China’s overall commerce with Russia increased to levels not seen since the start of Moscow’s war in Ukraine, according to official figures released Wednesday, as Beijing increases its support for its sanctioned ally.
According to figures from Beijing, trade between the two nations was worth $20.5 billion last month, with Chinese imports from Russia totalling $11.3 billion.
There was no official breakdown of the numbers, which also indicated that China’s exports fell for the first time since February, snapping a two-month growth run as a post-Covid bounce.
Rising global prices, the danger of recession abroad, and geopolitical tensions with the US have all weighed on demand for Chinese goods.
However, China’s trade with Russia defied the typically bleak trend for Beijing.
China is Russia’s largest trading partner, with trade between them reaching a record $190 billion last year, according to Chinese customs data.
During a summit in March, Chinese President Xi Jinping and Russian leader Vladimir Putin pledged to boost trade to $200 billion in 2023 as they hailed their “no limits” partnership.
And Russian energy deliveries to China were set to grow by 40 per cent this year, Deputy Prime Minister Alexander Novak said last month.
Beijing says it is a neutral party in the Ukraine war, but has been criticised by Western countries for refusing to condemn Moscow and for its close strategic partnership with Russia.
Figures Wednesday also showed exports to Russia rising 75.6 per cent in May, the highest rate since Moscow invaded Ukraine, even as trade with most major European markets and the United States fell.
‘Disappointing data’
And the data more broadly highlighted weaknesses in the world’s number two economy, with manufacturing activity shrinking in May for the second successive month.
Reports said Wednesday that authorities have asked the country’s biggest banks to lower their deposit rates in a bid to boost the economy.
Analysts said such a move could indicate the People’s Bank of China was considering an interest rate cut as soon as this month.
The figures were “yet another disappointing data which will raise growth concerns and intensify expectations of more policy support”, said Khoon Goh, at Australia & New Zealand Banking Group.
China is also grappling with a new Covid-19 outbreak, but official data on its scale is scarce and there is little sign that containment policies will be reimposed.
The property sector, which along with construction accounts for about a quarter of China’s GDP, experienced its “worst-ever slump” last year, according to Beijing-based economic consultancy Gavekal-Dragonomics.
To revive a struggling industry, the government has pivoted away from its crackdown on debt towards a more conciliatory approach since November, with targeted support measures for the most financially sound developers.
Ting Lu, Nomura’s Chief China Economist, said in a note this week that analysts expected “more easing and stimulus measures”.
“Amid the deteriorating property sector, its potentially devastating impact on government finance and the rising risk of double-dip, we do not expect Beijing to sit idle,” Lu wrote.
May’s trade data suggests “subdued global demand for Chinese goods and supports our view that the robust export figures of the previous couple of months reflected distortions to the customs data rather than a turnaround in foreign demand”, Capital Economics analysts wrote in a note on Wednesday.
“We think exports will fall further before bottoming out later this year.”
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