China review 2024-3. China and Russia relations.

Prioritising diplomatic relations

The meetings highlighted in the table are considered to be of the highest importance because of the participation on the Chinese side of the members of the 20th CPC Politburo Standing Committee (involving the top 3 positions in the power hierarchy).

Source: Chinese and Russian foreign ministries.

On 3 July, Putin met with Xi Jinping on the sidelines of the Shanghai Cooperation Organisation (SCO) summit. This was the third interaction between the two heads of state this year. Official statements from both Russia and China regarding the meeting emphasised the comprehensive partnership between the two countries, mutual respect, and a shared opposition to external interference and sanctions imposed by the West. Interestingly, however, the main emphases of their official speeches often diverged, reflecting differing viewpoints. Xi’s speech was more general in nature, focusing mainly on long-term prospects and aspirations. He placed significant emphasis on the importance of long-term bilateral cooperation, the alignment of development strategies, and the need for security coordination through the SCO. Putin’s speech, on the other hand, was pragmatic and detailed, emphasising the existing economic partnership, trade growth and statistics, and the importance of strengthening multilateral cooperation through BRICS and the SCO. In this context, Russia sought to highlight its historical significance and role in establishing these formats, while China appeared more focused on the future aspirations.

However, the most significant diplomatic event of the quarter was Chinese Premier Li Qiang’s working visit to Russia and Belarus on 20–23 August. The visit to Russia was highly symbolic, as it marked the 75th anniversary of bilateral diplomatic relations, and aimed to strengthen the strategic partnership between the two countries. While both countries hailed the visit as a success, the official speeches of the leaders once again revealed subtle differences and diverging points of emphasis. For example, the Chinese premier and state media adopted a more strategic approach to the visit, emphasising the “new era” of international relations, while the Russian president was more keen to highlight the current progress and tangible results of economic cooperation, accenting the practical side of their collaboration. Emphasis placed on framing international relations also differed: Li framed the visit as part of a broader effort to exemplify a new era of international relations and resist Western domination, whereas Putin focused on the domestic aspect of economic stability, particularly in light of Western sanctions, highlighting the importance of China as a key partner.

Bilateral trade in the grip of tightening sanctions

In the first six months of this year, trade between Russia and China reached $117 billion, but growth was minimal, at just 1.6% compared to the previous year. While Russian exports to China grew by 3.9%, imports decreased by more than 1%. One important factor here is that on 12 June, the US further expanded sanctions against Russia, due to the war in Ukraine, to include new foreign entities and increased scrutiny of foreign banks that continue to provide services to Russia. This, combined with previous sanctions, has significantly impacted China’s declining exports, leading to increased delays in financial transactions and higher costs due to the growing risk of US secondary sanctions on financial institutions, as well as the “safer” but more expensive alternative of using third parties as intermediaries.

The toll of China upholding its close ties with Russia is steadily climbing. All of this is presenting a growing challenge for Putin’s regime. Chinese banks have begun rejecting payments from Russia in yuan en masse, which has recently become a crucial currency for the Kremlin in light of its international isolation. This trend has been evident since the beginning of the year, as large Chinese banks with a substantial presence in international markets have significantly increased their scrutiny or withdrawn from providing financial services to Russia. However, until now, smaller regional Chinese financial institutions have been lending a helping hand, as they are less exposed due to their limited international operations. With Western sanctions impacting larger financial institutions, it was these smaller, local banks that had allowed bilateral trade to continue growing and facilitated transactions in sectors such as energy. These banks enjoy greater flexibility in conducting transactions in national currencies, which reduces their dependence on the US dollar and the international financial systems dominated by the West. However, as many as 98% of banks have since shifted away from yuan-based transactions, with regional banks following the lead of the larger institutions.

In light of Russia’s gradually deepening international isolation and the more cautious behaviour of Chinese financial institutions, there have been repeated references to the possibility that the two countries may begin to move away from cash transactions and engage in barter trade. The latter may soon become a lifeline for sustaining Russia’s economic viability. According to Reuters, citing sources close to the matter, barter trading between China and Russia is likely to begin as early as this autumn. This would enable them to circumvent payment issues, limit currency risk, and reduce international visibility and traceability. Barter trade is not something China is unaccustomed to. For example, in 2019, a Chinese company struck a barter deal with Iran, trading Chinese car parts for Iranian pistachios. Russia is also starting to normalise barter trade with its foreign partners, highlighted by the announcement on 2 October that Russia and Pakistan have agreed to trade Russian chickpeas and lentils for Pakistani mandarins and rice. It looks like both Moscow and Beijing are becoming increasingly at ease with this type of trade, and historically speaking, barter was once a routine practice between China and the former Soviet Union.

China’s peculiar diplomatic activism to resolve the war in Ukraine

Over the past quarter, Beijing has maintained a cautious stance regarding the war in Ukraine, steering clear of a definitive position that could sour relations with both the West and the Global South. Since the announcement of the 12-point peace plan on the first anniversary of the war in Ukraine, Beijing has actively promoted its vision of peace, which, despite widespread criticism from the West, has remained central to the country’s diplomatic strategy to this day. Despite China’s emphasis on its status as a neutral country, it was not until more than two years later, on 23–26 July 2024, that the now-former Ukrainian Foreign Minister Dmytro Kuleba first visited China since the outbreak of the war in Ukraine. This visit was described by the Global Times as a recognition of China’s constructive role on the international stage.

China declined to participate in the Ukraine peace conference held in Switzerland in mid-June, arguing that such meetings must include three elements: (a) recognition from both Russia and Ukraine; (b) equal participation of all parties; and (c) fair discussion of various scenarios for different peace plans. Instead, China has been actively supporting various alternatives, and there have even been hints at attempts to hold a parallel conference. Diplomatic visits have also been in full swing. For example, during their bilateral meeting on 23 May, China and Brazil announced “common understandings” regarding the need for a political solution to the Ukraine crisis, which outlined six key points addressing issues ranging from de-escalation to opposition against strikes on nuclear infrastructure. However, one of the most important points, namely guaranteeing Ukraine’s territorial integrity and the withdrawal of Russian troops from Ukraine, was notably absent from the plan. Ukrainian President Volodymyr Zelensky slammed the initiative, calling it “destructive”. At the same time, there were signs of a shift in the Ukrainian government’s rhetoric toward Beijing: the once cautious and measured tone has grown bolder and more critical. During the Shangri-La Dialogue conference, Zelensky openly stated that “elements of weapons from China” were entering Russia, adding that Beijing and Moscow were “disrupting the Peace Summit [in Switzerland] by pressuring leaders of other countries”.

Despite the West’s escalating rhetoric towards Beijing, China continues to actively promote its role as a peacemaker and a responsible global power through its so-called “shuttle diplomacy” initiatives. Beijing’s recent focus on and activity in the Global South regarding the war in Ukraine are particularly evident and directly tied to its efforts to deflect Western criticism and portray itself as a painstakingly neutral and impartial country. At the end of August, the Chinese Special Representative for Eurasian Affairs Li Hui visited Brazil, Indonesia, and South Africa. According to a Chinese Foreign Ministry report, “[r]ather than instigating [the conflict], many countries from the Global South have put forward peace initiatives or conducted shuttle diplomacy between Russia and Ukraine, becoming key players in fostering dialogue and promoting peace.” However, the third and fourth rounds indicate that China is paying less attention to countries directly involved in the war in Ukraine, with its diplomatic initiative increasingly focusing on the more Beijing-friendly countries in the Global South that are more susceptible to its influence.

China’s “shuttle diplomacy” over the war in Ukraine. Source: Chinese Ministry of Foreign Affairs.

According to Zhou Bo, a senior fellow at Tsinghua University’s Center for International Security and Strategy, China possesses three strengths as a crucial peacemaker: (a) its ability to broker ceasefire negotiations; (b) its capacity to contribute, alongside other countries, to provide collective security guarantees necessary for maintaining the ceasefire; and (c) its superior capability, compared with any other nation, in assisting with the post-war reconstruction of Ukraine and Gaza. Although China’s real influence over Russia is often questioned, Zhou argues that “if Russia were to heed the warnings of any country, it would definitely be China”. However, despite Beijing’s active and ongoing narrative of China as a peacemaker, especially in the Global South, there has been no significant momentum in China’s diplomatic activism.

What the future holds

Frequent high-level diplomatic meetings between Russia and China, along with deepening strategic cooperation, indicate that this relationship is a priority for both. With that said, China is likely to continue focusing on its long-term global initiatives to expand its influence and expedite military modernisation, which necessitates avoiding confrontation with both the East and West; thus, a strategic partnership with Russia makes perfect sense. Russia, on the other hand, is more focused on diplomatic support and practical cooperation with China, as these are vital for its survival. Meanwhile, barter exchanges, once relegated to the margins of history, may resurface due to the increasing risk of secondary sanctions, which have become intolerable for Chinese financial institutions, both large and small. China’s global ambitions and Russia’s reliance on China for its stability suggest that the future of their partnership will be increasingly transactional, with mutual benefits carefully weighed against rising costs.

There are no signs that China’s stance on the Ukraine war is about to shift. It continues to balance its relations with both Russia and the West while also focusing heavily on positioning itself as a neutral peacemaker in the Global South. Chinese academic articles point to the fact that the Ukrainian President has mentioned the possibility of holding the next peace conference in the Global South, highlighting this as a significant opportunity for China. Despite ongoing criticism, China continues to see itself as playing a key role in the Ukraine situation and, judging by its shuttle diplomacy, appears to be focusing on more China-friendly countries.