When Russia and China declared a “no limits” partnership in 2022, the symbolism was powerful—but the economic reality has proven very different. Despite deepening ties in energy, defence and diplomacy, the commercial relationship is now showing signs of strain across trade, investment and financial channels.

“China is more important for Russia than Russia is for China,” Liam Peach, Senior Emerging Markets Economist at Capital Economics, said in a recent note. “That asymmetry has become increasingly clear. Russia wants and needs more from the relationship than China is willing—or able—to provide.”

Bilateral trade surged to a record $244bn in 2024, but has since contracted by around 10% in the year to September 2025. China remains Russia’s dominant trading partner, accounting for 30% of its exports and half its imports. Yet Russia accounts for just 3% of China’s goods exports.

“This is a relationship forged by necessity,” Peach notes, “but it’s highly imbalanced.”

Much of the post-2022 trade boom was driven by energy. China’s imports of Russian mineral products peaked at $101bn in the 12 months to April 2024, before falling to $89bn, driven largely by a drop in crude oil volumes.

“China’s oil demand is close to peaking,” says Peach, “and its long-term contracts with Middle Eastern suppliers show a clear desire to diversify.”

There are some bright spots. Pipeline gas flows have doubled since 2021, and industrial metal imports have surged, with Chinese imports of Russian copper and aluminium up five-fold since 2020.

“The green transition may help sustain demand for metals,” Peach says. “But it won’t be enough to offset falling energy volumes or the collapse in manufactured goods trade.”

The outlook for manufactured goods is particularly bleak.

“There is very little need for China to import more of Russia’s manufactured products,” says Peach. “Russia has lost its EU export market, and China is not going to fill that gap.”

At the same time, Russia’s capacity to absorb Chinese machinery and transport equipment is waning. A military-driven investment boom is ending, and Russian car production has halved since 2021. New import tariffs, such as an expanded vehicle “recycling fee,” have further dampened demand for Chinese vehicles.

Investment and financial integration remain limited. Despite headlines, outbound Chinese foreign direct investment into Russia totalled just $4bn in 2024—equivalent to 0.2% of Russian GDP.

“There’s little evidence of Chinese firms embedding supply chains in Russia,” says Peach. “Concerns over sanctions, technology transfer and capital controls are significant constraints.”

Use of the renminbi in cross-border settlement is also declining, with Russian banks pulling back amid tightening Western sanctions.

Even politically, the alignment is not seamless. While both countries seek to counterbalance Western influence, they pursue divergent priorities in Central Asia and North Korea, creating underlying tensions.

“There will continue to be symbolic summits and displays of unity,” Peach says. “But the truth is, deeper economic cooperation is unlikely. China will not replace what the West once provided for Russia.”

For Moscow, that poses a lasting challenge: stronger ties with Beijing cannot compensate for lost access to Western capital, technology and markets. For Beijing, it is a reminder that even its closest strategic partnerships are constrained by practical economic limits.

Investment and FX

Beyond trade, the potential for deeper Russia-China ties in investment and financial integration now appears increasingly limited as well.

“There is little sign that Chinese firms are expanding supply chains in Russia,” says Peach.

“China’s Great Wall Motor has increased investment in its Haval plant in Tula since 2022, but few other Chinese automakers have followed suit.”

While there are isolated reports of Chinese investment in Russia’s metals sector, such cases remain rare.

“This underscores a persistent imbalance in the relationship,” Peach notes. “It’s largely one-sided, transactional, and on China’s terms.”

Russia no longer publishes detailed foreign direct investment data, but headline figures show FDI inflows have been negative for three consecutive years—reflecting the exit of Western firms.

“Greenfield investment in Russia is essentially non-existent today,” Peach adds. On China’s side, outbound FDI to Russia rose to $4bn in 2024, the highest in over a decade. “But this is still negligible—just 0.2% of Russian GDP,” he says.

China’s state oil firms have not made new equity investments in Russian energy assets since 2022, opting instead for opportunities in the Middle East, Africa and Latin America. Nor have there been any major Belt and Road announcements involving Russia since 2021.

“Russia wants more from the partnership—particularly investment—than China seems willing to offer,” Peach argues.

Financial linkages, which showed early momentum after 2022, have also stagnated. Initially, Russian banks expanded renminbi lending and corporate bond issuance in renminbi reached $25bn in 2022.

“But bond issuance has dried up and renminbi loans are now contracting,” says Peach.

While the renminbi remains widely used for settling bilateral trade—President Vladimir Putin recently claimed 90% of Russia-China trade is settled in renminbi or rubles—the overall share of settlement in “other currencies” (primarily renminbi) has declined since its peak in 2023–2024, according to Russia’s central bank data. “What we’re seeing is a shift back towards ruble settlement,” says Peach.

Sberbank recently reported declining interest in renminbi-denominated products and the renminbi’s share of assets and liabilities is falling. Russia’s finance ministry, meanwhile, has refrained from issuing renminbi-denominated bonds in China’s onshore market.

Peach attributes these limits to a range of structural and geopolitical factors.

“Russia has long had a poor business environment, and that has deteriorated further since 2022 with widespread asset seizures and weakened property rights,” he says.

Chinese firms also remain wary of transferring technology or embedding supply chains abroad, and capital controls continue to restrict cross-border renminbi use. But Western sanctions have played the most decisive role.

“Since the imposition of sanctions on institutions like the Moscow Exchange and the National Settlement Depository in April 2024, most Chinese banks have stopped processing Russian transactions,” Peach explains. Reuters has reported that 98% of Chinese banks have ceased accepting payments from Russia. Fears of secondary sanctions have also dried up renminbi liquidity in Russia.

“Mainland Chinese banks with US exposure are now avoiding direct renminbi lending to Russian banks. Only smaller banks without international ties remain active,” he says.

“This renminbi shortage has pushed Russian banks to stop all new renminbi lending.” According to Peach, this reflects China’s broader strategic calculus: “Beijing wants to support Russia, but it is unwilling to jeopardise access to US and EU financial systems. That ultimately imposes hard limits on how far the partnership can develop.”

Diverging geopolitical interests

Beyond economic ties, Russia and China also appear increasingly misaligned in their broader geopolitical priorities, a factor that further constrains the depth of their partnership. While the two powers maintain a shared interest in counterbalancing Western influence, their foreign policy goals in key regions frequently diverge.

“President Xi has said that the development strategies and foreign policies of China and Russia are ‘long-term’, and described both countries as ‘good neighbours that cannot be moved apart’,” notes Peach. “But this masks growing tensions in their respective approaches to third countries, which risks creating regional frictions.”

Central Asia illustrates the most visible area of competition.

“Russia still views the region through the lens of its post-Soviet sphere of influence,” Peach says. “But China has emerged as one of Central Asia’s largest trade and investment partners, largely through the Belt and Road Initiative.”

While countries in the region often seek closer ties with both powers, their interests do not fully align.

“Russia has lost considerable influence among its neighbours since the Ukraine war began, and it will be wary of Beijing’s attempts to expand its presence—especially in areas linked to security,” he adds.
 

Another friction point is North Korea. China has long pursued a policy of maintaining stability on the Korean peninsula through isolation, avoiding open provocation of the United States and its regional allies.

“Russia’s recent engagement with Pyongyang—aimed at securing arms transfers and circumventing sanctions—undermines that goal,” says Peach. “China is likely concerned that Russian support could upset the fragile balance in the region, while also raising the risk of technology transfers that reach North Korea via Russia.”

On Ukraine, China has offered Moscow diplomatic cover—refusing to condemn the invasion and often echoing narratives that blame Nato expansion. But support remains calibrated.

“Beijing has not supplied weapons or key military technologies,” Peach notes. “That reluctance highlights a key divergence. Putin likely wants more backing, but China is unwilling to cross certain lines.”

According to Peach, Beijing’s strategic calculus may favour prolonging the war.

“A drawn-out conflict keeps the West focused on Ukraine, sapping resources and political attention. But a decisive victory for either side would be disruptive. China is probably content with the status quo.”

Ultimately, while symbolic gestures of unity between Moscow and Beijing continue, diverging geopolitical interests—especially in Central Asia, North Korea and Ukraine—highlight the limits of the relationship.

“There’s no real evidence that China sees the world in the same zero-sum terms as Russia,” Peach says. “Their strategic alignment is conditional, not absolute.”