China’s advanced machine tool exports to Russia soar after Ukraine invasion

Chinese shipments to Russia of an important class of advanced machine tools have increased tenfold since the full-scale invasion of Ukraine, with the country’s producers now dominating trade in high-precision “computer numerical control” devices vital to Moscow’s military industries.

The soaring shipments of CNC units, which permit extremely precise metal milling, have become a big concern to Ukraine’s allies as they seek to crack down on Russia’s access to the equipment.

Russian customs returns show Chinese producers shipped $68mn worth of CNC tools in July, the latest verifiable figure available, up from just $6.5mn in February 2022 when Moscow launched the full-scale invasion.

Michael Raska, assistant professor at Singapore’s S Rajaratnam School of International Studies, said CNC exports were an example of how China and Russia were being drawn into a deepening military-industrial partnership.

“China and Russia share the same political interest, which is to challenge and confront the US,” Raska said. “The fact is Russia has been cut off from importing European machinery, it has no choice but to rely on China.”

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Russian imports of CNC tools from the EU, historically its main source, have dramatically fallen as restrictions have tightened since February 2022. Analysts said Moscow was seeking to obtain CNC tools from sources that would not be closed off by international controls.

The customs returns show Chinese-origin CNC devices made up 57 per cent of Russian imports by value in July, up from just 12 per cent before the war. They suggest Moscow also continued to import substantial amounts of CNC tools made in Taiwan and South Korea.

In November, the US imposed sweeping sanctions on all significant Russian importers of CNC tools — including some that had moved less than $200,000 of equipment since the invasion in February last year. Chinese companies that continue to trade with the Russian importers now risk action from the US that would imperil their ability to trade in other markets.

Beijing insists it does not ship lethal weapons to Moscow and denies supporting its neighbour’s war effort, but also rejects the use of sanctions. Chinese shipments of products including oil, machinery, consumer goods and cars are helping to sustain Russia’s sanctions-hit economy. Xi Jinping, president of China, told Russia’s Vladimir Putin in October that annual trade between the two countries had hit a “historic high” of nearly $200bn.

Allen Maggard, an analyst at the Washington-based conflict analysis organisation C4ADS, said CNC tools could “rapidly produce complex components from metal and other rigid materials with a consistent degree of precision and accuracy. These qualities make CNC machine tools particularly valuable for defence manufacturing.”

They are also often large pieces of equipment, making them harder to smuggle into Russia from the west than smaller components such as microchips.

A Financial Times analysis of export records shows some major winners from the Russian surge have strong links with China’s People’s Liberation Army.

Wuhan Huazhong Numerical Control, for example, has increased exports to Russia. In 2017, it was the main contractor in a “Brain Switch Project” — a scheme to replace foreign CNC systems with domestic ones in the defence industry — and has worked with Chinese jet fighter maker Shenyang Aircraft Corporation.

HuazhongCNC was itself the subject of US sanctions between 2008 and 2010 under an act banning the transfer of weapons technology or equipment to Syria, Iran and North Korea. The company did not respond to a request for comment.

Emily Kilcrease, a former deputy assistant US trade representative, said Washington had been reluctant to use financial sanctions to target Chinese companies helping Russia because of concern that doing so would reduce the effectiveness of such measures in case of a crisis with Beijing.

“That dynamic about overuse is very much on the administration’s mind,” Kilcrease said. “They know that these sanctions and export controls are never going to be perfect. And so what they’re really focused on is making sure that what Russia can get is inferior goods. It’s cost imposition — making it much more difficult and expensive for Russia to get these sorts of machine tools.”

Analysis by the Bank of Finland Institute for Emerging Economies suggests the median price to Russia of a basket of Chinese goods that could support its war effort rose 78 per cent from 2021 to 2023. The price of Chinese exports of the same goods to other countries rose just 12 per cent.

Existing US sanctions and export controls against Beijing’s military contractors over other issues have led many Chinese companies to disregard potential US sanctions risks, according to Alexander Gabuev, director of the Carnegie Russia Eurasia Center in Berlin.

Many Chinese companies “expect that sooner or later, all companies linked to the People’s Liberation Army will be sanctioned”, Gabuev said. “So they think either you can try to stay on the market by avoiding deepening your military ties and get sanctioned anyway, or you can just go ahead with it.”

How Russia has deployed the Chinese CNC devices it has imported is unclear. Maggard said he believed Russian defence plants were only “beginning to use Chinese CNC machine tools”.

Analysts are yet to positively identify any being used on social media or during hours of propaganda footage filmed inside Russia’s high-tech military factories. CNC devices pictured are still all from European, Taiwanese, Korean or Japanese suppliers.

This picture is supported by other sources. For example, customs records show CFT, a large now-sanctioned Russian importer of CNC devices, imported very few Chinese-origin products up to July. A leaked internal document from CFT shows it is a supplier to Russian defence manufacturers including Aeroscan, which produces the Lancet kamikaze drone that has inflicted serious losses on Ukrainian forces. CFT did not respond to a request for comment.

Olena Yurchenko, an analyst at investigative and advocacy organisation the Economic Security Council of Ukraine, said it would be “almost impossible” to use a Chinese CNC machine in a plant that had based its production processes around a tool from another producer with different specifications.

A preference among defence manufacturers for equipment from other countries may also reflect scepticism about the quality of Chinese machines. Maggard noted recent public comments from a Russian sector expert who said that Chinese tools were less precise, less accurate, and had shorter operational lifetimes than equipment made by German and Japanese companies.