Chinese companies in dilemma over Russia

Chinese companies are caught between the high reputational risk of remaining in Russia during its war against Ukraine and the pro-Moscow sentiment dominating China’s state-controlled media. So far, most have chosen to remain silent.

According to the Yale School of Management, more than 400 companies have announced his retirement of Russia’s economy since Putin launched the war on February 24. Most are based in the US, the European Union, Japan, and South Korea.

Salvatore Babones, an associate professor at the University of Sydney with a background in the political economy of the Indo-Pacific region, said that for companies outside of China, the desire to maintain a positive public image led them to withdraw from Russia.

“The risk of staying in Russia is reputational,” he told VOA Mandarin in a phone interview. “Russia is a relatively small market and there is a huge public backlash against Russia right now. They (companies) are responding to consumer pressure.”

Russia’s imports from China totaled about $54.9 billion in 2020. China is the largest source, followed by Germany, at $23.4 billion, and the United States, at just over $13.2 billion. millions. according to Trading Economics website, which uses figures from the United Nations COMTRADE database. By comparison, the site reports that China’s exports to the US in 2020 totaled $452.6 billion.

Dan Harris, a business lawyer who specializes in doing business in emerging markets and co-author of the China Law BlogHe said the business calculus has changed due to the sanctions imposed on Russia.

“Companies that aren’t sanctioned… are saying ‘I’m out’ for reputational reasons or because it’s not worth finding out and risking getting into trouble to sell $100,000 worth of products to Russia. It’s just more easier and safer. get out,” he told VOA Mandarin over the phone.

A Different Approach

But while non-Chinese companies are rushing to leave Russia, most Chinese companies, especially those in the tech sector, have so far chosen to stay.

The United States and other nations have imposed unprecedented sanctions on Russia, including energy import bans, export bans on advanced technology and measures to exclude Moscow from the SWIFT system that banks and other financial institutions use for global financial transactions.

In a phone call on Friday.US President Joe Biden warned Chinese President Xi Jinping that Beijing would face dire consequences if it decided to provide aid to Russian President Vladimir Putin’s war effort.

On March 14, Hong Kong’s Hang Seng Index hit a six-year low on fears Chinese companies could be ostracized if Beijing sides with Russia. according to Bloomberg.

But on Chinese social media, where anti-war sentiment is heavily censored, netizens overwhelmingly support Russia. A CNN analysis showed that during the first week of the Russian invasion, half of the most shared content on China’s Twitter-like Weibo platform contained information attributed to a Russian official or comments gleaned directly from Russian state media.

Consequently, some Chinese companies have doubled down on their support for Moscow, while others have changed course after coming under fire online for announcing plans to halt operations in Russia.

The Chinese government has refused to call Russia’s action in Ukraine an invasion. At a daily briefing on March 15, Foreign Ministry spokesman Zhao Lijian said that China was “deeply sorry to see that the situation in Ukraine has reached its current state,” saying that insisted that the country was working towards peace talks.

Didi, a ride-sharing app, faced public backlash after announcing that it would withdraw from the Russian market on March 4. Chinese netizens criticized the company, accusing it of caving in to pressure from the United States. Later, the company made a U-turn and said it would continue to operate in Russia.

Hong Kong-based Lenovo Group, which announced the suspension of its shipments to Russia in late February, faced similar criticism on Chinese social media. Sima Nan, a Chinese television pundit known for his nationalistic and anti-American sentiment, wrote on his Weibo account that “Lenovo’s decision to follow in the footsteps of the United States is disgusting”.

This public support for Russia has left little room for maneuver for companies, according to Babones.

“The Chinese government suppresses any kind of discussion (that condemns Russia),” he said. “I can’t imagine that in China we will see massive condemnation of Russia leading to pressure on Chinese companies to leave the market.”

China’s official position on the invasion of Moscow has spread to both sides. Beijing has called for a peaceful resolution of the conflict while maintaining that the The sanctions imposed by the West on Russia are counterproductive.

The Japanese business publication Asian Nikkei quoted an official from a major Chinese telecommunications company on March 9 as saying that most Chinese companies “will not express opinions that conflict with the position of the governmentAt the same time, the official said, the companies will avoid “any statement that is friendly to Russia to prevent the boycott of Western companies.”

A former executive of the Chinese telecommunications company Xiaomi told the financial times – and was quoted elsewhere as if to say, that “it is politically sensitive to openly announce a suspension of sales in the Russian market like Apple and Samsung, but from a business perspective, it makes (sense) to wait and see what happens next.”

Cost to Chinese companies

That wait-and-see approach could be costly for Chinese companies, according to experts. And companies that are more openly supportive of Russia risk losing international market share, forcing them to recalculate the risks of remaining in Moscow.

For example, at telecommunications giant Huawei, just the rumor that it was helping the Russians defend against cyberattacks had reputational costs.

These came from a March 6 report from the daily maila British newspaper, which cited “reports in China” as saying that Huawei has been helping Russia stabilize your internet network after the cyberattacks since the beginning of the Ukraine crisis.

the daily mail it also cited a report on a Chinese news site that Huawei would use its research centers to train 50,000 technical experts in Russia. The Chinese report has been removed.

On March 9, the two remaining British members of Huawei UK’s board of directors resigned due to demand. For his part, Robert Lewandowski, Polish professional footballer named Best FIFA Men’s Player of 2020 and 2021, announced the early termination of its sponsorship agreement with Huawei.

Huawei’s former regional ambassador to his home country and other parts of Europe, Lewandowski, wore an armband with the Ukrainian colors yellow and blue during a match, saying: “The world cannot accept what is happening there. I hope the whole world does.” support Ukraine.

Harris, the trade lawyer, said that Huawei is already on the “do not trade” list of the US and some of its allies, and that companies in other parts of the world, particularly those in Central and Eastern Europe, could decide to cut ties. with the Chinese firm to avoid violating the sanctions imposed by Washington and other governments.

“If you’re dealing with China right now, you should look at what the world has done to Russia and think what could happen to China in the next few months,” Harris said.

“It may not happen if China moves away from Russia, but if China doesn’t move away from Russia, there will be a lot of sanctions and things will get really bad.”

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