March 5, 2022
Chinese ride-sharing giant Didi Chuxing has faced a public backlash after announcing it will pull out of Russia, with social media users accusing it of bowing to US pressure.
Chinese companies are staying in place in Russia for now despite a growing exodus of Western companies – although bracing for growing uncertainty – taking inspiration from Beijing’s stance that refrains from criticizing Moscow for its invasion of the EU. Ukraine.
Even though Apple, Nike, Netflix, fashion chain H&M and many other multinational companies have reduced or suspended their activities in Russia, Chinese companies have so far remained largely silent on their operations in Russia.
The Chinese government, which reached a ‘no limits’ partnership agreement with Russia just weeks before the February 24 invasion of Moscow, blamed NATO expansion for the crisis and called for talks to resolve the situation.
On social media, the Chinese public has shown overwhelming support for Russia’s attack, which Moscow calls a “special operation”.
Chinese ride-sharing giant Didi Chuxing faced a public backlash in China last week after announcing it would withdraw from Russia, with social media users accusing it of bowing to US pressure on Moscow.
He then reversed the decision without giving an explanation.
Lenovo, the world’s largest personal computer maker, also came under heavy criticism in China when local Belarusian media announced it would stop supplying Russia.
Moscow in the face of collapse
Lenovo did not respond to requests for comment from Reuters on the matter.
The relatively small size of the Russian market for Chinese companies, however, would make it easier for them to change course and join foreign rivals initially, especially as Moscow faces economic collapse due to mounting sanctions.
“For most Chinese companies, Russia is simply too small a market for the company to be worth the risk of being cut off from developed markets or being sanctioned itself,” wrote Dan Wang, an analyst at Gavenkal. Dragonomics, in a research note.
The Russian smartphone market, for example, totaled 31 million units last year, barely a tenth the size of China’s domestic market by comparison, according to research firm IDC.
But by choosing to stay in Russia, Chinese companies may be able to capture market share. How much longer they will be able to sell there is a big question, given escalating sanctions and export restrictions, analysts said.
Chinese smartphones made by brands such as Xiaomi and Honor are vying with market leaders Samsung and Apple for sales in Russia, while Chinese automakers such as Great Wall Motor and BYD have also targeted the Russian market in recent years.
These Chinese smartphone makers use chips designed at least in part with US-sourced technology.
This potentially exposes them to secondary sanctions against Russia via the Foreign Direct Product Rule, which states that products containing a certain percentage of US-sourced technology cannot be shipped to targeted parties without an appropriate license.
- Reuters with additional editing by George Russell