Reviving and reversing the Sino-Soviet trade bloc

Over the last month or so, since Vladimir Putin’s meeting with Xi Jinping in Beijing on the eve of the Winter Olympics, it’s been commonplace to say that ties between China and Russia are tighter than they have been since the Sino-Soviet alliance in the 1950s. In the joint statement issued after the meeting, the two countries went even further, asserting that “the new inter-state relations between Russia and China are superior to political and military alliances of the Cold War era.”

Doing a bit of reading, I discovered the parallels between 1950 and 2022 are pretty striking. Consider the sequence of events in both cases: the leader of the junior partner travels to the capital of the senior partner, where an agreement is announced formalizing ties between the two. Shortly afterward, the junior partner engages in military adventurism that results in US sanctions, making the junior partner even more economically dependent on the senior partner.

In the first iteration, the junior partner was of course China. Mao Zedong arrived in Moscow on December 16, 1949, just two months after declaring the foundation of the People’s Republic, seeking a treaty with the Soviet Union. Although Stalin dragged out the talks for weeks to emphasize Mao’s lower status, they signed the Treaty of Friendship, Alliance, and Mutual Assistance on February 14, 1950. Mao’s officials had only a few months to do follow-up work before North Korea invaded South Korea on June 25, 1950. On October 19, China’s own forces crossed the Yalu River and entered the war. On December 3, the US Department of Commerce announced a trade embargo against China (these dates are all matters of public record, but here I’m relying on the narrative in Jason M. Kelly’s recent book Market Maoists).

The terms of the embargo against China were even stricter than the one already in effect against the Soviet Union, intensifying China’s dependence on its socialist “big brother.” The arrangement between the two was simple: the Soviet Union would supply China with the technology, equipment and specialists it needed to build up its own industrial capacity, which China would pay for with exports of commodities and Soviet loans. Here’s an old-school infographic from a 1959 CIA report that captures the structure of China’s trade dependency nicely: it sold the Soviet Union farm products, metals and textiles, and bought machinery and weapons.

The second iteration unfolded on a much more compressed timescale. Putin landed in Beijing on February 4 for the opening ceremony of the Olympics, and the two governments issued a joint statement on their “future-oriented strategic partnership” the same day. The closing ceremony of the Olympics was held on February 20, and Russia began moving troops into Ukraine on February 21. The US announced its first sanctions on February 22, ramping to a joint announcement with allies of financial sanctions on February 26. The dizzying cascade of corporate announcements and market turmoil since then has starkly highlighted how China is now one of Russia’s most important remaining trade relationships.

There’s no question that Russia is the junior partner this time around; it accounts for less than 2% of world GDP while China is now over 20%. The pattern of trade dependency is also the mirror image of what it was in the 1950s. As these nice visualizations from the Observatory of Economic Complexity show very clearly, it is now Russia who is the supplier of commodities and raw materials to China.

In turn, China now supplies Russia with machinery, electronics, and a range of consumer and capital goods.

Given that history is repeating itself in such an unusually straightforward way, it’s worth recalling that the Sino-Soviet alliance of the 1950s did not prove to be a stable arrangement. The explicitly hierarchical relationship was distasteful to China’s Communists, who were strong nationalists. But it was seen as a necessary temporary arrangement to rebuild the war-damaged Chinese economy. The supply of machinery and technical knowledge from the Soviet Union was a key part of a crash program to create China’s own socialist industrial base and achieve self-sufficiency. China never intended to be in an ongoing relationship of dependency. Eventually China lost faith in the Soviet Union and decided to exit the relationship to pursue self-sufficiency on its own terms, through Maoist projects like the Third Front.

For now, China and Russia seem happy to bond based on their shared criticism of the US and its aggressive assertion of authority over global trade and finance, which has resulted in sanctions on both countries. But I can’t help but wonder whether Russia is going to eventually find itself just as unwilling to acquiesce to long-term economic dependence as China was in its day.

One Comment

  1. Hello Andrew,
    Wanted to share some thoughts about the Sino-Russian relationship.
    As far as I know, a lot of Russian elites, even the in-system elites, are at least somewhat uncomfortable about the reliance on China. Partly because they feel uneasy about the imbalance of power the same way Beijing was in the 50s. Partly because of just simple, yellow peril is coming-type of racism. Until now, only Navalny team voiced concerns about the relationship by releasing videos and articles about the Chinese economic involvement in the Russian Far-East and how the country looses its natural resources without getting enough in return.
    Given the slow, but steady changes in Russian society, stagnating economy and potential frictions in Central Asia, I had thought for a while the relationship between the two countries would deteriorate, potentially precipitated or followed by the changes in the Kremlin. The invasion obviously made this prediction worthless and both Russia’s internal politics and Sino-Russian relations will be in a flux in a foreseeable future.
    On a side note, despite all the international chaos caused by the invasion, I think the party and the PLA will at least appreciate an opportunity to learn from a host of Russian mistakes, even down to the operational and tactical levels.

    Reply

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