Japan Institute for National Fundamentals

Speaking out

Hideo Tamura

【#1147】Threats of China Subjugating Russia

Hideo Tamura / 2024.05.22 (Wed)

May 20, 2024

Russian President Vladimir Putin and Chinese President Xi Jinping at their meeting in Beijing last week agreed to enhance strategic cooperation. This demonstrates the formation of a Sino-Russian axis to undermine the U.S. global hegemony. In reality, however, China subjugates Russia.

The areas of China-Russia cooperation are ranging wide from advanced technologies and supply chains for key components/materials to overall security.

Munition-related exports to Russia up 2.5 times from the prewar level

China has been supporting Russia put under Western sanctions for its aggression against Ukraine, providing international payment services as well as drones, semiconductors, and other technologies available for military and civilian use. While the Xi government denies China’s provision of lethal weapons to Russia, China’s exports to Russia of “arms and ammunition components and related goods” in 12 months to March this year were 2.5 times higher than in 2021, according to China’s trade statistics. The U.S. Biden administration has asked China to halt military assistance to Russia, while threatening financial sanctions against China. However, the Xi government is trying to get away with a verbal promise to strengthen export controls.

There is no denying that the Russian wartime economy is fragile. The consumer price inflation rate has been hovering around 8%, with the basic interest rate remaining as high as 16%. Unless interest rates are kept high, the Russian ruble could plunge against the dollar, the euro and other major currencies. The import ratio from China for items such as automobiles and general consumer goods shot up from about 20% in 2021 to nearly 40% in 2023.

The Putin government cannot continue the war or manage the economy without Chinese help. The longer the war lasts, the more dependent Russia will be on China. China buys Russian crude oil at prices about 20% higher than international market prices. As China’s crude oil imports from Russia in 2023 amounted to $60.7 billion, a rough calculation indicates the premium comes to about $12 billion. China thus covers more than 10% of Russia’s military spending of about $110 billion. However, the benefits from the protracted war flow to China.

Xi unfazed by U.S. punitive tariffs

China has successfully won over Russia that has a large share of energy and grain export markets, demonstrating an achievement of the Xi government’s external expansion strategy. The Xi government is gaining momentum to take every action to control supply chains for goods. Despite overproduction amid a domestic demand slump under a recession caused by the bursting of property bubbles, the Chinese government has invested in expanding production of conventional products like steel, as well as new-field goods such as electric vehicles and semiconductors, causing a flood of low-priced exports. The Biden administration is trying to impose high punitive tariffs on EVs and other Chinese products, but the Xi government remains unfazed.

China, bolstered by a weakening Russia, is tearing apart the U.S.-centered international order. Japan’s response to the geopolitical challenge posed by China and Russia will be crucial.

Hideo Tamura is a Planning Committee member at the Japan Institute for National Fundamentals and a columnist for the Sankei Shimbun newspaper.