In November, the peak sales season of the year, Chinese exporters are expected to achieve record-high revenues in Russia, but businesses may suffer losses. Reports suggest that the sharp depreciation of the Russian ruble has led Chinese merchants to halt sales on Russian e-commerce platforms.
Russian lawyer Pavel Bazhanov informed the News Weekly on Saturday (November 30) that Chinese exporters are concerned about the devaluation of the ruble, especially because “November is the month of sales”.
Bazhanov provides legal support for Russian businesses in China and other regions. “During this period, the market will put pressure on suppliers to offer discounts,” he said. “Chinese suppliers on Russian e-commerce platforms in November may generate significant sales, but businesses will incur losses.” Bazhanov stated that “sensible businesses may decide to temporarily suspend sales.”
He pointed out that Russian e-commerce platforms lack regulation and are not friendly to suppliers, but Chinese merchants do not have many options.
Amidst Western sanctions and dwindling sources of income from other markets, China has become Russia’s main trading partner.
This week, the USD to ruble exchange rate dropped to 114, hitting a 32-month low. This prompted the Russian central bank to halt foreign purchases in the domestic currency market for the remainder of the year.
In November, the United States imposed new sanctions on Russia’s largest bank, Gazprombank, which handles foreign purchases of Russian natural gas business.
According to the South China Morning Post, Chinese exporters are concerned about incurring losses from doing business with Russia and have halted sales on Russian e-commerce platforms.
Andy Guo, founder of the WeChat Foreign Trade Family Business Platform, told the South China Morning Post that the ruble devaluation is causing “severe losses to Chinese exporters.”
The devaluation of the ruble has led to a significant increase in prices of Chinese exports to Russia, which has “weakened the purchasing power of Russian consumers, resulting in fewer orders for us.”
The exchange rate of the Renminbi to ruble rose from 1 yuan to 13.99 rubles on November 22 to 15.61 rubles on Thursday (28th) and dropped to 14.91 rubles on Friday (29th).
Guo added that the drastic fluctuation in exchange rates is also “further eroding the profit margins of Chinese merchants after settlement.”
Bazhanov predicted, “Unless the ruble sharply depreciates, I expect Chinese merchants will not stop all sales or daily transactions on Russian e-commerce platforms.”
“Firstly, Russian customers still have a certain purchasing power, and considering China’s poor economic performance and Trump’s (US President-elect) threats of additional import tariffs on Chinese products, Chinese companies will seek consumers worldwide,” he said.
He explained that since Chinese companies need to explore any available foreign markets, the Russian market may still be an option.
In a report released on Friday, the Russian central bank stated that Russian companies will try to circumvent US sanctions, and the foreign exchange market is expected to stabilize.