Chinese IT firms are expanding in Russia, filling the gap left by Western exits after the invasion of Ukraine.
While Chinese companies are taking advantage of the ever-stronger economic ties between the two countries, concerns are being raised about Russia’s level of dependence on its neighbor at a time when it is being choked by sanctions and IT firms are laying off staff.
Newsweek reached out to the Russian and Chinese foreign ministries with emailed requests for comment.
What to Know
Last year saw an 18 percent rise in the number of Chinese and Russian IT companies seeking help to penetrate “friendly markets” from the Russian-Asian Union of Industrialists and Entrepreneurs, which fosters economic cooperation between Moscow and its Asian partners, Russian newspaper Kommersant reported. Chinese companies have reportedly approached the organization twice as often.
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Chinese developers see a less competitive market brimming with opportunities, with Chinese applications now accounting for more than half of purchases on Russian app platform RuStore. Three-quarters of these are games, per the report.
The departure of Western tech companies such as Microsoft and Adobe in response to Vladimir Putin‘s unprovoked war against Ukraine, and Moscow’s move to reverse its ban on cryptocurrency payments, the legalization of crypto mining, and the introduction of the digital ruble in 2023 have opened the door wide to Chinese tech industries.
Local companies have only replaced 30-40 percent of foreign software, with the remainder being imported through third countries to skirt sanctions, the Moscow Times wrote.
The trend comes at a difficult time for Russia‘s IT workers.
Despite a shortage of skilled labor in most sectors of Russia’s war-time economy, tech companies have been carrying out mass lay-offs, Russian news outlet The Bell wrote last month, citing two-decade-high interest rates introduced by the central bank to combat inflation and temper demand.
The value of Russia-China trade reached $244.8 billion—a new high—in 2024, Chinese customs statistics showed, though the 1.9 percent increase paled in comparison to the 26 percent seen the year prior, amid export hangups and stalled cross-border payments resulting from internationalsanctions.
Chinese machinery, cars, spare parts and computers also flow into Russia, which continues to provide the world’s second-largest economy with discounted natural gas and oil in return.
Why It Matters
In addition to software development, many of the Chinese firms are capitalizing on opportunities to mine cryptocurrencies, or the process of using computational power to validate and add transactions to a blockchain.
Once a global leader in cryptocurrency mining, China banned the activity in 2021, citing financial and environmental concerns.
Russia is also becoming increasingly dependent on its neighbor at a time when its war-time economy is being choked by sanctions, with no end in sight.
What People Are Saying
Vitaly Mankevich, president of the Russian-Asian Union of Industrialists and Entrepreneurs, told Kommersant:
“For both Chinese and Russian companies, foreign markets are now limited, but not their own. In this regard, the number of “mixed” IT teams, where there are both Chinese and Russians, is increasing.”
“Import substitution is turning into Sinicization even in sectors that were traditionally considered Russian,” The Bell cited one observer as saying.
What’s Next
The war in Ukraine shows no sign of ending, though Donald Trump has said he’ll bring about a peace settlement.
Russia’s economy is likely to continue struggling under the weight of sanctions.
