Chinese Exports to Russia Plummet for First Time Since War Began

Chinese exports to Russia last month fell for the first time year-on-year since the war in Ukraine began in 2022, according to Chinese customs data.

The shift came as Chinese companies moved to dodge secondary sanctions that the Biden administration introduced to squeeze industries deemed to be supporting Russia's military supply chain.

Trade between the neighbors soared to new heights following Russian President Vladimir Putin's February 24, 2022, invasion. This propped up Russia's isolated wartime economy amid crushing Western sanctions but also made the country ever more dependent on China.

Russia-China trade soared to $240 billion last year on the back of Russian oil imports and Chinese exports of electronics, vehicles and machinery, a $50 billion improvement on the record trade turnover in 2022.

General Administration of Customs China (GACC) statistics for last month, however, showed a steep decline of 15.7 percent compared to March 2023.

The drop came as a growing number of major Chinese banks began restricting payments in Chinese yuan from Russian traders.

Russia has been relying more on the yuan to conduct international trade since the country was blocked from the SWIFT global payment system shortly after it launched its invasion. This left Moscow unable to settle trade in dollars.

GACC data for March also showed that, for the first time since the end of 2022, Chinese exports of machinery equipment, now subject to secondary U.S. sanctions, had fallen.

Newsweek has contacted the Russian Ministry of Trade and Industry to request comment.

"The threat of U.S. secondary sanctions is the most serious challenge to bilateral trade since sanctions started and is a direct threat to Russia's economic stability if not addressed within months," Chris Weafer, CEO of the political analysis and risk assessment firm Macro-Advisory, told Newsweek.

Weafer said, however, that he expects Moscow and Beijing to find way to bypass the sanctions threat.

"The political and strategic relationship between Russia and China is too important for both governments not to find a workaround," Weafer said.

Russia is the primary export market for Chinese cars and increasingly a destination for Chinese consumer goods. Meanwhile, "Russia supplies China with cheap oil and gas, coal, industrial metals and, in recent years, wheat and other agriculture," Weafer said. "It also does so via secure land routes which could be important in the event of a future standoff with the U.S. and its powerful navy.

During her visit to China this month, U.S. Treasury Secretary Janet Yellen warned her Chinese counterpart, He Lifeng, that there would be "significant consequences" for Chinese companies that aid Russia in its war against Ukraine.

U.S. Secretary of State Antony Blinken is expected to reiterate the message during a trip to Beijing this week, a state department official told the press on Saturday.