China-Russia relations: Xi Jinping and Vladimir Putin meeting raises risk of more US sanctions, analysts

say
Chinese firms could become collateral damage if the US chooses to double down on sanctions following a
meeting between Beijing and Moscow
Some analysts, however, believe Beijing is making a calculated play that serves its economic needs while
searching for resolution to the Ukraine war

Frank Tang in Beijingand Kinling Lo in Beijing

Published: 10:00pm, 23 Mar, 2023

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Chinese President Xi Jinping met Russian President Vladimir Putin in Moscow earlier this week. Photo:
EPA-EFE

China’s pledge to deepen hi-tech cooperation with Russia might have ushered in a new round of
geopolitical struggle among major powers, while exposing more Chinese companies to US curbs, analysts
said.

President Xi Jinping and his Russian counterpart Vladimir Putin shook hands in the Kremlin this week,
posing for pictures together and issuing joint statements lashing out at hegemony, unilateralism and
protectionism – terms often used to describe the United States.

Many overseas analysts believe Chinese firms could become collateral damage as relations worsen
between the West and Beijing. Xi’s closeness with Putin suggests strategic competition is intensifying,
while US officials have repeatedly warned of severe consequences for China’s support for Russia, which is
facing heavy sanctions for its invasion of Ukraine.

“Washington is almost certain to sanction more Chinese companies, especially those involved in any
sanctions-busting with Russia,” said Neil Thomas, a fellow at the Centre for China Analysis under the Asia
Society Policy Institute.

“Chinese technology companies are already in Washington’s cross hairs, and those that visibly deepen
their involvement with Russia are likely to put themselves at higher risk of attracting US sanctions.”

Xi and Putin deepen China-Russia partnership in Moscow talks, but no Ukraine peace deal details
Some, however, believe Beijing is keeping its distance and making a calculated play, ensuring it has access
to energy, grains and technology while potentially bringing Russia and Ukraine back to the negotiation
table.

The Beijing-Moscow joint statements caught market attention because bilateral trade was projected to rise
by more than 30 per cent to surpass US$200 billion this year. More energy cooperation is planned before
2030 and both agreed to work together in areas of technology where they are being strangled by the US.

In addition to civil aircraft construction, shipbuilding and car manufacturing, the two countries will join
hands in research and artificial intelligence, the Internet of Things, 5G and the digital economy, many of
which are facing bans from the US.
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In their talks, Putin explicitly mentioned his support for Chinese businesses to fill the vacuum left by
Western companies.

What is the trade, investment relationship between China and Russia?

24 Mar 2023

As part of joint endeavours to “minimise external risks”, the two countries vowed to steadily increase the
proportion of local currency settlement in bilateral trade, which has jumped by two thirds from the end of
September, after Russia was largely excluded from the US dollar system.

“There’s no need to worry about the US sanctions,” said Wang Yong, director of Peking University’s
Centre for American Studies.

Close cooperation between China and Russia reflects their complementary economic structure – China
needs bulk energy shipments from its northern neighbour and exports consumer goods in return.

Russia is China’s second largest source of crude oil imports after Saudi Arabia, supplying 86.2 million
metric tonnes last year. The volume marked an 8.3 per cent year-on-year rise. In the first two months of
this year, it became the top supplier to China, with sales of 15.7 million metric tonnes.

“Obviously, it was to counter the US hegemony. Both countries are facing the US containment,” Wang
said.

It’s perfect timing, mainly because the US and the West are facing a financial crisisWang Yong
The professor attributed US restraint in sanctions to its reliance on made-in-China products amid high
inflation and the financial turbulence following the recent collapse of Silicon Valley Bank and Signature
Bank.

“It’s perfect timing, mainly because the US and the West are facing a financial crisis. If the crisis escalates,
they need more help from China,” he said.

Such speculation was reinforced by a White House statement on Tuesday that it is in discussion with
Chinese officials about a potential visit to the mainland by US Secretary of the Treasury Janet Yellen and
US Secretary of Commerce Gina Raimondo to talk about economic issues.

Currently, more than 600 Chinese companies are on a US blacklist that prevents access to American
components, technology and markets, most of which were added after the trade war launched by former
US president Donald Trump

John Lee, director of East-West Futures Consulting, said that US export controls are a bigger issue when it
comes to semiconductors.
“Chinese entities are still likely to avoid openly cooperating with sanctioned Russian entities … to avoid
making China’s situation worse,” he said.

“Of course, foreign actors will not want to do business with Chinese entities that are openly violating the
sanctions regime on Russia.”

Some sanctioned Chinese companies have been blacklisted because of their alleged support for Russia’s
invasion of Ukraine.

For instance, Changsha Tiny Space Science and Technology Research Institute was sanctioned in late
January after the US Treasury Department accused it of providing satellite images to the Wagner
mercenary group.

Nick Marro, a lead analyst of global trade at the Economist Intelligence Unit, said China and Russia should
move their economic cooperation forward carefully, because the US and European Union are getting
anxious around export controls and sanctions evasion.

A ‘wasted trip’ or ‘good news’? Xi Jinping heads home from Russia

23 Mar 2023

Washington also expanded the scope of export administration regulations in February to put more Russia-
bound exports under its watch.

“The biggest issue right now, however, is around whether the Chinese government is purposefully sending
lethal arms to Russia,” he said.

“This could trigger a severe US punitive response either against the implicated Chinese companies, or – in
a more escalatory scenario – against parts of the Chinese government itself.”

Foreign spokeswoman Mao Ning denied Beijing’s direct involvement in the war at a briefing in late
February and urged the Biden administration to stop spreading disinformation. “We will take resolute
countermeasures in response to the US sanctions,” she said.

Economic interconnectedness remains a bedrock for China-US relations and doors are still open for
dialogue, despite Xi making rare criticism of the US for its containment endeavours during the “two
sessions” earlier this month.

It suggests that Beijing still has limits to how much it will risk its economic relations with the West to
support MoscowNeil Thomas
Thomas, of the Asia Society Policy Institute, said there was a sense of restraint in the China-Russia joint
statements, as they omitted language from a February 2022 communique that promised “no forbidden
zones” in their relations.

Beijing also said relations with Moscow were not the stuff of Cold War-era political or military allies.
Instead, they sought no alliance or confrontation, nor were they targeting a third nation, according to the
joint statement.

“It suggests that Beijing still has limits to how much it will risk its economic relations with the West to
support Moscow, and that it may remain reluctant to supply lethal aid to Russia’s invasion of Ukraine,” he
said.
Diana Choyleva, chief economist at London-based Enodo Economics, said Xi’s visit is best seen as an
exercise in political signalling, designed to demonstrate its constructive diplomacy to resolve the Ukraine
conflict.

“We judge on balance that Xi will conclude that the risks of supplying Russia with weapons and
ammunition on a scale that will be strategically significant will outweigh the benefits, at least for the
immediate future,” she said.

Additional reporting by Amanda Lee and Ji Siqi