Xi Jinping’s sanctions split: Not all Chinese companies are helping Putin

Rhetorically, China is fully on the Russian line, the propaganda of the Kremlin is adopted almost unfiltered. But cooperation knows its limits: several Chinese companies are reducing their business with Russia for fear of Western sanctions.

After the attack on Ukraine, many people in Europe want all economic ties to Russia to be severed. The populations of other nations are less sensitive: opinion is divided in South America, many Asian states definitely want to continue doing business with Moscow, has a worldwide opinion poll the Alliance for Democracy result.

China also welcomes Russia with open arms. No surprise, says Tim Rühlig. The People’s Republic is rhetorically and politically on the Russian line, says the China analyst of the German Council on Foreign Relations (DGAP) in the ntv podcast “Learned again”. Russian propaganda is spread unfiltered in the country almost every day.

Autocracies stick together. Because for the Chinese President Xi Jinping, the Russian head of state Vladimir Putin is the “best friend”, as he revealed a few years ago. Economically, the states have been moving ever closer together for several years. The People’s Republic mainly exports clothing, electronic goods and machines to Russia. Conversely, China is primarily interested in Russian energy: coal, oil and gas imports have more than doubled since 2010.

Meanwhile, Beijing is said to be loud Bloomberg also think about replenishing its strategic reserves with cheap oil from Russia. State-owned oil giants like Sinopec have also started tapping into Russia’s bargain market Reuters reported. A new course, because in the first weeks after the start of the war they had reduced purchases and imports.

Explore what is possible

“On February 4, Xi Jinping and Vladimir Putin concluded a very comprehensive agreement that reads like a new alliance between the two great autocracies of our time,” says China analyst Rühlig. Nevertheless, the Russian attack on Ukraine is not in China’s interest, because Beijing hates uncertainties and risks – especially in years when a party congress is taking place like this one.

But time cannot be turned back, which is why the new motto in Beijing for the past few weeks has apparently been: explore what is economically possible without offending the West. In other words: in contrast to the EU, buy cheap Russian energy and make the Kremlin dependent on Chinese companies. The real enemy of China is the USA. You need allies for this dispute, but Beijing doesn’t have that many really powerful ones, says DGAP expert Rühlig. Geopolitically, Russia is a key player that China could use as a junior partner. “But you have to give the Russians something for that.”

A stable order situation for Russian energy companies, which puts money into the state coffers, makes the Kremlin docile. But surprisingly, support seems to be exclusively limited to this sector. There is no military aid, and Chinese limits are also clearly visible in the financial industry or in the important technology sector.

Only five goodbyes

For example, the former smartphone giant Huawei added the Russian payment service Mir to its app store shortly after the start of the war, but threw it out just a month later. By then, the apps of several sanctioned Russian banks could no longer be installed on the smartphones of the stricken company.

This was reported almost at the same time “Wall Street Journal”that Xiaomi, the second Chinese smartphone giant, would temporarily halt its shipments to Russia – as would Hong Kong-based computer maker Lenovo. And Unionpay, the Chinese answer to Visa and Mastercard credit cards, informed Sberbank and other Russian banks, according to the “Moscow Times” that they are currently not interested in working together.

“There’s a lot to suggest that people in Beijing initially thought they had to send a signal of support,” says Tim Rühlig. With each additional package of sanctions, however, one sensed that the West was serious and decided that it was better not to take any risks.

Chinese exports collapse

Not only did European and American technology exports to Russia collapse in March, but Chinese companies also delivered 40 percent fewer laptops and around two-thirds fewer smartphones than in February trading data of the Chinese government – although officially only four major Chinese banks and the drone manufacturer DJI have completely left the Russian market, as if from one Listing of the US Yale University emerges.

Actually it would have been six, because car service providers didi also wanted to withdraw from Russia. However, after a public shitstorm, the once multi-billion dollar company began to withdraw from the retreat. The Chinese population took the farewell as a sign of weakness.

Beijing dares the balancing act

Xi Jinping has to dare a balancing act on the Russia question: Slowly cut the cord between the People’s Republic and the West without endangering joint trade. Hence the withdrawal of the four major banks. Thus, while they lose revenue that they would have received as a payment service provider for Russian companies, they also do not risk intentionally or accidentally violating Western sanctions.

Because if it comes to that, there is a threat of powerful secondary sanctions from the USA and the EU. A catastrophe for financial institutions that are interwoven with the international financial system and also for the state leadership in Beijing. Life without dollars, euros, western chips and semiconductors is still unimaginable. The USA and Europe still control and dominate the financial markets and the technological cutting-edge area. Especially as long as the People’s Republic with clogged ports and other aftermath of its zero-Covid policy.