the delicate position of Chinese companies

As explained BloombergRussia’s invasion of Ukraine poses a major dilemma for Chinese companies who do not really know which side to position themselves on.

War in Ukraine puts Chinese companies in trouble

The situation is delicate for Chinese companies. They have a choice between complying with Western sanctions against Russia. This would go against the official policy of the Chinese government, which opposes such measures. On the other hand, Chinese companies can choose to bow to the government line but face huge fines and penalties for violations of sanctions if they work with Russian entities. Washington is currently trying to put pressure on big Chinese companies to comply with the sanctions imposed by the United States and the European Union against Russia in response to the invasion of Ukraine.

Without the production capacity of the Chinese giants, Russia would be totally crippled and its ability to buy key technologies and components could be reduced to nothing. Indeed, China is Russia’s leading supplier of electronic components. The Middle Kingdom represents a third of semiconductor imports and more than half of computers and smartphones. Officially, the Chinese government has opposed US moves to try to restrict Russia’s economy in response to its invasion of Ukraine. All US products, even those made overseas, are subject to restrictions imposed by Western countries.

Technologically, Russia depends on China

In 2022, Russia is sourcing from 70% in chips, computers and smartphones from China. Unsurprisingly, the Chinese Foreign Ministry expressed its disapproval of the sanctions, explaining “to be opposed to illegal and unilateral sanctions without an international mandate. Western nations should not infringe on the legitimate rights and interests of the Chinese motherland.”. While Beijing is indeed trying to achieve self-sufficiency in the semiconductor sector, its tech companies are still largely dependent American designs and technologies.

This is precisely the case of Semiconductor Manufacturing International Corporation (SMIC), which continues to use American equipment to manufacture its electronic chips. It’s the same for Xiaomi, like the majority of OEMs, which uses Qualcomm components. Lenovo depends on Intel processors for the manufacture of its computers… In short, Chinese companies are stuck. The example of Huawei is on everyone’s mind. The Chinese giant saw its business collapse following the sanctions imposed by the United States in 2020…