The relationship between the two countries is very unequal.
Reporting recently from Asia, Real Money Columnist Alex Frew McMillan says the Russia-Ukraine war has shocked Pacific Rim onlookers.
China’s reaction continues to be what traders in Asia are watching in particular.
“China may find that its recently renewed alliance with Russia is a costly partnership,” McMillan wrote. “Investors have jettisoned Russian assets, causing an all-time low in the Russian ruble, and are selling risk in Asia, too.”
McMillan believes Russia will lean on China far more in the current crisis than China will turn to Russia.
That’s partly because of outsized imbalances between the two nations.
“China sends more exports to Malaysia, Singapore and the Netherlands than it does to Russia, which ranks 12th on that front,” McMillan wrote. “China imports more from Australia, Germany and Brazil than Russia, its 9th-largest supplier of goods as a nation.”
He added, “for Russia, though, China is No. 1 on both fronts, its top source of exports and of imports.”
That doesn’t hide the fact that China has a heavy investment in Russia.
“The two sides struck US$117.5 billion in deals for Russia to supply gas to China,” McMillan noted. “They also said they oppose the AUKUS alliance in the Indo-Pacific between Australia, the United Kingdom and the United States, which will see Australia secure nuclear-powered submarines. China has trotted out its usual line that the three Western allies are acting out on “a cold-war mentality.”
Still, “China has a very careful balancing act of diplomacy to pull off,” McMillan said. “With war – even when it’s far away, there are many losers and few winners.”
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