China’s imports from Russia reach record with largest ever surge

China’s imports from Russia surged by the most ever in dollar terms, bucking an overall decline in its purchases of foreign goods as trade between the neighbors booms.

China bought $11.5 billion of Russian products in August after an increase of more than a quarter from July, according to customs figures published in Beijing on Thursday. The monthly haul was the biggest in data going back more than two decades.

Though Chinese exports to Russia dipped after two months of gains, bilateral trade now stands at a cumulative of just over $155 billion in the year to date.

Commerce between Russia and China has surged after the sanctions imposed on the Kremlin by the US and its allies over the invasion of Ukraine upended trade routes and shifted more shipments toward Asia. Russia expects the trade volume with China to reach $200 billion this year from roughly $185 billion in 2022.

Though China has long been a key destination for Russian energy, it’s also increasingly become a critical source of imports such as cars and consumer electronics after the exodus of many international companies after the war began.

According to the latest Kiel Trade Indicator released on Thursday, activity in Russia’s ports was “surprisingly high” in August, with the volume of goods unloaded at the country’s three biggest container hubs — including Vladivostok on the Pacific coast near China — “approaching the levels seen at the outbreak of the war.” 

In response to sanctions, Russia has also moved to settle a much bigger share of its trade in yuan instead of dollars and euros. The Chinese currency accounted for 34% of Russian imports in July and 25% of exports, according to the latest figures published by the central bank.

At the same time, the Bank of Russia has warned the domestic market is also at times experiencing a deficit of the Chinese currency. In a June report, it said some yuan proceeds are occasionally being held by market participants in non-resident Chinese banks, in part to help finance imports. 

As a result, the central bank said Russia has seen outflows of the currency to accounts abroad, while capital controls in China make it difficult to raise onshore yuan.