Amid rising global pressure over isolating Russia in terms of business and trade, Chinese exports to the country have witnessed a rapid decline. According to the latest report, the Russian economy is slowing as the rouble swings in value, clear evidence of a ripple effect that Western sanctions over Russia's invasion of Ukraine are having in China, even as it sticks by its neighbor diplomatically.
Chinese multinationals have stayed in Russia while their Western rivals flee but it is smaller Chinese companies that are more vulnerable to exchange rate losses, with several telling Reuters that much of their Russian business is on hold as both sides wait out the volatility.
China is Russia's biggest source of imports and sold $12.6 billion of goods to Russia just in January and February – mostly computers, cars, shoes, and toys, according to customs data.
Both Russian importers and Chinese exporters are putting off business on fears of being caught out by the roller-coaster rouble. “The depreciation of the rouble means that you lose money every time there's a sale,” Shen Muhui, who heads a trade group representing more than 20,000 small Chinese exporters to Russia said.
Meanwhile, the rouble has seen huge volatility against both the US dollar and Chinese yuan since Russia launched what it calls a ‘special operation' in Ukraine on Feb. 24. The conflict triggered a slump of more than 40% in the rouble's value against the yuan, though the Russian currency has rebounded roughly 70% since a March 9 low.
China has declined to condemn Russia's action in Ukraine or call it an invasion and it has repeatedly criticised what it calls illegal and unilateral sanctions. Major Chinese companies such as Xiaomi, Great Wall Motor have largely stayed silent on their Russia plans.
But behind the scenes, China is wary of its firms running afoul of sanctions and is pressing them to tread carefully with investments there, Reuters reported on March 25. State-run Sinopec Group has suspended talks on a major petrochemical investment and a gas marketing venture in Russia, the sources said.