Trade Between Russia and China Sees Decline

By Gleb Stolyarov and Alexander Marrow

(Reuters) – Slowing economic growth and reduced demand for large purchases like cars, electronics, and household appliances have curtailed the volume of Russia’s imports from China, as shown by first-quarter customs data. This decline comes at a time when Beijing is facing serious trade headwinds due to U.S. tariffs.

Trade between Russia and China has soared since Western countries shunned Moscow following its February 2022 invasion of Ukraine, reaching a record 1.74 trillion yuan ($239 billion) last year, despite payment disruptions caused by Western sanctions.

Russia’s economy rebounded from contraction in 2022 after the imposition of sanctions related to the war, largely due to increased military spending. However, high interest rates, labor shortages, and limited production outside the defense sector are currently squeezing Russia’s economic growth potential.

Customs data published on Sunday revealed that Russia spent $22.7 billion on imports from China in the first quarter of 2025, signaling a drop of 6.9% compared to the same period last year, according to Reuters calculations.

In February, Russia’s expenditures on Chinese imports totaled $5.8 billion, marking the lowest monthly volume since June 2022. Import levels saw a slight uptick in March, with Russian imports from China rising by 1.9% to nearly $7.8 billion year on year.

Both China’s Commerce Ministry and Russia’s Industry and Trade Ministry did not respond to requests for comment.

Analysts suggest that Russia’s cooling economy and saturation of markets that China dominates are contributing factors to the decreased demand. The automotive sector has notably seen changes, with Chinese carmakers now holding over 50% market share, up from under 10% pre-war, according to Vladislav Onishchenko, head of the Agency for Economic Transformation and Development, a Russian think tank.

The slowdown in auto imports coincides with speculations about the potential return of Western automakers to Russia, alongside decelerating income growth.

Onishchenko noted that the initial enthusiasm for Western brands’ return has decreased demand for other imported goods like electronics and household appliances.

Overall, Russia’s economy is slowing, with companies citing high borrowing costs of 21% as a reason to cut back on investments.

“There is potential (to increase imports from China), but the question is how fast,” Onishchenko commented. “(Russia) needs to pursue investment demand, but the money has to come from somewhere.”

Industrial production growth has nearly flatlined, and both consumer and corporate lending growth have softened.

Alexei Podshchekoldin, president of the Association of Russian Automobile Dealers, stated that imports of heavy equipment like cranes and diggers have been declining since late last year.

Despite continued expansion in consumer activity in February, retail sales growth slowed to 2.2%, primarily supported by services. Demand for goods imported from China has waned, with the central bank reporting a reduction in population interest in large purchases.

No Substitute for U.S.

Russia represented 3.2% of China’s exports last year, an increase from 2.0% in 2021, while the United States accounted for 14.7% in 2024, according to Chinese customs data.

China’s trade with Russia is not enough to offset any drop in exports to the United States due to tariffs from the Trump administration, though those trade restrictions could potentially strengthen ties between Beijing and Moscow further.

Recent reports indicate that China plans to increase its imports of Russian liquefied natural gas this year, having shifted from U.S. LNG completely in March.

Payment restrictions and the threat of secondary sanctions on Chinese firms involved in trade with Russia have dampened trade flows over the past year. However, Alexander Gabuev, director of the Carnegie Russia Eurasia Center, noted that sanctions enforcement may be less stringent now, following government personnel cuts under the Trump administration.

The U.S. Treasury did not respond to a request for comment.

Gabuev commented that while Russia cannot replace U.S. imports, it remains a sizeable market, and many Chinese businesses might see little risk in pursuing market dominance, potentially by lowering profit margins or offering discounts.

“There will always be a way,” Gabuev concluded.

($1 = 7.2873 Chinese yuan renminbi)