A record trade turnover was recorded between Russia and China in 2022. Quite a bit failed to reach the goal of $ 200 billion, which was set only for 2024. This year it will definitely be completed ahead of schedule. And another just historical change will happen this year. The EU as the main trading partner will become a thing of the past. China will take its place for the first time. In 2022, Russia and China showed a record trade turnover, which increased by a third to $ 190.27 billion, according to the General Customs Administration of China.
Russia and China fell a little short of the 200 billion goal set by the countries for 2024. However, there is no doubt that this task will be completed already in 2023, and, most likely, even with a reduction in the cost of energy resources.
"In 2023, most likely, it will be possible to achieve the goal of $ 200 billion even while maintaining the same quantitative volumes of supplies only due to price inflation. But even with the preservation of the scale of prices, this indicator would most likely be achieved, because imports in quantitative terms will grow in 2023," says Denis Perepelitsa, Head of the Department of Global Financial Markets and Fintech at the Russian University of Economics. Plekhanov.
In order to achieve the goal of $ 200 billion in trade turnover, it is necessary to increase it by only 10%, whereas in recent years it has grown at a much faster pace. Even in the pandemic year 2021, it grew by more than a third, last year – by another third. "And in 2023, against the background of the abolition of the zero tolerance policy for COVID-19 in China, which will lead to an increase in demand for energy resources, and a small number of alternative destinations for Russia, the trade turnover will surely exceed $ 200 billion," said Vladimir Chernov, analyst at Freedom Finance Global. So it's time to set a new level of $300 billion.
Another important change awaits Russia. It is in 2023 that the EU as the main trading partner will become a thing of the past, and it will be replaced by China,
experts believe.
It is curious that in 2022 the EU is still Russia's main trading partner, moreover, it has shown serious growth. At least in the first 10 months of 2022, the trade turnover increased by almost 20% to 227.7 billion euros, and China is clearly lagging behind. There is nothing surprising in the fact that China will displace the EU from the first place not in 2022, but in 2023. "The fact is that last year the EU countries sharply increased the volume of energy exports from the Russian Federation to replenish and increase reserves against the background of the expectation of an embargo on their supplies. And this year, all restrictions on exports from the Russian Federation have already come into force, so the trade turnover with the EU countries will fall sharply. China, on the contrary, is actively increasing it, so we can expect that in 2023 China will become the first trading partner of the Russian Federation," Chernov believes.
Exports from China to Russia in 2022 increased by 12.8% to 76.12 billion dollars. Imports from Russia to China increased even more – by 43.4%, to $ 114.15 billion. This is due to the fact that more than 70% of all Russian exports to China are oil, pipeline gas, LNG, coal and fuel oil. And this year they were sold at an extremely attractive price, and practical Chinese could not miss it.
For example, in 2022, China as a whole reduced oil imports due to covid restrictions and slowing economic growth. However, this did not apply to Russian oil. He bought it in some months in record volumes. Because our oil is sold at a discount, and China, other things being equal, preferred it instead of more expensive Saudi or other oil.
China also took Russian pipeline gas at the peak of the pipeline's capabilities, while it resold some LNG shipments to Europe. Because Russian gas, the pricing of which depends on the oil basket under the contract, is cheaper than LNG, the price of which is formed from prices on spot markets.
Finally, China increased the purchase of Russian coal, which was also supplied with a sanctions discount. Records are also marked here. Moreover, market participants pointed out that in reality China could buy even more coal from Russia if we had already built the second BAM and Transsib.
Actually, the restriction of logistics and infrastructure are today the main constraints on the growth of trade turnover between Russia and China.
The Power of Siberia gas pipeline is increasing supplies even beyond planned targets. However, it was nice to have at least one more such pipe. And it is already, of course, in the plans. But the "Power of Siberia – 2" may appear only by 2030. At the same time, there is no commercial contract between Russia and China for the supply of gas through the future pipeline yet. And starting to build it before signing such a contract may go sideways to Russia – this will give China a reason to knock out lower prices for supplies. Therefore, difficult negotiations with Beijing are ahead.
"The railway corridor is already fully loaded. But they are also gradually trying to solve this problem. By the end of 2022, the carrying capacity of the Eastern landfill railway increased by about 14 million tons per year – up to 158 million tons, and on behalf of the President of the Russian Federation by 2024, the capacity of the Eastern landfill should be increased to 180 million tons per year, in total it is expected to increase to 240 million tons per year", – Vladimir Chernov points out.
In order to be able to transport oil by sea on tankers and insure such cargo, Russia is creating its own shadow fleet and its own insurance system for such transportation.
But the main mouthpiece for the growth of Russian exports to China in 2023 will be the growth of the Chinese economy itself. "Last year, anti-liquid restrictions were in effect in China, due to which industrial production and GDP fell, which led to a decrease in demand for petroleum products and metals in the country. And in 2023, most of the most important restrictions have already been lifted, so economic growth, industrial production and, as a result, demand for energy resources and metals are expected," the analyst at Freedom Finance Global notes.
China buys mineral fertilizers, wood, agricultural products and seafood from Russia. And here, too, there is potential for growth.
On the other hand, we should expect an increase in the flow of Chinese goods to Russia, given the closure of European imports. Mainly Chinese consumer electronics, excavators, cars, microprocessors, clothing, shoes and consumer goods are coming to Russia.
"Russia has significantly increased purchases of Chinese-made electronics and cars. The potential for growth here remains quite large, since there is still a shortage of these goods on the Russian market," Chernov believes.
"Most of the "dropped out" goods have already been replaced by Chinese and Russian analogues. However, there is some potential for import growth, especially given Russia's transition to active industrialization of the economy, when a lot of machine tools, equipment, components, etc. are required," says Denis Perepelitsa. In his opinion, the biggest problem for Russia is the supply of high–precision equipment for the production of chips and precision machining, and the chips themselves. "This equipment was manufactured in Taiwan, Japan, the USA and the EU, and mainland China may not replace all such imported items," he says.
Olga Samofalova