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1 [1] (May 24, 2022)

handle is hein.crs/govefuu0001 and id is 1 raw text is: L Congessoa Reeac Sevc May 24, 2022 China's Economic and Trade Ties with Russia Two developments in February 2022-the announcement by leaders of the People's Republic of China (PRC or China) and the Russian Federation (Russia) of a strategic partnership that knows no limits and Russia's renewed invasion of Ukraine with tacit PRC support-may raise new considerations for Congress about the deepening China- Russia ties. China's trade, financial, and technology ties with Russia may affect the strength of U.S.-led efforts to constrain Russia, including through sanctions and export controls. China's alignment with Russia also appears to be part of broader efforts to create alternative global systems in trade, finance, and technology that could intensify and challenge the liberal global economic order. Also see CRS In Focus IF12100, China-Russia Relations. China's Economic Ties to Russia An easing of trade tensions and mutual assurances on border disputes has deepened Russia-China ties and allowed both sides to focus on other geopolitical priorities. Since 2014, China and Russia have reached agreements in trade, energy, finance, technology, and aerospace, while increasing diplomatic and defense cooperation. Bilateral trade has expanded since 2014, but flows are asymmetric. In 2021, China accounted for 18% of Russia's trade while Russia represented a 2% share of China's trade. China's share of Russia's trade has steadily grown from 11% in 2013, largely at the expense of the European Union (EU). (Figure 1). Russia provides China strategic exports, including energy, fertilizer, and metals (e.g., gold, nickel, titanium, and platinum). China has been increasingly turning to Russia for crude oil, natural gas, and coal (Figure 2), and Russia could become a more important supplier of wheat and fertilizer as China faces shortfalls. After Russia's 2022 invasion of Ukraine, China lifted import restrictions on Russian wheat. China exports to Russia machinery and electronics ($28.8 billion), followed by base metals ($5.7 billion), textiles and apparel ($5.4 billion), and vehicles, ships, and aircraft ($5.0 billion). The war could deepen bilateral ties if Russia's access to global markets further deteriorates, and if China looks to Russia to address global shortages. Disruptions in Ukraine likely affect China's access to agricultural products (e.g., corn, sunflower oil, and pork). China had turned to Ukraine to diversify away from U.S. exports and is now seeking alternative suppliers. Given its outsized role as a buyer, China could crowd out countries seeking scarce food and energy. U.S. and EU Sanctions China's leaders have not condemned Russia's invasion of Ukraine-instead largely blaming the United States and NATO-and have criticized and refused to join U.S.-led sanctions on Russia. China's critique of U.S.-led sanctions appears to disregard how it has used economic coercion, import bans, and de facto trade embargoes against countries for economic and political aims. The PRC government has positioned itself to engage in counter-sanctions by enacting new anti-sanctions laws and blocking measures to counter foreign sanctions with which it disagrees. These laws and measures contain provisions to punish PRC and foreign firms that comply with such sanctions. China's leaders may assess that China will not face consequences for its support of Russia and unwillingness to impose sanctions on Russia. They may judge that China can wait out or work around any sanctions on Russia, which they may assess as not longstanding or comprehensive enough to constrain China, while some restrictions might advantage China. They also may assess that China could leverage EU-U.S. rifts, although such PRC efforts seem to have fallen flat for now. Figure I. Share of Russia's Trade with Select Partners Russia Total Trade, % Share 54% 47% 40% % 30% 20% .1.0 . 10.5 0% 201 201 21s 20-16 20_17 2018 01 2r 2021 Figure 2. Russia as Share of China's Imports 3G% 20% r 10% 9% 8% o% 0% 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: CRS with data from the Trade Data Monitor. Note: Percentage based on value (Figure 1) and volume (Figure 2). China's approach to sanctions will likely evolve with any shifts in global approaches to Russia and identification of potential new trade and financial pathways. Responses may vary depending on the type of firm and extent of global exposure, and the strategic value of certain trade and investment. So far, some PRC firms and banks with major https://crsreports.congress.gc

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