As Beijing opposes Western sanctions over Russia’s invasion of Ukraine, local Chinese governments are eager to support companies’ expansion into a Russian market that global multinationals have abandoned.
In an online forum geared toward investors, Shanghai-listed Senci Electric Machinery said it is looking for opportunities in Russia and Ukraine and will set up a sales team “at an appropriate time.”
Such efforts have the support of authorities. In the company’s home city of Chongqing, the local branch of the China Chamber of International Commerce has partnered with Bank of Kunlun, a key player in China’s yuan-denominated international payments network, to help facilitate export transactions to Russia.
According to authorities in Xiangshan County of Ningbo, an export hub for textiles in Zhejiang Province, five local companies and a Russian trading house agreed to consider doing business in an online meeting early this month.
The county is home to about 1,000 apparel companies, most of which rely on exports, according to its government. Though exports to Russia accounted for $7.5 million, or less than 1% of the county’s total in 2021, the Xiangshan government has expressed interest in the “massive potential” of the Russian market.
Shandong Province, which is home to a robust electronics industry, hosted a conference at the end of March for Russian economic officials as well as Russian and Chinese industry groups.
“We want to turn this crisis into an opportunity to strengthen our cooperation,” a provincial official said at the gathering.
Similar efforts are also underway in Heilongjiang Province in China’s northeast, which borders Russia. An organization dedicated to bolstering cooperation and trade with Russian companies launched this month in a pilot free trade zone in Harbin. The body will provide businesses with financial and legal services as well as regulatory updates, and help resolve troubles with imports and exports.
But the risks of doing business in Russia are high. Companies filed more than $6 million worth of trade insurance claims related to Russia in the January-March period, around 36 times more than a year earlier, according to a Communist Party-affiliated news outlet in Hangzhou.
The Chinese government encourages trade with Russia, but has maintained a cautious stance on new investments in the country.
“We will heed the calls by the national government, but actually expanding operations in Russia is difficult, since it could impact exports to the U.S. and Europe,” a regional government official said.
