俄罗斯经贸合作重点转向东方

英文版：

On Prospects of RUSSIAN-CHINESE Economic Cooperaiton

By GUSELETOV B.P.    Senior Research Fellow, PhD, The Institute of Europe, Russian Academy of Science

Recently,
in connection with a change in the international situation, Russia and
China have entered a new round of cooperation, which Western countries
perceive ambiguously. At the same time, many Chinese and Russian experts
agree that Chinese-Russian economic and trade cooperation rests on a
solid foundation of political trust and a common desire for mutual
benefit, and meets the interests of both countries.

Despite
the introduction of sanctions against Russia (RF) by the United States,
the European Union and other countries, the policy of the China (PRC)
towards our country remained unchanged. A solid basis for further
dialogue is provided by the positions of RF and PRC on key political
issues, as well as the intention of the governments of Russia and China
to strengthen interstate relations in all promising areas of
cooperation. The agreement signed between the RF and the PRC in May 2014
became a significant impetus for strengthening interaction between the
two states: China secured gas supplies for itself for a 30-year period,
and Russia received a full-fledged competitive sales market also
guaranteed additional investment inflows.

On the results of trade and economic cooperation between Russia and China in the first half of 2018

According
to the Federal Customs Service (FCS) of the RF, in the first half of
2018, China came in first place among Russia's trading partners in both
import and export. Russian exports to China grew in the first quarter by
42.7% and exceeded $25 billion, while imports from China grew by 19%
and amounted to $24 billion.

China’s
share in Russia's foreign trade turnover was 15.2%, China’s share in
exports in the first half of 2018 was 12.2%, and its share in Russian
imports was 20.8%. In the first half of 2018, the trade turnover of the
two countries reached $49.95 billion, an increase of 30.2% compared to
the same period in 2017. In January-June, Russia's trade balance with
China in the first half of 2018 was positive $1.94 billion. In the first
half of 2017, the balance of Russia and China was negative and amounted
to $1.99 billion.
In the structure of Russian exports lead mineral
products, whose growth for 6 months amounted to 53.6%, and their total
share is 75.1% of the total Russian exports to China.
Followed by
–
Wood and wood products with an increase of 23.8% over the period (their
share amounted to 9.55% of the total exports of the Russian
Federation).

–
Food products and raw materials for their production and agricultural
products with an increase of 21.7% of them (their share in exports is
4.4%).

– Chemical industry, plastics, which showed a drop of 10.3% (the share of 3.16% of the total) .

–
Engineering, electrical engineering, means of transport, which also
showed a drop of 20.8% in Q1 (the share of which was 3.02%).

In the structure of imports in the first half of 2018, supplies prevailed.

–
Products of mechanical engineering, electrical engineering, means of
transport, which showed a 21.7% growth (57.2% of Russia's total imports
from China).
– Products of light industry – an increase of 14.1% (10.7% of total imports).
– Products of the chemical industry, plastics – an increase of 24.8% (share of 10.5%).
– Base metals and products from them – 16.7% (share 7.7%).
– Food products and raw materials for their production, agricultural products – 14.3% (the share in imports – 4.1%).

The
presented statistics on the structure and dynamics of changes in the
volumes of exports and imports between our countries convincingly show
that the fuel and energy complex, the mining industry and forestry of
Russia were of the greatest interest to Chinese investors. Consider the
prospects for the development of cooperation between the RF and China in
these areas.

Prospects for the development of trade and investment cooperation in the fuel and energy complex

The
share of mineral fuels, oil and petroleum products fell to 75% due to
lower prices for resources and the devaluation of the ruble. The main
export item is crude oil and crude oil products. In the near future, a
reduction in the share of crude oil is not expected, since several new
contracts have been concluded, and deliveries under previously concluded
contracts are planned. For example, on November 17, 2017, Rosneft Oil
Company announced an agreement with China Energy Company Ltd on supplies
of up to 60.8 million tons of oil to it by the end of 2022. In December
2019, gas supplies to China are scheduled to start "Power of Siberia-1"
in volumes up to 38 billion cubic meters. m of gas per year for 30
years.

Prospects for trade and investment cooperation in the field of forestry

Russian
exports of wood and pulp and paper products to China in recent years
grew by 15% and reached 3.4 billion dollars in 2016. The decline was
observed only in 2015, which is explained by the collapse in prices as a
result of declining demand in China as raw wood, and on the products of
processing. From 2013 to 2016, despite the steady decline in foreign
trade prices for wood, China’s share in Russian exports increased from
30% to 40% due to an increase in supply volumes. Moreover, the four
leading regions for the supply of timber to China (the Irkutsk Region,
the Khabarovsk Territory, the Krasnoyarsk Territory, the Primorsky
Territory) generally export 97% of untreated wood and 63% of the
processed wood. For four years, the share of unprocessed timber from 37%
to 28% in the commodity structure of exports decreased due to primary
processing (growth from 37% to 49%). It should be noted that the share
of products of rather deep processing (mainly wood pulp) remained at the
level of 20-23%.

Russia
is taking measures both to develop woodworking in the Far East and
Siberia, and to prevent illegal logging and shadow trade in timber.
Among them is the granting of preferences to enterprises investing in
woodworking projects; implementation of a unified state automated
information system for wood accounting and transactions with it;
implementation of a pilot project in the Irkutsk region to control the
origin of wood; the expected introduction of quotas for the export of
round wood from the Far East and prohibitive export duties outside of
quotas. However, the situation with illegal logging and smuggling of
wood remains difficult.

Cooperation
between Russia and China in the field of forestry is developing in
accordance with the Program of Russian-Chinese cooperation in the
development and use of forest resources. The results of the work are
summarized at the meetings of the permanent Russian-Chinese working
group. The first and second stages of the Program are implemented in the
Tomsk Region and the Jewish Autonomous Region (JAO). The Chinese Union
of Forest Industry Enterprises has been established, which plans to
certify Chinese companies to work in Russia. Today, among the
successfully developing large-scale investment projects of China in the
woodworking industry there are only three: the project of the RFP Group
holding for the creation of the Far Eastern Center for the Deep
Processing of Wood in the Khabarovsk Territory, in which the
Russian-Chinese investment fund owns 42%; the project of Ruskytinvest
JSC to create a timber industry cluster in the Tomsk region; Sibirles
Ltd. project for the production of veneer and furniture components in
the Tomsk Region. A number of new projects in the Republic of Buryatia,
the Novosibirsk Region, the Khabarovsk and Krasnoyarsk Territories are
at the discussion or initial stage of implementation. Of particular
interest is the project for the processing of wood waste in the city of
Kansk, Krasnoyarsk Territory, proposed by Jilin Energy Company Zhengten
LLC.

Prospects for the development of trade and investment cooperation in engineering

About
half of all Russian exports of engineering products to China accounted
for turbojet engines, although their share since 2013 has decreased by
24%. Four regions are leading in terms of these supplies: the Republics
of Bashkortostan and Buryatia, Moscow and the Yaroslavl Region.
Gradually, the share of electrical products in the structure of exports
to China is growing.

Chinese
automakers are interested in organizing the assembly or production of
cars in Russia, both for realization on the domestic market of the
country and abroad. For example, the Great Wall Motors plant in the Tula
region is being built; FAW's joint projects with Avtokor for the
assembly of crossovers in Kaliningrad and with Sumotori for assembling
trucks in the Primorye Territory; Successfully develop projects for the
production of automotive components in the Kaluga region. The company
plans to gradually increase the level of localization of production up
to 50% over five years. In addition to investments in the automotive
industry, the production of oil and gas equipment is being developed in
the Kurgan Region, and a machine-tool plant is planned to be built in
the Moscow Region.

On the prospects for cross-border and interregional cooperation between Russia and China

It
is expected that ongoing efforts at the federal and regional levels to
increase the investment attractiveness of the Far East, as well as new
formats of interaction will contribute to a qualitative shift in
Russian-Chinese border cooperation. On September 8, 2017, the first
meeting of the Russian-Chinese Commission for Cooperation and
Development of the Far East, the Baikal Region of the Russian Federation
and the North-East of China was held at which the implementation of
infrastructure projects, namely the construction of international
transport corridors Primorye-1 and Primorye-2, the
Nizhneleninskoe-Tongjiang railway bridge and the Blagoveshchensk-Heihe
road bridge, a high-speed highway between Vladivostok and the cities of
the northeastern provinces of China. Investment projects in the sphere
of industry were also considered, including the creation of an
export-oriented cluster for deep processing of steel with an investment
volume of about $ 2 billion. The Ministry for the Development of the Far
East of the Russian Federation is developing a program of
Russian-Chinese cooperation between border regions.

A
striking example of interregional cooperation is cooperation in the
Volga-Yangtze format, within which 21 joint investment projects are
being implemented for the production of building materials, the
agro-industrial complex, mechanical engineering, high technologies, etc.

Conclusion

So,
we can note that the development of cooperation between these countries
is extremely important both for the economies of these countries, as a
whole, and for their individual regions. Russia-China relations affect
almost all spheres of activity, including not only traditional direct
trade and production relations, but also large investment projects,
projects for the development of regional and cross-border trade and
economic cooperation, programs in the field of culture, science, and
education. It is also important that the alliance between Russia and
China is gaining momentum and moving to a higher level.

In
2018, Russian-Chinese cooperation reached a new level. The process of
rapid growth of cooperation between Russia and China coincided with a
sharp deterioration in US-China relations, which began in the spring of
2018. The trade war led to the erosion of the economic basis of US-China
relations, which played an important stabilizing role. During the year,
the conflict due to an imbalance in bilateral trade evolved into a
full-fledged economic war, in which the United States attacked the
high-tech sectors of the Chinese economy, and China, for its part,
introduces reciprocal tariff barriers and implements an active strategy
of import substitution.

Russia,
in turn, is gradually moving the vector of trade and economic
cooperation from the West to the East, developing trade and economic
relations with the dynamically developing countries of the Asia-Pacific
Region (APR), primarily with the PRC, in order to expand the sphere of
its economic interests. This will allow it to minimize the losses that
the Russian economy has suffered as a result of the global financial
crisis. At present, the development of trade and economic cooperation in
the eastern direction is becoming more attractive for Russia due to the
more rapid economic development in the Asia-Pacific countries compared
to the United States and European countries.

Author | GUSELETOV B.P.    Senior Research Fellow, PhD, The Institute of Europe, Russian Academy of Science 

Design | Jiang Lingzhi