Notable points in economic relations between Russia and China

Legal framework

The Treaty of Good Neighborliness, Friendship and Cooperation between the two countries, signed on July 16, 2001, is the basis for Russia-China economic and trade cooperation. Accordingly, economic relations between the two countries are described as comprehensive, equal and trustworthy partnership, and strategic interaction. The treaty was extended for another five years in June 2021. Action plans for implementing the provisions of this document are adopted every four years.

Trade turnover

According to the General Administration of Customs of China, the trade volume between the two countries in 2022 increased by 29.3% compared to the previous year, reaching 190.27 billion USD, a record number for the two countries throughout the cooperation process. Imports from Russia to China increased by 43.4% in 2023 to 114.15 billion USD, while exports from China to Russia increased by 12.8% to 76.12 billion USD. Russia accounts for 3% of China's total foreign trade volume. According to China, from January to September 2023, bilateral trade volume increased by 29.5% with a total value of 176.4 billion USD.

Russia mainly exports energy resources, metals, timber, agricultural products and seafood to China. In return, China exports cars and trucks, consumer electronics, excavators, microprocessors, clothing, shoes, and consumer goods.

Invest

A special intergovernmental commission on investment cooperation serves as the main mechanism for interaction between the two countries in the investment field. The Russia-China Investment Fund, co-founded by the Russian Direct Investment Fund and the China Investment Corporation, has been operating since 2012. The Russia-China Investment Fund for Regional Development was established in 2018 with a target capital of about $750 million, prioritizing projects in the fields of energy, transport infrastructure, logistics and agriculture.

According to the Russian Ministry of Economic Development, as of September 2023, Russia and China have jointly implemented 79 large-scale projects, with a total investment of about $170 billion. According to the Chinese Consulate General in Vladivostok, Chinese investment in the Russian Far East exceeded $13 billion in 2022. According to the Russian-Asian Federation of Industrialists and Entrepreneurs, the main areas of Chinese investment in Russia are now replacing Western companies that left Russia due to sanctions.

Oil

At the end of 2022, Russia ranked second in oil supplies to China, exporting 86.25 million tons (Saudi Arabia ranked first with 87.49 million tons). In 2023, Russia increased its exports - in the first half of the year alone, 60.6 million tons were supplied to China, up 25.2% year-on-year. Oil imports from Russia to China fell by 5.8% in value year-on-year to $32.1 billion.

Russia supplies oil to China through three main routes: a branch of the Eastern Siberia-Pacific Ocean (ESPO) pipeline, tankers passing through Kazakhstan and from the Port of Kozmino in the Far East.

Until recently, China received 7 million tons of Russian oil via Kazakhstan every year. Rosneft and China National Petroleum Corporation signed a deal in February 2022 to increase the transit to 10 million tons of oil per year over 10 years. The contract is worth $80 billion.

Natural gas

The Power of Siberia gas pipeline began transporting gas to the Russian domestic market and exporting it to China in December 2019. A branch of the pipeline to the eastern regions of China has been built on the Russian-Chinese border in the area of ​​the Russian city of Blagoveshchensk and the city of Heihe, located on the opposite side of the Amur River. Gazprom and CNPC signed a contract in May 2014. Gas will be supplied along the eastern route for 30 years, while the pipeline's design capacity is 38 billion cubic meters of gas per year and the contract is worth $400 billion. Gazprom has supplied 10.39 billion cubic meters of gas to China via this pipeline in 2021, 15.5 billion cubic meters in 2022 and 22 billion cubic meters in 2023. The construction of a gas processing plant in the city of Svobodny (Amur Region, Russia) is an important step in the development of the route. The first line was launched in June 2021, and is expected to reach full design capacity in 2025 (42 billion cubic meters/year).

The second project involves the transport of up to 50 billion cubic meters of gas per year to China via the Power of Siberia-2 gas pipeline. This route will pass through Mongolia to the Xinjiang Uyghur Autonomous Region in western China. The project passed the feasibility study stage in January 2022, and the framework agreement was signed by Gazprom and CNPC in November 2014. The gas supply contract has not yet been signed.

The third project involves the supply of gas from Sakhalin Island along the Power of Siberia-3 gas pipeline currently under construction connecting the cities of Dalnerechensk and Hulin (Far Eastern route). Gazprom and CNPC signed an agreement in February 2022 to supply 10 billion cubic meters of natural gas per year over the next 30 years via this route. Moscow and Beijing signed the corresponding intergovernmental agreement on January 31, 2023 (ratified by the State Duma on May 31, 2023). Gazprom and CNPC signed a technical agreement on the project in June 2023.

The volume of Russian pipeline gas supplied to China will reach 48 billion cubic meters per year when the Power of Siberia and Power of Siberia 3 projects reach full capacity.

Liquefied Natural Gas (LNG)

Novatek signed long-term contracts with Chinese companies ENN Natural Gas and Zhejiang Energy in January 2022 to supply LNG from the Arctic LNG 2 project. Novatek and Zhejiang Energy agreed to supply 1 million tonnes of LNG per year for the next 15 years. The agreement with ENN Natural Gas calls for the supply of about 0.6 million tonnes of LNG per year for the next 11 years. The LNG will be delivered to the companies' receiving terminals in China.

China Development Bank and VEB agreed on a strategic partnership in September 2019 to finance the construction of a natural gas processing plant in Nakhodka. The first phase of the project will have a total design capacity of 1.8 million tons of methanol per year. Natural gas for production will be sourced from the Sakhalin field. Construction of the plant began in 2020, with full capacity expected in mid-2023. VEB.RF has received a loan totaling more than $11.6 billion from the Chinese bank.

Russia exported 6.5 million tons of LNG to China in 2022 (up 44% compared to 2021), the supply increased 2.4 times in value, exceeding 6.74 billion USD.

LNG supplies to China in the January-July 2023 period also increased by 62.7% year-on-year to 4.46 million tonnes.

Nuclear energy

Atomstroyexport, part of Russia's state corporation Rosatom, built four power units with VVER-1000 reactors at the Tianwan nuclear power plant from 1998 to 2018. The total cost is estimated at $3.5 billion. Nuclear fuel for the plant is being supplied by Rosatom's subsidiary TVEL under a $1 billion contract until 2025. The Russian and Chinese parties have signed agreements worth more than $50 million for the installed capacity. On March 7, 2019, the general contract for the construction of units 7 and 8 with the latest generation 3+ VVER-1200 reactors was signed - China is building units 5 and 6 of its own design.

The strategic program for the development of cooperation in the field of nuclear technology until 2030 was signed in March 2023.

Charcoal

China is the world's largest coal importer. Russia and China signed a roadmap for developing coal cooperation in October 2014.

According to Russian Deputy Energy Minister Sergey Mochalnikov, Russian coal exports to China have increased 2.6 times over the past six years to 67 million tons per year, and at least 85 million tons of Russian coal are expected to be supplied to China by the end of 2023.

Agriculture

China is a major importer of Russian food and agricultural raw materials. According to the Russian Federal Customs Service, Russian exports of these goods to China totaled $3.5 billion in 2021. China has traditionally been a big buyer of fish and seafood (more than 30% of total food exports). Russian exports of vegetable oil, honey, chocolate, beer and ice cream have also increased over the past five years. In 2015, China opened its grain market to Russian producers.

Uralkali signed an agreement to supply about 3.5 million tonnes of potassium chloride to China from 2023 to 2025 on June 15, 2023.

Transportation

The Europe-Western China Corridor is the largest transport project. The highway stretches about 8,500 km, of which 2,200 km are in Russia, 2,800 km are in Kazakhstan and 3,500 km are in China. Construction began in 2008 and is expected to be completed in 2024. The expected freight volume is 33 million tons per year. Some sections are already in operation. The investment by Chinese companies is estimated at 150 billion rubles ($1.53 billion).

A road and cable-stayed bridge over the Amur River between Blagoveshchensk and Heihe opened to traffic in August 2020. The construction concession agreement was signed in June 2016. The total cost of the project is estimated at 20 billion rubles ($204.18 million). The bridge is expected to open to freight traffic in June 2022.

Payment in local currencies

Bank of China was the first Chinese commercial bank to start settlement operations in renminbi and rubles in March 2003. In March 2017, a renminbi settlement and liquidity center was opened in Moscow. There are several representative offices of Russian banks in China, as well as a branch of VTB Bank in Shanghai. There are about 60 Russian commercial banks with correspondent accounts in Chinese banks.

Since October 2017, a payment system in Chinese yuan and Russian rubles has been operating within the framework of the China Foreign Exchange Trading System (CFETS).

On June 5, 2019, an intergovernmental agreement on the transition to settlements between the two parties in national currencies was reached. In March 2023, Russian President Vladimir Putin announced that Russia and China conducted two-thirds of their trade in rubles and yuan.