China and Russia have recently announced plans to expand their economic cooperation through a new banking system, a move that experts believe is aimed at bolstering their military capabilities and challenging the U.S.-led global order. The joint communiqué issued by the two countries outlines their intention to strengthen and develop the payment and settlement infrastructure, including opening corresponding accounts and establishing branches and subsidiary banks in each other’s countries to facilitate smooth payment in trade.
The agreement was reached during a meeting between Chinese Premier Li Qiang and Russian Prime Minister Mikhail Mishustin in Moscow. Mishustin highlighted the unfair competition and illegitimate sanctions imposed by Western countries, emphasizing the need for closer economic ties between China and Russia. The use of their national currencies in mutual payments has exceeded 95%, indicating a deepening cooperation in investment, economy, and trade.
The meeting between Li and Mishustin resulted in the signing of more than a dozen agreements on economic, investment, and transport cooperation. David Asher, a senior fellow at the Hudson Institute, emphasized the significance of this cooperation, suggesting that it could have a significant military dimension that poses a threat to U.S. national security. He pointed out the potential for Russia to assist China in the Pacific and the South China Sea in exchange for Beijing’s support for Moscow’s economy and industry, particularly in light of Russia’s actions in Ukraine.
The U.S. has expressed concerns about China’s support for rebuilding Russia’s defense industrial base, particularly through the provision of dual-use goods that could aid Moscow in evading Western sanctions. Edward Fishman, an adjunct professor at Columbia University, highlighted the strategic importance of Chinese firms in sustaining Russia’s military capabilities, suggesting that these deals go beyond mere commercial significance and play a crucial role in supporting Putin’s war efforts.
In response to the China-Russia plan to establish a financial system to facilitate trade, the U.S. Treasury Department imposed sanctions on entities and individuals supporting Russia’s war efforts in Ukraine, including Chinese firms involved in evading Western sanctions. The U.S. Deputy Treasury Secretary emphasized Washington’s commitment to targeting any branches set up by China and Russia to circumvent sanctions.
Analysts have suggested that China and Russia may increasingly turn to alternative payment methods to evade sanctions, such as central bank digital currencies, cryptocurrencies, and stable coins. Russia’s decision to suspend trading in dollars and euros in the Moscow Exchange and the use of non-U.S. dollar payment mechanisms indicate a desire to operate beyond the reach of U.S.-led sanctions.
Despite the deepening economic and financial cooperation between China and Russia, experts believe that China is unlikely to jeopardize its ties with Western markets to support Russia’s actions in Ukraine. While the partnership between China and Russia may pose challenges to the existing global order, the extent to which China is willing to align itself with Russia’s interests remains a subject of debate among analysts.
