U.S. tariffs on Chinese goods are going to lead to a “substantial improvement” between China and its neighbor Russia, the former People’s Bank of China (PBOC) Governor Zhou Xiaochuan told CNBC Tuesday.
“From the economy’s (point of view) and the financial sector’s (perspective), we would like to have a normal relationship with the U.S.,” he told CNBC’s Geoff Cutmore at the Eastern Economic Forum (EEF) in Vladivostok, Russia.
However, he added that a massive package of U.S. tariffs on Chinese imports, instigated by President Donald Trump, has made China “look at other markets and to diversify our trade and business relationships.”
“In this sense, China’s relationship with Russia and also EU countries is going to have a substantial improvement,” he said.
Chinese President Xi Jinping arrived in Russia on Tuesday to attend the forum for the first time, at the invitation of Russian President Vladimir Putin. The two superpower leaders will hold talks at the forum, marking their third meeting this year and increasingly close diplomatic relations.
Closer business and political ties between China and Russia come at a time when the U.S. is implementing punitive tariffs on China’s imports and experiencing frosty relations with Moscow amid an ongoing investigation into alleged Russian meddling in the 2016 U.S. election.
China has responded with sanctions on U.S. goods but it stands to lose out given its massive trade surplus with America.
Commenting on the importance of Russia and China’s business and diplomatic links, Zhou Xiaochuan said the neighbors had historically enjoyed good relations.
“China and Russia have always had a good relationship, we are the neighbor. China actually imports a large amount of oil and gas from Russia so the economic link is (there) and they’re very important to each other,” he said.
Earlier on Tuesday, it was announced that a group composed of Russian and Chinese businesses is considering 73 joint investment projects cumulatively worth more than $100 billion. The group overseeing the potential billions in investment is the Russian-Chinese Business Advisory Committee, which held an annual meeting this week at the Vladivostok forum.
Separately, Russia is launching a week of military exercises in the far east of the country that China is participating in.