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All news / Is the U.S.-China trade war beneficial for Russia?

  • 07 Aug 2019, 10:36

While Washington and Beijing are still having a hard time finding a way out of their economic standoff, Moscow’s been busy with new opportunities that are opening up for its exporters on the Chinese market.

The end of July brought good news to Moscow - China had removed all restrictions on imports of soybeans from Russia, a decision that the Kremlin considers a “huge breakthrough”, as Beijing has long been restrictive towards Russian agricultural goods.

The media was quick to tie this decision to the ongoing economic standoff between China and the U.S., who has been one of the main suppliers of soybeans to China over the past few years. According to the International Trade Center, the amount of soybean trade between China and the U.S. reached $16.3 billion back in 2014 and last year fell to just $7 billion, with Brazil remaining the number 1 exporter of soybeans to China ($28.8 billion). As for Russia, it only supplied $257.4 million-worth to China in 2018.

But is it correct to link the new opportunity opening up to Russia with the U.S.-China trade war? And can Russia really benefit from this economic standoff?

Business as usual

One might think that the economic standoff between China and the U.S. will open new opportunities for Russian exporters (for instance, in pork production), but, in practice, the Chinese demand is so high that even if the whole Russian pork production sector would focus solely on meeting this demand, it would not be able to, says Oleg Remyga, head of China Unit at Skolkovo Business School. 

“The situation is pretty much the same with soybean exports. There is an evident growth of agricultural products exports from Russia to China thanks to the steps made by Chinese regulators, but, again, this process started way before the U.S.-China trade war,” he explains, adding that it’s rather the consequence of Russian-Chinese efforts to boost bilateral ties.

The Russian authorities have repeatedly stressed that the trade war between China and the U.S. is not a good development for the Russian economy. “Our trade with China reached $108 billion last year and we are looking to increase this figure to $200 billion. And it’s not connected to any kind of limitations and trade wars,” said the Russian Minister of Finance Anton Siluanov back in June. “We need to promote our products, whether or not there is a trade war going on.”

Chinese experts echo this view. China and Russia actively work on improving bilateral cooperation, because it’s beneficial for them, not because of some standoff with other countries, argued Li Yonghui, Deputy Director at the Institute of Russian, Eastern European and Central Asian Studies, Chinese Academy of Social Sciences.

So, more opportunities or problems?

It will also be wrong to say that the U.S.’s unfavorable stance towards Chinese companies like Huawei will push them to be more active on the Russian market. “Huawei or Xiaomi, for example, have been on the Russian market for a while now and thanks to right marketing and adaptive development strategies Huawei is the no.1 smartphone manufacturer in Russia,” says Remyga. As he explains, it’s primarily the economic factors like competitive price and decent quality that made it successful on the Russian market, not the trade war between China and the U.S.

Moreover, he believes that the economic standoff between the two might actually hamper Huawei’s activities in Russia. “Google decided against installing Android operating systems on Huawei smartphones, which might lead to the fall of sales for Huawei, because many consumers are used to Android,” the expert explains. “The war, in any form, rather creates greater problems for the economy and business than opportunities.”