SHANGHAI (Reuters – China is slowing its exports of Russian goods to Russia as the rouble’s value swings. It seems that China has been feeling the ripple effects of Western sanctions against Russia for their invasion of Ukraine. However, China remains diplomatically neutral.

While multinational Chinese corporations have stayed in Russia, their Western counterparts fled. However, it’s smaller Chinese businesses that are most vulnerable to currency losses. Several of them told Reuters that a lot of their Russian business has been put on hold while both sides await the volatility.

Deng Jinling from eastern China’s vacuum flask factory said that the products he was supposed to ship to Russia were still in his warehouse.

Russia accounted for around 30% of her $40 million ($6.29million) annual revenue last year.

“Our clients wait patiently to see whether the exchange rates can rise.” She said that their costs were too high due to the current exchange rate.

According to another Chinese trader, Guo only spoke her name and said her firm was an intermediary between Chinese and Russian customers, however, the volume of their products, including kitchen equipment, has dropped by a third.

According to data from customs, China is Russia’s largest source of imported goods. It sold $12.6 million worth of products to Russia in January and February. These items included computers, toys, and cars.

Russian exporters as well as Chinese importers put off their business in fear that they might be caught up by the rollercoaster rouble.

Shen Muhui who is head of a group representing over 20,000 small Chinese exporters, said that the depreciation in the ruble means that one loses money for every sale.

His Russian clients were more willing to buy goods, but it wasn’t enough to make a significant difference. The demand for his Russian warehouse services has dropped by approximately a fifth in the time since the Ukraine war started. About 90% of his Russian members have been affected.

The Russians cannot afford to pay higher prices so you can’t increase them. Shen stated that converting receipts to yuan is a losing proposition.

It is now impossible to export to Russia.

LONG-TERM PROFITISM

Since Russia started what it called a “special operations” in Ukraine on February 24, the Russian rouble saw a huge rise against both Chinese yuan and U.S. dollars.

The conflict caused a drop in the value of the rouble against the Yuan by more than 40%, but the Russian currency has recovered roughly 70% from a March 9 low.

China is not condemning Russia’s aggression in Ukraine nor has it called it an invasion. It has also repeatedly criticised the illegality of unilateral and unilateral sanctions.

Great Wall Motor and Xiaomi, two of the largest Chinese corporations, have mostly remained silent about their plans for Russia.

Reuters reported that China was concerned that its investment in the country could be affected by sanctions.

The sources claimed that the Sinopec Group, a state-owned company (NYSE:) Group, has suspended negotiations on a large petrochemical investment in Russia and a Russian gas marketing venture.

Winnie Wang is the president of Shenzhen Cross-Border E-commerce Association. She expressed optimism about Russia trade in the long-term, saying that she anticipated Chinese exports increasing in volume and variety, in spite short-term difficulties like currency volatility. 

Wang expressed hope that traders would be able to get rid of the U.S. dollar settlement.

She stated that “the two countries should cooperate to develop a new payment structure for trade.”