War in Ukraine makes China benefit

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On China's snowy border with Russia, a dealership that sells trucks doubled its sales last year thanks to Russian customers. China's exports to its neighbor are so strong that Chinese construction workers built warehouses and 20-story office towers on the border this summer.

The border town of Heihe is a microcosm of China's increasingly close economic relationship with Russia. China is benefiting from the Russian invasion of Ukraine, which has led Russia to switch from the West to China to buy everything from cars to computer chips.

Russia, in turn, has sold oil and natural gas to China at deep discounts. Russian chocolates, sausages and other consumer goods abound in Chinese supermarkets. Trade between Russia and China surpassed $200 billion in the first 11 months of this year, a level the countries did not expect to reach until 2024.

Russia's war in Ukraine has also received an image boost from China. State media spread a steady diet of Russian propaganda in China and around the world. Russia is so popular in China that social media influencers flock to Harbin, the capital of China's northernmost province in the east, Heilongjiang, to pose in Russian outfits in front of an ancient Russian cathedral there.

Xi Jinping, China's top leader, and Russian President Vladimir V. Putin have made numerous public displays of the close ties between the two nations. Mr. Xi visited Harbin in early September and declared Heilongjiang to be the “center” of China.northern gateway.” China's exports to Russia soared 69 percent in the first 11 months of this year compared to the same period in 2021, before the invasion of Ukraine.

“Maintaining and well developing China-Russia relations is a strategic choice made by both sides based on the fundamental interests of the two peoples,” Xi said during his meeting in Beijing on Wednesday with Russian Prime Minister Mikhail Mishustin.

China has filled a critical need for imports for Russia, which many European and American companies rejected after Putin began his war in February 2022. China has maintained its role as a substitute supplier of goods despite putting their close economic ties at risk. with many European nations.

Before the invasion of Ukraine, the leaders of Germany, France and other European countries mostly put aside differences with China over issues such as human rights to emphasize trade. Chinese officials, for their part, insist that they should not be forced to choose between Europe and Russia, and that China should be free to do business with both.

China's biggest winners from increased trade with Russia have been its vehicle manufacturers.

On a recent afternoon in Heihe, rows of diesel cargo trucks with decals of snarling bears, a symbol of Russia, on their drivers' doors waited to be driven across an Amur River bridge into Russia. The bridge is new, as are the trucks, which sported Genlyon insignia, a brand that belongs to the state-owned Shanghai Automotive Industry Corporation. The company, known as SAIC, also makes car brands such as MG, acquired in Britain.

The sales helped China overtake Japan this year as the world's largest auto exporter. German manufacturers such as Mercedes-Benz and BMW used to be strong sellers in Russia, but they pulled out in response to sanctions imposed on the country by Europe, the United States and their allies.

Sales of luxury cars in Russia have plummeted, contributing to a decline in the overall size of the country's car market, which is now less than half the size of Germany's. But poor and lower-middle-class Russian families, whose members make up the bulk of soldiers fighting in the war, have increased purchases of affordable Chinese cars, according to Alexander Gabuev, director of the Carnegie Russia Eurasia Center.

One reason, Gabuev said, is the death and disability payments that the Russian government and insurers are making to the families of Russian soldiers: up to $90,000 in the case of a death.

Russia has not released the number of dead and injured, but the United States estimates the total in 315,000.

Russians almost exclusively buy internal combustion cars. China has a surplus of them because its consumers have quickly switched to electric cars.

And the land border means China can transport cars to Russia by rail, an important factor because China lacks its own fleet of vehicles. transoceanic transport vessels for the export of vehicles.

The result? Chinese automakers have cornered 55 percent of the Russian market, according to GlobalData Automotive. They had 8 percent in 2021.

“Never before have we seen automakers from a single country absorb so much market share so quickly – the Chinese got a windfall,” said Michael Dunne, an Asia automotive consultant in San Diego.

The United States has strongly warned China not to send weapons to Russia and has yet to uncover evidence that it is doing so. But some civilian equipment that China is selling to Russia, such as drones and trucks, it also has military uses.

Beijing's embrace of Russia has also provided a modest but timely benefit to China's construction industry. The economy has struggled to recover from the scars left by almost three years of strict “zero Covid” measures.

The real estate market is in crisis throughout China. Tens of millions of apartments sit empty or unfinished, and new projects have stalled, depriving the construction sector of work that has long created jobs.

“Many buildings have been built, but no one lives inside,” said Zhang Yan, a wooden door seller in Heihe.

But some workers are finding work on Russia's 2,600-mile border, which until this year had a shortage of truck stops, customs processing centers, rail yards, pipelines and other infrastructure. Construction progressed rapidly over the summer in cities like Heihe, although it halted during the frigid winter.

Pipelines are needed for one of the most important commodities traded between the two countries: energy.

Cheap Russian energy, bypassing sanctions imposed by the West, has helped Chinese factories compete in global markets, even as their manufacturing rivals elsewhere, especially in Germany, have faced sharply higher energy costs for much of the year. part of the last two years.

Russia has been increasing shipments of natural gas through its Power of Siberia pipeline to China and has been negotiating the construction of a second that would transport gas from fields that supplied Europe before the Ukraine war. China and Russia also agreed less than three weeks before the Ukraine war to build a third, smaller pipeline that would transport gas from far eastern Russia to northeastern China, and construction of that project has progressed rapidly.

The newest pipeline will cross lands that Russia seized from China in the late 1850s and never returned. As recently as the 1960s, China and the Soviet Union were fighting over the location of their border and their troops were fighting each other. In a village near Heihe, a larger-than-life statue of a Chinese imperial general still stares across the Amur River.

Today Russia and China are building bridges and pipelines that cross it.

Li you and Olivia Wang contributed to the research.



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