China has its ‘limits’
Vladimir Putin's latest sit-down with Xi Jinping—the count has now surpassed 40 bilateral summits—was big on bromance imagery. China's state-controlled People's Daily confided there was a "restrictive" meeting between the two this week with only a handful of aides present, in addition to larger formal sessions. Xi even attempted a bear hug of Putin.
The two celebrated Putin's latest presidential "election" win and hailed the 75th anniversary of ties between the two giant Eurasian neighbors. Together, they re-endorsed a 2030 development plan, according to state media organs, and declared "a new starting point" from which Russia and China will "further synergize" their strategies.
But when it comes to economics, the story isn't about backslapping authoritarians joining forces against the US. It's becoming increasingly clear that there are indeed limits to the "no limits" partnership Xi and Putin declared just before Russia's full-scale invasion of Ukraine. That's according to Alex Isakov at Bloomberg Economics, who's pored over bilateral trade and finance figures to showcase concerns on both sides.
While both Beijing and Moscow have endorsed a de-dollarization agenda, the reality is that companies and financial institutions on each side of the Russia-China border are wary of isolation from a global financial system that remains dominated by the dollar. And China's slow-walking its supposed interest in new natural-gas pipelines illustrates its continuing commitment to avoiding over-reliance on one source—in this case its ostensibly friendly junior partner.
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Russia may be a strategic partner that helps to strengthen Xi's multipolar global vision in the face of a US that wants to keep the old world order in place. But it cannot replace the West when it comes to buying up Chinese exports—especially at a time when exports are vital to China's economic growth.
Mainland China exported about $24 billion to Russia in the first seven months of its fiscal year. That's less than a quarter of its direct shipments to the US, and even less considering that notable chunks of exports to Hong Kong, Southeast Asia, Mexico and others end up as purchases by American households.
And Russia may not get any better as an export destination. Data released Thursday showed that Russia's current-account surplus swelled in the first four months of 2024, thanks especially to a slump in imports. Russia's central bank on May 13 indicated that payment problems may be an issue.
"In the past, companies have found ways to solve these problems," the central bank said. But now international payments are a factor of uncertainty as the West seeks to tighten its sanctions regime against the Kremlin. Some banks in China, the United Arab Emirates and Turkey have stopped international payments and servicing accounts of Russian corporate clients.
The two celebrated Putin's latest presidential "election" win and hailed the 75th anniversary of ties between the two giant Eurasian neighbors. Together, they re-endorsed a 2030 development plan, according to state media organs, and declared "a new starting point" from which Russia and China will "further synergize" their strategies.
But when it comes to economics, the story isn't about backslapping authoritarians joining forces against the US. It's becoming increasingly clear that there are indeed limits to the "no limits" partnership Xi and Putin declared just before Russia's full-scale invasion of Ukraine. That's according to Alex Isakov at Bloomberg Economics, who's pored over bilateral trade and finance figures to showcase concerns on both sides.
While both Beijing and Moscow have endorsed a de-dollarization agenda, the reality is that companies and financial institutions on each side of the Russia-China border are wary of isolation from a global financial system that remains dominated by the dollar. And China's slow-walking its supposed interest in new natural-gas pipelines illustrates its continuing commitment to avoiding over-reliance on one source—in this case its ostensibly friendly junior partner.
Vladimir Putin, left, with Xi Jinping in Beijing on May 16. Source: Contributor/Getty Images AsiaPacif
This week in the New Economy
China unveils a property rescue plan amid a two-speed recovery.
Honda trumpets a $65 billion electrification plan over several years.
Lula's Petrobras intervention stokes Brazil angst as floods take a toll.
How strategic port-nation Djibouti has navigated the Red Sea crisis.
The world's superpowers are ramping up support for semiconductors.
Russia may be a strategic partner that helps to strengthen Xi's multipolar global vision in the face of a US that wants to keep the old world order in place. But it cannot replace the West when it comes to buying up Chinese exports—especially at a time when exports are vital to China's economic growth.
Mainland China exported about $24 billion to Russia in the first seven months of its fiscal year. That's less than a quarter of its direct shipments to the US, and even less considering that notable chunks of exports to Hong Kong, Southeast Asia, Mexico and others end up as purchases by American households.
And Russia may not get any better as an export destination. Data released Thursday showed that Russia's current-account surplus swelled in the first four months of 2024, thanks especially to a slump in imports. Russia's central bank on May 13 indicated that payment problems may be an issue.
"In the past, companies have found ways to solve these problems," the central bank said. But now international payments are a factor of uncertainty as the West seeks to tighten its sanctions regime against the Kremlin. Some banks in China, the United Arab Emirates and Turkey have stopped international payments and servicing accounts of Russian corporate clients.
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