supplies.
Russia’s state news agency TASS quoted Valery Kudinov, head of airworthiness at the Russian Air Transport Agency, as saying that Russia will look for opportunities to acquire parts from countries including Turkey and India after a failed attempt to obtain them from China.
“As far as I know, China refused,” Kudinov was quoted as saying.
In response to CNN’s request for comment, the Chinese Foreign Ministry reiterated Beijing’s comments The sanctions opposition added that China and Russia would maintain “normal economic and trade cooperation”.
China and Russia set up a civil aviation joint venture in 2017 to build a new long-range, wide-body passenger jet, in a bid to rival the duopoly of Boeing and Airbus. Production CR929 I startedHowever, disputes over suppliers have caused delays. It was initially expected to deliver the aircraft to customers in 2024. But Russia postponed the schedule to 2028 to 2029.
Infrastructure investment freeze
The World Bank suspended all of its programs in Russia and Belarus after the invasion of Ukraine. It has not approved any new loans or investments to Russia since 2014, nor has it approved any new loans or investments to Belarus since 2020.
Most surprising, perhaps, is the decision of the Beijing-based Asian Infrastructure Investment Bank to do the same. In a statement issued earlier this month, it said it would suspend all of its activities related to Russia and Belarus “as war breaks out in Ukraine”. She added that the move was “in the interest” of the bank.
Frustrated by the relative lack of influence at the World Bank (based in Washington, D.C.) and the Asian Development Bank (where Japan is a major power), China launched AIIB in 2016. In addition to hosting the headquarters, China provides the head of the bank and has 26.5% of the vote. India and Russia 7.6% and 6%, respectively.
The decision of the Asian Infrastructure Investment Bank means the suspension of activities in Russia $1.1 billion in approved or proposed lending It aims to improve the country’s road and railway network and is now suspended.
CNN’s Beijing bureau and Hannah Ritchie’s Sydney contributed to this article.