China Triples Investment In Russia
- 20.05.2025, 14:11
The war had an impact.
Despite Russian President Vladimir Putin's statements about the "unprecedented" level of partnership with China and "limitless" opportunities for interaction between the two countries, Chinese investors have sharply reduced investments in Russia amid the war in Ukraine. While in 2011-2018, on average, China invested $1.2 billion a year in Russian projects, the figure fell threefold to $400 million in 2022-2023, according to a report by the Bank of Finland's Institute for Emerging Economies (BOFIT), which was highlighted by The Bell.
In the matter of investing in Russia, Chinese investors behaved like everyone else. According to the Central Bank, over the three years of the war, non-resident investment in the real sector of the Russian economy fell by 57%. Of the $497.7 billion in foreign direct investment (FDI) that businesses had as of January 1, 2022, only $216 billion remained by the beginning of 2025 - the lowest amount since 2009. Thus, the Kremlin's hopes that "friendly" countries, which include China, would replace Western investors in Russia have proved futile.
In a meeting with Chinese President Si Jinping in early May, Putin said that Russia would welcome the emergence of Chinese industries on its territory. He noted that Moscow is ready to provide "comfortable conditions for companies from China to operate in Russia" and considers Russian-Chinese relations "a model of interstate communication in the 21st century." However, before that, the Chinese authorities banned local companies from investing in Russia's oil and gas sector, instructed auto companies not to build factories in Russia and refused to finance the Power of Siberia-2 project. According to the American Enterprise Institute, the last major Chinese investment project (from $100 million) in Russia dates back to 2021. That was a $360 million investment from Chinese oil and gas company Sinopec in the Russian oil industry.
Russia had a bad reputation among Chinese investors even before the war, says Alexander Gabuev, director of the Carnegie Berlin Center and one of Russia's leading Chinese scholars. According to him, Russian assets are as expensive for them as in developed markets, but, unlike the latter, the country has neither investment protection nor an understandable judicial system. At the same time, larger investment projects, such as Yamal LNG, are possible because they are coordinated at the highest political level. Also, due to sanctions, it is easier for Russia to buy critical components and equipment, such as CNC machine tools, from China than to achieve localization of this production in the country through Chinese partners, Gabuev concluded.