Russia and China: More tourists, less business

The circumstances seemed favorable for the "Power of Siberia 2", the planned second gas pipeline from Russia to China, which is known internationally as the Power of Siberia 2. One day before Russian President Vladimir Putin set off for Beijing on May 19, 2026, his advisor Yuri Ushakov announced "very detailed" talks on the mammoth project, which the two countries have been negotiating for eleven years. With a capacity of 50 billion cubic meters of gas, the pipeline is intended to connect the West Siberian gas fields to China. Russia has repeatedly pushed the project forward, especially as it has largely lost its customers in Europe after 2022. However, the Chinese doubt whether they would actually need so much additional Russian gas over a contract period of several decades. Despite Hormuz: pipeline project without a breakthrough This time, however, the Russian negotiators traveled to China in high hopes, the US news agency Bloomberg learned from government circles. In view of the Iran war and the blockade of the Strait of Hormuz, the Chinese should be more interested in concluding the negotiations, so the argument goes. But even the "biggest threat to energy security in history" according to the International Energy Agency (IEA) failed to bring about a breakthrough for Power of Siberia 2. Putin and Xi Jinping signed or witnessed the signing of a total of 40 documents, none of which mentioned the gas pipeline.In addition to outstanding economic issues, which we have already presented in a background report the project has now taken on a geopolitical dimension, according to an analysis by the Warsaw Center for Eastern Studies (OSW) from the end of 2025. According to the analysis, Beijing is also hesitating because the signing of a supply contract would be China's visible break with the West. Russian gas would allow Beijing to divert liquefied natural gas (LNG) from existing supply contracts to other markets and thus compete with the world's largest LNG supplier, the USA. So far, China has not been prepared to take this step, according to the authors, and Power of Siberia 2 had already dominated the headlines during Putin's last visit to Beijing last September. At the time, the Russian side announced that the state-owned companies Gazprom and China's counterpart CNPC had signed a "legally binding memorandum" on the construction of the pipeline. There is still no confirmation from China and no details of this agreement have been released. Tourism boom thanks to visa-free travel Both meetings produced concrete results in a completely different field: tourism. In September 2025, both sides had already agreed on mutual visa-free travel. It was a historic first, because despite the geographical and ideological proximity, citizens of the two giant countries had never been able to visit their neighboring country without further ado. For Russian tourists, the visa-free regime came into force on September 15, 2025, while in the opposite direction it only came into force on December 1, 2025. The regulation was originally intended to apply until September 2026. In the context of Putin's most recent visit to Beijing, it was extended until the end of 2027. Even before the visa-free regime, the Chinese dominated tourist travel to Russia. In 2025 as a whole, the Russian border guard counted around 834,500 tourists from China, more than ten times the approximately 75,000 visitors from Saudi Arabia, which was in second place. As expected, the visa-free regime led to a sharp rise in numbers in both directions in Q1 2026. 154,000 tourists from China represented an increase of more than 44% compared to the same quarter last year. This means that more than one in two of the total 293,000 tourists in Russia came from China. If the trend continues, the number could rise to 1.2 million visitors for the year as a whole. Before the pandemic, Russia had a total of more than 5 million foreign tourists, 1.5 million of whom came from China. In the opposite direction, the visa-free regime already helped China become the second most important destination for Russian tourists in 2025. Almost 2.5 million visits meant an increase of 30% compared to 2024 and second place, ahead of the United Arab Emirates with 2.4 million visits and behind Turkey with 6.9 million visits. In the first quarter of 2026, the number of Russian visitors to China even increased by almost 54% to 690,000. Only Thailand was ahead of China with 726,000 visits in the winter months of January to March. However, these exit figures from the Russian border guard also include transit trips to other Asian countries. The tour operator Space Travel estimates the number of genuine China tourists in the first quarter of this year at 380,000, i.e. just over half of the recorded tourist outbound trips to China. For 2025, this would mean around 1.4 million real tourist trips from Russia to China. Space Travel expects growth of 150% for 2026 as a whole, which would push the figure to almost 3.5 million tourists. Package tour providers are already reporting a 2 to 5-fold increase in China bookings compared to the previous year, with easier entry being one of the most important arguments in favor of China, according to Pegas Touristik, one of Russia's leading travel companies. Trade: First decline since the pandemic In contrast to tourism, Russian-Chinese trade is already past its boom phase. The mutual trade volume skyrocketed from around 110 billion dollars in 2018 to 2020 to more than 240 billion dollars in 2023, according to statistics from the Chinese customs administration. After only a moderate increase of 2% in 2024 to 244.8 billion dollars, 2025 saw the first decline since 2020. In the year of the pandemic, trade fell by 2.7% to 108 billion dollars, while in 2025 the decline amounted to almost 7%, to 228 billion dollars. One reason for the decline is the fall in commodity prices, which were lower in 2025 than in previous years. Russian exports to China, which largely consist of crude oil and other fossil fuels, fell by 3.9% to 124.8 billion dollars. At the same time, imports from China - primarily industrial goods and machinery - fell by 10.4% to 103.3 billion dollars. Not only Western sanctions and restrictions on international payments are responsible for this, but also domestic factors, states the renowned China and trade expert Sergei Tsyplakov in a research report. These include the high Russian key interest rate and the labor shortage, but also the limited Russian market for imports from China. These experienced a boom in the years 2021 to 2023 because they replaced imports from the EU and took up the niches that Western companies had vacated by withdrawing from Russia, explains Tsyplakov, who also noted a partial saturation of the Russian market with Chinese goods last summer. While the "expansion of goods" is reaching its limits, the share of high-tech products in imports should increase in the future, the minister hopes. In the long term, a "technological-industrial partnership" between the two countries is more promising than pure trade in goods anyway, explained Alichanov. Two unequal trading partners To date, economic relations between the two countries have been characterized by a double imbalance. For Russia, China is by far the most important trading partner, while for China it is just one of many partners. Last year, Russia ranked tenth among the target countries, accounting for 2.7% of Chinese exports. In terms of Chinese imports Russia's share of 4.8% put it in sixth place. The second asymmetry lies in the structure of the mutual exchange of goods. While Russia mainly supplies raw materials such as oil, gas and coal, it purchases industrial goods and other finished products from China. According to Industry and Trade Minister Alichanov, the path to greater equality leads through a portfolio of 63 joint investment projects worth around 130 billion dollars. Russian officials sometimes put the figure at more than 80 bilateral projects worth 200 billion dollars. This refers to a list compiled by the Russian-Chinese Commission for Investment Cooperation. As of July 2024 it contains 63 "important" and a further 23 "promising" projects. According to an analysis by German economist Janis Kluge, most of these projects "have not progressed beyond the status of announcement even after many years", and new projects were mainly launched in the years 2014 to 2019. Chinese investments: Slump since 2022 The volume of real Russian-Chinese investment is more modest. The American Enterprise Institute (AEI) has not recorded any Chinese investments in Russia since 2021. The Washington-based think tank puts the volume of investments registered since 2005 at 34 billion dollars. By comparison, AEI puts investment in Germany at 56 billion dollars, including almost 5.3 billion dollars since 2022. According to the investment tracker of the US think tank Rhodium Group Chinese investment transactions in Russia since 2000 total around 22 billion dollars, practically the same amount as in its Southeast Asian neighbor Thailand. However, according to Rhodium, almost all of the Chinese direct investment (FDI) was made before 2022. Since then, there have been announcements of Chinese direct investment totaling just 1 billion dollars in Russia. The figures only include the inflows of direct investment, but not the outflows and the development of the stock of FDI. The total stock of foreign FDI in Russia decreased from around 500 billion dollars in 2021 to around 220 billion dollars at the end of 2024, according to a study by the Finnish central bank's research institute BOFIT, citing Russian statistics. Foreign companies have generally refrained from making new investments in Russia in recent years. The study attributes this primarily to concerns about secondary sanctions and the "capriciousness" of Russian economic policy. An example of the latter is the seizures of foreign companies, which have so far only been directed against owners from the so-called "unfriendly" countries of the West. According to the study, the fact that companies from friendly China are also following this trend is evidence of the "superficiality" of Russian-Chinese economic relations. Car manufacturing as an investment destination The automotive industry has accounted for a large proportion of Chinese investment since 2022. For example, car manufacturer Great Wall Motor expanded its factory in Tula, which was built in 2019, with an engine plant in 2024. In 2026, the parent company of the Haval brand also plans to open a factory for car parts there, for which the Chinese are investing a total of 30 billion roubles, the equivalent of around 360 million euros. The Chinese share of imported new cars amounted to 77% in the first half of 2025, according to the industry service Awtostat. In April 2026, it was similarly high at 72%. Over the whole of 2025, Russia imported 396,000 new cars, almost 60% less than in the previous year. The car market as a whole shrank by 16% to 1.33 million vehicles. Including the cars manufactured by Haval, Geely and Co. in Russian factories, 685,200 Chinese cars were sold, meaning that their share of the Russian passenger car market fell from around 59% to 52%.2025's import slump is due to a drastic increase of up to 85% in the disposal fee for vehicles at the beginning of last year. The fee is a de facto tax on imported cars and makes them 7,000 to 20,000 dollars more expensive, depending on the vehicle class, calculated the Rhodium Group. This also increases the pressure on Chinese manufacturers to relocate production to Russia, which is in line with the government's goal of not just being a buyer of Chinese finished products. In the meantime, car imports from China have recovered. The Chinese industry service Gasgoo reports an almost doubling of imports to 187,000 vehicles in the first quarter of 2026 compared to the weak same quarter of the previous year. Russia is therefore once again the world's largest export market for Chinese car manufacturers, ahead of Brazil (167,000 cars) and the UK (109,000 cars). This article was created for the German-Russian Chamber of Commerce Abroad. The post Russia and China: More tourists, less business appeared first on ostwirtschaft.de.