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Bilateral trade between Russia and China has grown 28.7% YoY in the first quarter of 2022, according to China customs, although growth slowed somewhat during March bringing the overall quarters figures down.

The March slowdown was more evident in China’s imports from Russia than exports to it. Import growth fell from 35.8 % in both January and February to 28% in March.

Sanctions Impact: Trade Settlement

Chinese customs stated a mixture of factors was behind the slowdown, including the fallout from the Russia-Ukraine conflict and the ensuing Western sanctions against Russia, which made shipments and trade settlement inconvenient.

The China Institute of International Studies commented on this, saying that “Local currency settlement usually accounts for less than one-fourth of China-Russia trade payments. If US dollar payments are cut off by Western sanctions, companies in Russia and China have to search for new trade settlement methods, and this takes some time.”

Sanctions Impact: Logistics

Logistics has proved another problem, as many international shipment companies have suspended services for Russia, creating a lack of containers to ship Russian goods out, a bottleneck that will also take time to resolve. The delivery time for goods moving between China and Russia by rail has risen from 10-14 days to 21 days.

Sanctions Impact: Market Volatility

China’s International Monetary Institute (part of the Renmin University) has commented that China-Russia trade is going through some structural adjustment after years of rapid growth and is expanding from energy and raw material imports to other products like grain, while the mechanisms for China to pay for imports in RMB Yuan are increasing. These changes will mean short-term volatility in China-Russia trade.

Trade Growth Fundamentals Remain High

However, China-Russia trade growth is still higher than China’s bilateral trade growth with most regions, which underscores that the two countries’ trade sectors have maintained relatively high-speed growth despite the pandemic slowdown. In US dollar terms, the 28.7% growth in China’s trade with Russia was significantly faster than the 12.2% growth in China’s trade with the US during the same Q1 period.

The Contemporary China-Russia Regional Economy Research Institute stated that “China-Russia trade will show a relatively large increase despite the Ukraine crisis, because the two countries’ trade complementarity and trade relations will develop further as Russia needs to strengthen cooperation with China to recoup capital, whether in terms of the Ruble or the RMB Yuan, while China needs Russian commodities like energy, mining products and food.”

Overall, China trade sources predict that China-Russia trade will maintain growth this year and reach in excess of RMB 1 trillion (US$157 billion). China-Russia trade stood at US$147 billion, a record high, in 2021. Because of the high base achieved in 2021, it is that 2022 bilateral trade growth will be lower, but this will not be significant as the countries’ products fit each other’s needs.