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Workers unload goods from a truck near a trading centre known as the Russian Market in Beijing on Tuesday. China says it hopes to maintain normal trade relations with both Ukraine and Russia. Photo: EPA-EFE

Ukraine-Russia crisis tests Beijing’s desire to maintain ‘normal trade’ with both

  • ‘We hope they can reach peace’, commerce minister says, as impacts of the Russia-Ukraine war begin to emerge on the world’s second-largest economy
  • Russia and Ukraine are both important trading partners with China, and Beijing made a deal with Kyiv last year after it withdrew its call to give UN human rights chief access to Xinjiang

China hopes to maintain normal trade with both Russia and Ukraine, according to Commerce Minister Wang Wentao, as the worsening crisis in Ukraine serves as a test for how Beijing manages ties with its trading partners.

“[Russia and Ukraine] are in talks now. We hope they can reach peace, and we hope to promote our normal trade,” Wang told reporters on the sidelines of a press conference in Beijing on Tuesday.
The comments came as Beijing has tried to walk a diplomatic tightrope between Moscow and Kyiv without taking sides over Russia’s invasion of Ukraine.

China is the largest trading partner of both Russia and Ukraine, and the values of both China-Russia and China-Ukraine trade in goods hit record highs in 2021. Russia is an important energy supplier for China, while Beijing is also a major buyer of Ukraine corn and wheat.

China lifts all wheat-import restrictions on Russia amid Ukraine crisis

Chinese authorities have not condemned its invasion, nor has Beijing made any direct endorsement of Russia’s invasion. Instead, China has called for negotiations between Russia and Ukraine.

On Monday, the Chinese foreign ministry also said: “China and Russia will continue to conduct normal trade cooperation in the spirit of mutual respect, equality and mutual benefit”, after Chinese customs authorities announced last week that they were allowing all wheat imports from Russia.

Still, impacts of the Russia-Ukraine war have begun to emerge on the world’s second-largest economy.

Experts have warned that the price spike in international oil prices serves as a wake-up call for China’s energy security. China’s state broadcaster also said that export orders from Ukraine have kept declining significantly since December. And unfolding financial sanctions against Russia are fuelling worries about the risks to Chinese traders.


Russia and Ukraine officials conclude first round of talks in Belarus

Russia and Ukraine officials conclude first round of talks in Belarus
The geopolitical risks facing China’s Belt and Road Initiative are mounting, warned China’s assistant commerce minister, Sheng Qiuping, during Tuesday’s press conference, without mentioning the Ukraine crisis.

Both Russia and Ukraine are participants in China’s plan to grow global trade. Notably, Beijing and Kyiv deepened their cooperation in the initiative by agreeing in December 2020 to work together on projects related to trade, transport, infrastructure, industrial investments and agriculture.

A further agreement to boost cooperation on infrastructure projects was made in July after Kyiv withdrew from a joint call for Beijing to give the UN human rights chief access to China’s Xinjiang region.
Meanwhile, Wang said, China will strive to dock its belt and road push with the European Union’s Global Gateway strategy.

China’s global economic ambitions face test over quasi-alliance with Russia

“China and Europe are two independent forces in the world, with broad strategic consensus and common interests … We believe that China-EU cooperation is greater than competition,” Wang said, while also calling for the China-EU bilateral investment deal to be ratified and brought into force.

That came after European Commission Vice-President and EU trade chief Valdis Dombrovskis reportedly told the trade committee of the European Parliament on Monday that the EU will hold a summit with China on April 1, in an attempt to defuse growing tensions.

Meanwhile, Wang also warned that foreign direct investment into China’s manufacturing sector has shown a downward trend.

The value declined by 4.6 per cent last year compared with that of 2019, before the pandemic, and the weight of manufacturing-directed foreign investment fell to only 19.4 per cent of the overall foreign investment, he said.

“We are a big manufacturing country … the decline in the scale of [foreign] investment into the manufacturing industry deserves our great attention,” Wang said.

He also called for more foreign investment to be directed toward advanced manufacturing, strategic emerging industries, the digital economy and green sectors.

And he reaffirmed that the pressure on trade this year is likely to be “tremendous” for the world’s largest exporter of goods.

“The bottlenecks in the supply chain [of raw materials and commodities] have not yet been eased,” he said, adding that this looks to remain the case in the short term.