China’s growing presence on the Russian market and what it means for the European Union — Alicia García-Herrero and Jianwei Xu

Russia doesn’t just look West, it looks East – and increasingly so. China’s economy has developed very rapidly over the past two decades, becoming the world’s largest exporter from a low base. Its goods have flooded Russia, eating into the EU’s export share. The changing global environment has helped re-orient Russia’s economic relationships eastwards, especially towards China. Chinese-Russian ties are also developing in the context of China’s massive Belt and Road Initiative.

This raises the question of the extent to which China might be able to displace the EU in Russia, in terms of trade, investment and lending. In a Bruegel working paper (written with the support of the EU Russia Expert Network on Foreign Policy), we assessed the deepening of Russia’s economic ties with China and what this might mean for the EU.

The data sheds light on some key issues EU policymakers should pay attention to. Since 2002, the EU’s share of Russia’s imports has dropped from 53% to about 40%, while China’s share has risen from less than 3% to 21%. Therefore, the EU still dominates, but what China exports is changing – and that should also give cause for concern. The share of domestic content in the goods China sells to the world has been increasing, and Chinese exports are increasingly substituting EU exports on the Russian market, especially in capital-intensive sectors. Notable overlaps are vehicles, industrial machinery, electronics and metal components.…

Bruegel

China’s growing presence on the Russian market and what it means for the European Union
Alicia García-Herrero and Jianwei Xu