Russia’s overheated economy is squeezing one of its key China trading channels

Investment in Russia’s railways is to be slashed by nearly a third, complicating trade with China, state media reported

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Russia’s President Vladimir Putin, left, and China’s President Xi Jinping in front of the Great Hall of the People in Tiananmen Square, Beijing in May. Photo: Pool / AFP / Getty Images / TNS

Published: 3:12am, 24 Dec 2024Updated: 3:52am, 24 Dec 2024

One of Russia’s key trading channels with China is facing serious snags. That is a result of burdens stemming from Russia’s war-driven economy, which have fuelled a big slowdown in the nation’s rail industry – a vital means of trade between Moscow and Beijing.

Russia’s rail industry is in its worst slowdown since the Great Financial Crisis, with the downtrend “still going strong”, according to an analysis from the Russian research firm MMI Research.

Freight volume transported by Russian Railways, Russia’s state-owned rail system, slumped 5 per cent in the first 11 months of 2024 compared with the same period last year, according to MMI data cited by Bloomberg.

The slowdown is driven in part by Russia’s need to ship war-related materials, which have worsened supply bottlenecks and slowed the trade of key commodities, such as coal and aluminium, the outlet reported.

Investment in Russia’s railways is also being slashed, partly due to high interest rates in the nation, according to a report from the state-owned Tass news agency.

Russian Railways said it would earmark just 890 billion roubles (US$8.5 billion) for its investment programme next year, a 30 per cent cut from investment in 2024, Tass reported.