4 ways China is quietly making life difficult for Russia

Will China collaborate with Russia during the war? 1:10 (CNN Business) — China is quietly distancing itself from Russia’s economy, hit hard by sanctions. The two countries proclaimed last month that their friendship “has no limits,” but that was before Moscow launched its war in Ukraine. Now, as Russia’s economy suffers from sanctions around the world, there is mounting evidence that China’s will and ability to help its northern neighbor may be limited. Beijing has refused to condemn Russia’s attack on Ukraine. But, even so, he wants to avoid being impacted by the sanctions that, on repeated occasions, he has denounced as an ineffective way to resolve the crisis. “China is not a part of the crisis [de Ucrania] and does not want the sanctions to affect it,” Foreign Minister Wang Yi said during a phone call with his Spanish counterpart on Tuesday. Why does China not get involved in the Ukraine war? 1:27Beijing also backed completely on Wednesday the comments China’s ambassador to Ukraine made earlier this week: “China will never attack Ukraine. We will help, especially financially,” Fan Xianrong said, as quoted in a press release by the Lviv regional government. Fears that Chinese companies could face US sanctions over ties with Russia have contributed to a sell-off in shares in recent years. days. That drop was reversed on Wednesday when Beijing vowed it would seek policies to boost its economy and keep financial markets stable. U.S. officials told CNN on Monday they have information suggesting China has expressed some openness to providing Russia with the assistance. military and financial security it has requested. China, however, dismissed such data as “disinformation.” Analysts say China is trying to strike “a delicate balance” between supporting Russia rhetorically, but not further antagonizing the United States. Beijing and Moscow share a strategic interest in challenging the West. However, Chinese banks cannot give have the luxury of losing access to US dollars. And many Chinese industries cannot afford to deprive US technology. Although China is Russia’s number one trading partner, Beijing has other priorities. Trade between the two countries accounted for just 2% of China’s total trade volume. The European Union and the United States have a much larger share, according to the country’s customs statistics from last year. These are 4 steps Beijing has taken in recent weeks to distance itself from Russia’s economy, which is isolated and in shambles. Let the ruble crash Is bitcoin the alternative to the ruble? Serbiá’s analysis 2:25China’s currency, the yuan, is not traded freely, but rather moves within the bands set by government officials People’s Bank of China (PBOC). Last week, they doubled the size of the ruble’s trading range, allowing Russia’s currency to fall faster. The ruble has already lost more than 20% of its value against the dollar and the euro since the war in Ukraine began. By allowing the Russian currency to crash against the yuan, Beijing is doing Moscow no favors. Russians will have to pay more in rubles for Chinese imports such as smartphones and cars. Chinese phone brands like Xiaomi and Huawei are very popular in Russia. They even competed with Apple and Samsung for market leadership before the war. Chinese automakers such as Great Wall Motor and Geely Auto hold 7% of the Russian market. In that sense, they sold more than 115,000 vehicles last year. Great Wall Motor has stopped supplying new cars to dealers in Russia due to exchange rate fluctuations. Widening the trading band would allow the yuan to keep pace with the sharp fluctuations of the ruble. So that Chinese companies can “better grasp the magnitude or trend of future exchange rate fluctuations, and reduce currency risks by using hedging methods such as derivatives,” state broadcaster China Business reported last week. pass. Russian stocks plunge as ruble falls to record low 0:49Currently, about $25 billion of trade between China and Russia is conducted in yuan, Chinese state media reported. Russia’s reserves in China The most important help that China could offer to Russia is through the US$90 billion reserves that Moscow holds in yuan, Alicia García-Herrero, chief economist for Asia Pacific at Natixis, wrote in a blog post. investigative report this Tuesday. The sanctions have frozen about $315 billion of Russia’s reserves — or about half of the total — because Western countries have barred dealings with the Russian central bank. Russian Finance Minister Anton Siluanov said this week that the country wanted to use yuan reserves, after Moscow was blocked from accessing US dollars and euros, according to Russian state media. The PBOC has so far not commented on its position regarding these reservations. China is the country with the most gold and currency reserves 0:53 If China allowed Moscow to convert its yuan reserves into US dollars or euros, “that would clearly help Russia’s current stagnation,” Garcia-Herrero said. However, “the reputational risk of potentially violating Western sanctions would be a big step for the PBOC. And therefore makes it highly unlikely,” she said. “The long-term benefits of reaching out to Russia may not match the impact of Western investors suddenly losing interest in China,” she added. Holding back aircraft parts from Russia Sanctions imposed by the United States and the European Union mean that the world’s two largest aircraft manufacturers, Boeing and Airbus, can no longer supply parts or provide maintenance support to Russia’s airlines. The same goes for jet engine manufacturers. That means Russian airlines could run out of parts in a matter of weeks… Or fly planes without equipment being replaced at the recommended frequency to operate safely. Earlier this month, a senior Russian official said that China has refused to send aircraft parts, while Moscow looks for alternative supplies. The state-run Tass news agency quoted Valery Kudinov, head of airworthiness at Russia’s air transport authority, as saying Moscow would seek options to source parts from countries including Turkey and India, after a failed attempt to source them from China. “As far as I know… China refused,” Kudinov said. Can China and Russia be allies in the invasion of Ukraine? 2:37 In response to CNN’s request for comment, the Chinese Foreign Ministry reiterated Beijing’s opposition to the sanctions. He added that China and Russia will maintain “normal economic and trade cooperation.” China and Russia set up a civil aviation joint venture in 2017 to build a new long-haul wide-body airliner. This to be able to compete with the duopoly of Boeing and Airbus. Production of the CR929 has already started, but disagreements over suppliers have caused delays. Initially, the plane was expected to be offered to customers in 2024. But, Russia postponed the schedule from 2028 to 2029. Infrastructure investment frozen The World Bank has stopped all its programs in Russia and Belarus after the invasion of Ukraine. It had approved no new loans or investments to Russia since 2014. And none to Belarus since 2020. More surprising, perhaps, is the decision of the Beijing-based Asian Infrastructure Investment Bank (AIIB) to do the same. In a statement earlier this month, he said he would suspend all activities related to Russia and Belarus “while the war in Ukraine unfolds.” The move was “in the best interest” of the bank, he added. Frustrated by a relative lack of influence at the World Bank (based in Washington) and the Asian Development Bank (where Japan is a major force), China launched the AIIB in 2016. In addition to hosting the headquarters, China provides to the president of the bank and has 26.5% of the votes. India and Russia have 7.6% and 6% respectively. China investors bet on Russia 0:59The AIIB’s decision to suspend activities in Russia means that $1.1 billion of approved or proposed loans to upgrade the country’s road and rail networks are now on hold. — CNN Beijing Bureau and Hannah Ritchie in Sydney contributed to this report.