Download publication

Working Paper

How does China fare on the Russian market? Implications for the European Union

China’s economic ties with Russia are deepening. Meanwhile, Europe remains Russia’s largest trading partner, lender and investor. An analysis of China’s ties with Russia, indicate that China seems to have become more of a competitor to the European Union on Russia’s market. Competition over investment and lending is more limited, but the situation could change rapidly with China and Russia giving clear signs of a stronger than ever strategic partnership.

By: , and Date: November 18, 2019 Topic: Global economy and trade

This paper was prepared for the seminar ‘Trade relations  between the EU, China and Russia’, co-organised by the delegation of the European Union to Russia and Bruegel with the support of the EU Russia Expert Network on Foreign Policy (EUREN). The seminar was funded by the European Union.

The content of this paper is the sole responsibility of the author and does not represent the official position of the European Union.

The last two decades have seen a very rapid increase in trade and lending between China and Russia. The investment relationship has remained more subdued. China dominates every aspect of the bilateral economic relationship, as a net exporter, net creditor and net investor, despite Russia long being a richer country than China.

China and Russia are increasingly viewed as important political and economic partners, notwithstanding their past differences. However, in terms of trade and investment, economic cooperation between the two countries’ remains less intense than their diplomatic relationship, even though their formal economic interactions can be traced back to the 1700s and both shared a similar economic model, namely central planning, for a good part of the twentieth century.

China has developed very rapidly in economic terms over the past two decades since its accession to the World Trade Organisation. In particular, it has become the largest exporter in the world from a very low base (Figure 1 and Table A1 in the Annex), surpassing Europe. In that context, it is unsurprising that Chinese goods have flooded Russia, eating into the EU’s and the US’s export shares to Russia. Beyond China’s increasing economic weight, the changing global environment, including the sanctions and counter-sanctions between the West and Russia, the US-China trade war and the US-led IndoPacific Strategy, have helped re-orient Russia’s economic relationships towards the east, with China being the largest player.

China has also become increasingly interested in its neighbourhood (and beyond) with its landmark project, the Belt and Road Initiative (BRI). Among the large and increasing number of countries that participate in the BRI, Russia occupies an important position as the recipient of the largest amount of Chinese funding, mainly for energy and railway infrastructure. In particular, out of the six corridors China has announced for the BRI, several cross Russia, including the New Eurasian Land Bridge and the China-Mongolia-Russia Corridor. In addition, Russia and China have agreed to jointly build an ‘Ice Silk Road’ along the northern sea route in the Arctic. All in all, Russia has unquestionably become an important partner in China’s massive global infrastructure project plans. Russia has also proposed the concept of a Great Eurasian Partnership, which is seen as a way for the Kremlin to preserve its relationships within its neighbourhood at a time of very rapid increase in Chinese influence (Köstem, 2019).

Read article More by this author
 

Opinion

European governance

Can EU fiscal rules jump on the green bandwagon?

By and large, setting a new green golden rule would be a useful addition to the existing EU fiscal framework.

By: Guntram B. Wolff Topic: European governance, Green economy, Macroeconomic policy Date: October 22, 2021
Read article
 

Opinion

COP26: why carbon pricing is crucial to China’s climate change pledges

China’s emissions trading scheme is a welcome but to reach its full potential, it needs to cover more of China’s emissions, go beyond the electricity sector and let prices reflect the true cost of carbon.

By: Alicia García-Herrero and Junyu Tan Topic: Global economy and trade, Green economy Date: October 22, 2021
Read article
 

Blog Post

European governance

Germany’s post-pandemic current account surplus

The pandemic has increased the net lending position of the German corporate sector. By incentivising private investment, policymakers could trigger a virtuous cycle of increasing wages, decreasing corporate net lending, which would eventually lead to a reduction of the economy-wide current account surplus.

By: Lionel Guetta-Jeanrenaud and Guntram B. Wolff Topic: European governance, Macroeconomic policy Date: October 21, 2021
Read article More by this author
 

External Publication

Global Economic Resilience: Building Forward Better

A roadmap for systemic economic reform calling for step-change in global economic governance to increase resilience and build forward better from economic shocks, prepared for the G7 Advisory Panel on Economic Resilience.

By: Thomas Wieser Topic: Global economy and trade, Macroeconomic policy Date: October 14, 2021
Read article More on this topic More by this author
 

Podcast

Podcast

Will ‘common prosperity’ address China’s inequality?

Why is China reviving this old mantra?

By: The Sound of Economics Topic: Global economy and trade Date: October 13, 2021
Read article More by this author
 

Opinion

European governance

The inconsistency in global strategic relations

All of this talk on strategic retrenchment and autonomy is the language of escalation, not of appeasement and collaboration.

By: Maria Demertzis Topic: European governance, Global economy and trade Date: October 13, 2021
Read article
 

Opinion

Xi’s pledge on financing coal plants overseas misses point

China’s domestic installation of coal-fired power plants continues at great pace.

By: Alicia García-Herrero and Simone Tagliapietra Topic: Global economy and trade, Green economy Date: October 7, 2021
Read article
 

Opinion

Will China use climate change as a bargaining chip?

Beijing shows signs of changing tactics ahead of the COP26 conference.

By: Alicia García-Herrero and Simone Tagliapietra Topic: Global economy and trade, Green economy Date: October 6, 2021
Read article More on this topic More by this author
 

Opinion

Letter: Declining investment may explain why rates are low

Perhaps an analysis of the causes of the declining investment rate would bring us closer to explaining why real interest rates are so low.

By: Marek Dabrowski Topic: Macroeconomic policy Date: October 1, 2021
Read article More on this topic More by this author
 

Opinion

What Evergrande signals about China's economic future

Under Xi Jinping's new economic agenda 'common prosperity', China is cracking down on indebted real estate developers like Evergrande.

By: Alicia García-Herrero Topic: Global economy and trade Date: September 30, 2021
Read article More on this topic More by this author
 

Opinion

Europe doesn’t need a ‘Mega-Fab’

Europe should defend its existing dominance in equipment manufacturing for semiconductors and invest in chip design instead of luring high-end fabrication to its shores.

By: Niclas Poitiers Topic: Global economy and trade Date: September 22, 2021
Read article More on this topic More by this author
 

Blog Post

Opening up digital platforms and reducing anticompetitive risks

The current convergence in measures to open up digital platforms leaves a door open to some form of international coordination.

By: Georgios Petropoulos Topic: Digital economy and innovation Date: September 22, 2021
Load more posts