Beijing also gave its full backing on Wednesday to remarks made earlier this week by China’s ambassador to Ukraine. “China will never attack Ukraine. We will help it, especially economically,” Fan Xianrong said in a press release from the Lviv regional government.
Fears that Chinese companies could face US sanctions over their ties to Russia have contributed to an epic sell-off in Chinese stocks The last days. That crisis was reversed on Wednesday when Beijing vowed to pursue policies aimed at stimulating its sagging economy and maintaining financial market stability.
Beijing and Moscow share a strategic interest in challenging the West. However, Chinese banks cannot afford to lose access to US dollars, and many Chinese industries cannot afford to be deprived of American technology.
While China is Russia’s biggest trading partner, Beijing has other priorities. Trade between the two countries accounted for only 2% of China’s total trade volume. The European Union and the United States have much larger shares, according to Chinese customs statistics last year.
Here are some steps Beijing has taken in recent weeks to distance itself from isolated and crumbling Russian economy.
Drop the ruble
China’s currency, the yuan, does not trade completely freely, instead moving within bands set by People’s Bank of China (PBOC) officials. Last week, they doubled the size of the ruble trading range, allowing the Russian currency to fall faster.
The ruble has already lost more than 20% its value against the dollar and the euro since the start of the war in Ukraine. By letting the Russian currency fall against the yuan, Beijing is doing Moscow a disservice.
Sitting in the reserves
The biggest help China could offer Russia is the $90 billion in reserves Moscow holds in yuan, Alicia García-Herrero, chief Asia-Pacific economist at Natixis, wrote in a statement. research report released on Tuesday.
The sanctions froze about $315 billion of Russia’s reserves – about half of the total – as Western countries banned dealing with Russia’s central bank.
The PBOC has not yet commented on its position on these reservations.
If China allowed Moscow to convert its yuan reserves into US dollars or euros, “it would clearly help Russia’s current stalemate,” García-Herrero noted. However, “the reputational risk of potentially breaching Western sanctions would be a huge step for the PBOC to take and therefore makes it highly unlikely,” she said.
“The long-term gains of a rapprochement with Russia may not match the impact of Western investors’ sudden disinterest in China,” she added.
aircraft parts retainer
That means Russian airlines could run out of parts within weeks or fly planes without equipment being replaced as often as recommended for safe operation.
Earlier this month, a senior Russian official said China had refused to send plane parts to Russia as Moscow sought alternative supplies.
Valery Kudinov, head of aircraft airworthiness at the Russian air transport agency, was quoted by Russian state news agency Tass as saying that Russia would look for opportunities to source parts from countries like Turkey and India after a failed attempt to get them from China.
“As far as I know… China refused,” Kudinov reportedly said.
In response to CNN’s request for comment, the Chinese Foreign Ministry reiterated Beijing’s decision opposition to the sanctions adding that China and Russia will maintain “normal economic and trade cooperation”.
Infrastructure investment freeze
The World Bank halted all of its programs in Russia and Belarus following the invasion of Ukraine. It had not approved any new loans or investments in Russia since 2014, and none in Belarus since 2020.
Perhaps more surprisingly, the Beijing-based Asian Infrastructure Investment Bank’s decision to do the same. In a statement released earlier this month, it said it was suspending all Russian and Belarus-related activities “as the war in Ukraine unfolds.” The move was “in the best interest” of the bank, he added.
— CNN’s Beijing bureau and Hannah Ritchie in Sydney contributed to this story.