Russia’s July 2022 Imports From China Up 29% Year on Year

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Russia now beginning the process of absorbing the complete loss of EU imports

Russia bought US$6.7 billion worth of goods from China in July, as supply chains adapt in the wake of Western sanctions. The data was released by the Chinese Ministry of Customs. Chinese shipments to Russia surged 22.2% in July from a year earlier in US dollar terms, reversing the decline of 17% in June and marking the first growth since March this year.

Overall, China-Russia bilateral trade stands at US$97.71 billion in the first seven months of 2022, up 29% on a yearly basis, an increase of over US$30 billion from 2021.

EU exports to Russia averaged US$101 billion in 2021, averaging US$8.4 billion a month. With China’s exports to Russia reaching US$73 billion last year, the Chinese surge in exports to Russia illustrate that Russia has been able to absorb about 10% of the total loss of EU imports from Chinese suppliers in the four months period from March to July. As Russian imports from other markets such as Brazil, India and Vietnam are also up this year, and new supply chain routes are being developed, this trend can be expected to increase. It can be estimated that about 25-30% of Russia’s 2021 imports from the EU have now been replaced from other sources. With parallel imports being permitted from early July, it would appear that in terms of consumer volumes, Russia will be able to absorb the loss of EU imports by late 2024, although certain technical component parts will take time to replace either from Russian domestic or alternative sources.

According to the European Commission, the EU’s main exports to Russia last year were led by machinery and equipment (19.7%), motor vehicles (9%), pharmaceuticals (8.1%), electrical equipment and machinery (7.6%), and plastics (4.3%). These are all commodities that it is relatively easy for Russia to replace with alternative suppliers.

Russian importers and Chinese suppliers have also been quick to navigate money transfer problems by using RMB Yuan deposits – Russia has some of the largest foreign reserves RMB holdings in the world, with 17% of Russia’s total foreign reserves held in the currency. Russian nationals have also been encouraged to set up RMB deposit accounts, while payments for goods in cryptocurrencies has also boomed in bilateral trade. The Russian Finance Ministry announced in Julu 2021 that its share of US dollars in the country’s national wealth fund had been reduced to zero.

Bilateral trade between China and Russia reached US$146.87 billion in 2021, itself a record high. That will almost certainly be broken this year. Presidents Putin and Xi had expressed a desire to see the figures reach US$200 billion by 2024. In addition to energy cooperation, trade between China and Russia has been expanding into other, non-energy sectors such as food and agriculture, new-energy vehicles, and other fields such as white goods. Chinese manufactured cars for example have made huge market share increases in Russia the past two years.

Overall, Russia’s imports grew by 49.3% in July, following increases of 56% in June and 79.6% in May.

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