Russia and China: The Trade and Investment Dynamics

Posted by

Bilateral trade and investment all increasing as the two economies absorb each others needs  

By Emil Avdaliani

Russia and China are closely working on re-creating a new global order which, from their perspective, will be more commensurate with their interests across Eurasia. Moscow-Beijing cooperation has notably increased since 2022 when the Ukraine conflict erupted, and the collective West imposed sanctions on Russia. This has pushed Russia towards Asia, a trend which had been observable before 2022 but exacerbated since, in Moscow’s seeking alternatives to its previous economic dependence on the West. As is the case with many countries across Eurasia, China has greatly benefited from Russia’s pivot to Asia. The market exit of many Western companies from Russia also created a significant vacuum, which Chinese investors have so far successfully managed to fill.

Russia-China Bilateral Trade

Economic ties between Russia and China are mutually beneficial, and both clearly see that it will be rather more difficult to resist the collective West if not acting in tandem. Given this realization, trade turnover between China and Russia at the end of 2022 reached US$190 billion, an increase of some 29% compared to 2021. Yet from the Chinese perspective, trade with Russia does not represent a huge part of the country’s overall commerce. In 2022, Russia accounted only for 3% of China’s total global trade turnover.

However, this upwards trade trajectory has persisted into 2023. Trade between the two countries in H2 2023 increased by 40.6% compared to the same period last year, reaching US$114.54 billion. Based on the results of the first quarter of 2023, Russia became China’s seventh largest partner in terms of trade turnover.

By the end of 2023, both countries expect the bilateral trade to exceed the US$200 billion trade target as laid out by Russian President Vladimir Putin and his Chinese colleague Xi Jinping during their last face-to-face meeting. Indeed, the latest figures indicate that bilateral trade in January-August increased by 32% reaching US$155.1 billion, making the expected target more possible.

China also expects that the share of trade in RMB Yuan will also increase with the bilateral commerce space. In April, Russian officials claimed that more than 70% of settlements in trade between the two countries were already made in national currencies. Later in June it was reported that the share of RMB Yuan in the Forex turnover on the Moscow Exchange increased to 39.8% and had overtaken trading in the US Dollar.

One of the reasons behind the growth in bilateral trade ties is the fact that more Chinese companies are actively working to replace Western ones, which left the Russian market from February 2022 and are now being replaced.

Amid the growing bilateral trade, a major shift is also taking place in the composition of the mutual commercial imports and exports.

China has now replaced the West by turning into a major source of technologies for Russia. For instance, in 2022 large part of the Chinese exports to Russia consisted of trucks, various types of cars, microchips, excavators and loaders, rubber tires, pumps and turbochargers for automobile engines, taps and so on. Of note is China’s jump in semiconductor technology which has now reached the commercial production stages of manufacturing 7-nanometer chips – several years ahead of US predictions of Chinese capabilities. That technology will invariably be shared with Russia.

Russian exports to China consist of oil and gas, which constitute around 70% of all Russian supplies. Oil is important as in 2023 Russia became the largest supplier to China outstripping Saudi Arabia.  Russian exports also include metals, timber, agricultural products, seafood, ore, rolled metal, coal, honey, petroleum, and various small-size industrial products.

Another notable shift is that before the pandemic and the war in Ukraine, Russians, along with the local car brands, generally preferred Western and Japanese/Korean car brands. However, a combination of Western sanctions, logistics issues, the exit of Western companies from Russia, difficulties with obtaining spare car parts has instead created highly favorable conditions for the Chinese carmakers – Chery, Omoda, Exeed among others  – to fill in the precious vacuum in the Russian market. Chinese auto sales in Russia have shot up to a 45% market share from 5% in 12 months.

There are other trade ties. China has a free trade agreement with the Eurasian Economic Union, which includes Russia, however is ‘non-preferential’ meaning no specific tariff reductions have been agreed. Instead, tariffs are reduced or reimposed on an ‘as need’ basis – meaning far greater flexibility and reaction timescales can be enacted, a useful tool when sanctions threaten supply chain shortages. The two are also allied through the BRICS grouping and also possess a Double Tax Treaty, which became effective from 2017. This provides favourable tax treatment on interest, dividends, royalties, and capital gains taxes.

Russia-China Mutual Investments

Throughout 2022, around 46% of foreign direct investment (nearly US$1 billion) from China to Russia was invested in the country’s real estate sector, with 9% in the construction sphere. Beyond these two areas, for Chinese investors the most promising sectors of the Russian economy are gas, oil refining, agriculture, IT and high technology, and transport infrastructure.

Russian media sources claim that in 2022 China participated in at least five major joint investment projects with Russian companies with a total value of US$2 billion. China was 22nd among major investors in Russia in 2022, although some strategic infrastructure investments do fly under the radar for political sensitivity issues, meaning the real volumes may be far higher.

China also pays particular attention to the Russian regions bordering China. In 2022 the extent of investments from China to Russia’s Far East exceeded US$13 billion. Chinese companies are investing in various plants in the Amur and Khabarovsk regions of Russia. China is especially interested in Russia’s Far East’s agricultural sector where the largest player is now the Legendagro agro-industrial group, owned by the Chinese corporation Joyvio Beidahuang Agricultural Holdings (JBA).

China has also been investing into the Yamal LNG, where the conglomerate CNPC owns a 20% stake, while another 10% belongs to the Silk Road Fund. 10% of Russia’s largest petrochemical company, Sibur, belongs to another Chinese giant, Sinopec. China is also aiming at construction of Zapsibneftekhim in Russia’s city of Tobolsk, as well as the implementation of synthetic rubber plant in Krasnoyarsk. Sinopec also made another significant investment of US$3.5 billion when it acquired 99% of the shares of Udmurtneft.

However, the two countries have not yet fully utilised their mutual investment potential. Chinese investments in Russia are not exceptionally large. For example, by mid-2022, the total Chinese FDI into the twelve post-Soviet countries exceeded US$67.5 billion, out of which only US$12.5 billion of investments went to Russia.

However, the ongoing geopolitical shifts favour closer trade and investment ties between Russia and China and the two countries are involved in working out more detailed and coordinated economic and production plans to better make use of each others strengths.

Overall ties with China will likewise be more trade-focused (complete re-orientation of trade away from the West). At this particular moment developments of trade relations represents a much bigger priority for Moscow than aiming at making significant investments overseas with perhaps the only exception being Russia’s interest in investing in nuclear energy plants in Asia, Africa and South America.

Russia-China relations will also be subject to multiple challenges. Foremost among them are the constant threat of Western secondary sanctions. Chinese companies are famously cautious not to flout the sanctions regime. Nor is China willing to fully commit to Russia’s position on the global stage, as this complicates its already tense relations with the United States and the European Union. China would likely continue to pursue a balancing act with Russia, which will involve a certain distance between Moscow and Beijing. That is often seized on by the West as a weakness, however in actual fact means the China-Russia relationship is well-managed and likely to remain so.

Emil Avdaliani is a professor at European University and the Director of Middle East Studies at the Georgian think-tank, Geocase.

Dezan Shira & Associates have 13 offices throughout China and can assist Russian investors into the country. We provide market intelligence, legal structuring, tax planning, and related assistance, including banking issues, to Russian companies wanting to access the China market. Please contact Maria Kotova at and see our 2023 Doing Business In China Guide below.

Related Reading


About Us

During these uncertain times, we must stress that our firm does not approve of the Ukraine conflict. We do not entertain business with sanctioned Russian companies or individuals. However, we are well aware of the new emerging supply chains, can advise on strategic analysis and new logistics corridors, and may assist in non-sanctioned areas. We can help, for example, Russian companies develop operations throughout Asia, including banking advisory services, and trade compliance issues, and have done since 1992.

We also provide financial and sanctions compliance services to foreign companies wishing to access Russia. Additionally, we offer market research and advisory services to foreign exporters interested in accessing Russia as the economy looks to replace Western-sourced products. For assistance, please email or visit