Download publication

Working Paper

How does China fare on the Russian market? Implications for the European Union

China’s economic ties with Russia are deepening. Meanwhile, Europe remains Russia’s largest trading partner, lender and investor. An analysis of China’s ties with Russia, indicate that China seems to have become more of a competitor to the European Union on Russia’s market. Competition over investment and lending is more limited, but the situation could change rapidly with China and Russia giving clear signs of a stronger than ever strategic partnership.

By: and Date: November 18, 2019 Topic: Global Economics & Governance

This paper was prepared for the seminar ‘Trade relations  between the EU, China and Russia’, co-organised by the delegation of the European Union to Russia and Bruegel with the support of the EU Russia Expert Network on Foreign Policy (EUREN). The seminar was funded by the European Union.

The content of this paper is the sole responsibility of the author and does not represent the official position of the European Union.

The last two decades have seen a very rapid increase in trade and lending between China and Russia. The investment relationship has remained more subdued. China dominates every aspect of the bilateral economic relationship, as a net exporter, net creditor and net investor, despite Russia long being a richer country than China.

China and Russia are increasingly viewed as important political and economic partners, notwithstanding their past differences. However, in terms of trade and investment, economic cooperation between the two countries’ remains less intense than their diplomatic relationship, even though their formal economic interactions can be traced back to the 1700s and both shared a similar economic model, namely central planning, for a good part of the twentieth century.

China has developed very rapidly in economic terms over the past two decades since its accession to the World Trade Organisation. In particular, it has become the largest exporter in the world from a very low base (Figure 1 and Table A1 in the Annex), surpassing Europe. In that context, it is unsurprising that Chinese goods have flooded Russia, eating into the EU’s and the US’s export shares to Russia. Beyond China’s increasing economic weight, the changing global environment, including the sanctions and counter-sanctions between the West and Russia, the US-China trade war and the US-led IndoPacific Strategy, have helped re-orient Russia’s economic relationships towards the east, with China being the largest player.

China has also become increasingly interested in its neighbourhood (and beyond) with its landmark project, the Belt and Road Initiative (BRI). Among the large and increasing number of countries that participate in the BRI, Russia occupies an important position as the recipient of the largest amount of Chinese funding, mainly for energy and railway infrastructure. In particular, out of the six corridors China has announced for the BRI, several cross Russia, including the New Eurasian Land Bridge and the China-Mongolia-Russia Corridor. In addition, Russia and China have agreed to jointly build an ‘Ice Silk Road’ along the northern sea route in the Arctic. All in all, Russia has unquestionably become an important partner in China’s massive global infrastructure project plans. Russia has also proposed the concept of a Great Eurasian Partnership, which is seen as a way for the Kremlin to preserve its relationships within its neighbourhood at a time of very rapid increase in Chinese influence (Köstem, 2019).

View comments
Read article Download PDF More on this topic

External Publication

Manufacturing employment, international trade, and China

The decline in manufacturing employment is often seen as a major reason for rising inequality, social tensions, and the slump of entire communities. With the rise of national populists and protectionists in recent years, the issue has become even more prominent.

By: Uri Dadush and Abdelaziz Ait Ali Topic: Global Economics & Governance Date: November 28, 2019
Read about event More on this topic

Past Event

Past Event

EU-Asia trade and investment connectivity

The Asia Europe Economic Forum (AEEF) was established in 2006 as a high level forum for in-depth research-based exchanges on global issues between Asian and European policy makers and experts. This year, the AEEF will be hosted by Bertelsmann Stiftung on 28-29 November, 2019 in Berlin, Germany, and it will focus on “EU-Asia trade and investment connectivity”.

Speakers: Aart de Geus, Guntram B. Wolff, He Fan, Alessia Amighini, John Beirne, Nicolaus Heinen, Jae-Young Lee, Cora Jungbluth, Alicia García-Herrero, Xin Yuan, Andreas Esche, Ken Wu, Sébastien Jean and Amb. Karsten Warnecke Topic: Global Economics & Governance Location: Bertelsmann Representative Office, Unter den Linden 1, 10117 Berlin Date: November 28, 2019
Read article Download PDF More on this topic

Working Paper

The state of China-European Union economic relations

More can be done to capture the untapped trade and investment opportunities that exist between China and the EU. China’s size and dynamism, and its recent shift from an export-led to a domestic demand-led growth model, mean that these opportunities are likely to grow with time.

By: Uri Dadush, Marta Domínguez-Jiménez and Tianlang Gao Topic: Global Economics & Governance Date: November 20, 2019
Read about event More on this topic

Past Event

Past Event

The role of China in global value chains

This event looked at how the rise of China is affecting global value chains.

Speakers: Alicia García-Herrero, Seamus Grimes, Margit Molnar and Guntram B. Wolff Topic: Global Economics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: November 18, 2019
Read article More on this topic

Opinion

Why sentiment in Greater Bay Area is deteriorating, especially in Hong Kong

Lack of concrete plans affects sentiment after brief surge on announcement of Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area

By: Alicia García-Herrero and Gary Ng Topic: Global Economics & Governance Date: November 13, 2019
Read article More on this topic

Opinion

Upbeat outlook from Chinese banks' profits masks growing problems for small banks

The performance of Chinese banks has been resilient so far, despite decelerating growth. While the performance of large banks remained steady, the rebound came from small banks. Why have small banks rebounded and is the rebound sustainable?

By: Alicia García-Herrero and Gary Ng Topic: Global Economics & Governance Date: November 12, 2019
Read about event More on this topic

Past Event

Past Event

Russian economy at the crossroads: how to boost long-term growth?

Russia’s convergence to advanced economy income levels has stalled. Long-term growth prospects are still obstructed by sluggish productivity growth, low capital accumulation and shrinking labour inputs. The new government has articulated a set of ambitious policy objectives for the next six years. But are additional reforms necessary to further boost productivity and investments in line with government targets?

Speakers: Marek Dabrowski, Markus Ederer, Elena Flores, Alexander Larionov, Dmitry Polevoy, Niclas Poitiers and Alexey Vedev Topic: Global Economics & Governance Location: Kadashevskaya Naberezhnaya, 14, Moscow, Russia, 115035 Date: November 7, 2019
Read article More on this topic More by this author

Opinion

Why investors should temper optimism over a China trade rally

The economy is in worse shape than in 2015 and policies to boost growth are not as effective as they once were

By: Alicia García-Herrero Topic: Global Economics & Governance Date: November 6, 2019
Read article More on this topic

Blog Post

China’s growing presence on the Russian market and what it means for the European Union

The European Union’s relationship with Russia is strained, but the two economies are nevertheless highly intertwined. A huge share of Russia’s exports go to the EU, while in the early 2000s, EU countries supplied more than half of Russia’s imports. The EU is also a major investor in, and lender to, Russia.

By: Alicia García-Herrero and Jianwei Xu Topic: Global Economics & Governance Date: November 6, 2019
Read article More on this topic More by this author

Opinion

HK, Taiwan divergence result of economic policies

While the effect of the ongoing unrest on the Hong Kong economy is obvious, Taiwan was already doing better before the protests started.

By: Alicia García-Herrero Topic: Global Economics & Governance Date: November 5, 2019
Read article More on this topic More by this author

Opinion

Bolsonaro’s pilgrimage to Beijing

A strategic alliance between Brazil and China could be music to the ears for both leaders, but Bolsonaro does not want to look like one more vassal. Xi Jinping might need to think of a more exclusive offer to the President of the largest economy in Latin America.

By: Alicia García-Herrero Topic: Global Economics & Governance Date: October 29, 2019
Read article More on this topic More by this author

Blog Post

A Fear of Regime Change is Slowing the Global Economy

Why did such a sharp and steady slowdown occur against a background of loose monetary policy, supportive fiscal policy, low inflation and absence of evident large imbalances? As argued in the IMF’s World Economic Outlook report issued last week, the evidence points to uncertainty over trade tensions as a major contributor.

By: Uri Dadush Topic: Global Economics & Governance Date: October 25, 2019
Load more posts