China-Russia bilateral trade is quickly growing opportunity corridor
Bilateral trade between China and Russia, being long time slowly going during 2000s, is now significantly increasing: from $ 69,5bln in 2016 to $ 84,1bln in 2017 and confirmed $ 107bln in 2018. The joint target is $ 200bln by the end of 2024. China is Russia’s largest trading partner, accounting for 15 percent of Russian international trade last year. According to the Russian regulator, both Russian and Chinese companies are willing to pay in ruble and renminbi and the share of national currencies in the mutual trade is increasing fast.
The growing trade potential between the two countries has been motivated by four factors:
- the huge energy deals of last few years regarding oil and gas
- the sanctions imposed by the EU and the US upon Russia and China, enlarging trade war between China – the US
- the relative weakness of the ruble,
- China’s BRI project combined with Russia’s EAEU development efforts
- mutual investments in integrated IT technologies and artificial intelligence
Underscoring their top IT quality, Russia and China rank first and second place, respectively, as the world’s best IT developers, according to international test 2016 (EW Digital News). Chinese programmers outscore all other countries in mathematics, functional programming and data structures challenges, while Russians dominate in algorithms. This has very specific implications as the world moves into a more IT-driven universe and with special attention to e-commerce and the new supporting businesses like 5G and blockchain.
Chinese UnionPay cards
Chinese UnionPay cards entered the Russian market in 2006 and experienced explosive growth in 2014, around the time that China established a comprehensive strategic partnership with Russia. In the following three years, the number of cards issued by UnionPay in Russia increased sharply to two million. In addition, driven by the Belt and Road construction, financial cooperation between China and Russia has been promoted. The use of modern ways to pay has also satisfied the need to safeguard Russia’s financial safety. In summer 2018, China’s UnionPay cards will be accepted by 90 percent of point-of-sale terminals and automated teller machines in major cities in Russia, including Moscow and St. Petersburg.
Russia’s two supermarket chains have announced that they will adopt Alipay as a way to pay at their stores before the Chinese Spring Festival 2018. Before this, Alipay is already connected with the public transportation systems in Moscow, including buses, subways, and even bikes. The large number of Chinese tourists in Russia and their strong buying power are reasons why Russian banks and merchants are interested to work with UnionPay and Alipay. So far, 10 banks in Russia have issued 1.3 million UnionPay cards, in a bid to offer more convenience to Russia users to pay overseas.
Chinese authorities have expressed often that anti-Russian sanctions imposed by Washington will not affect Chinese investors’ interest in the Russian market. Beijing will continue to support bilateral cooperation in trade and investment. New rounds of US restrictions under the Countering America’s Adversaries Through Sanctions Act (CAATSA) were introduced several times during last three years. In September 2018, Vice Minister of Commerce of China Fu Ziying announced that China and Russia when combining their efforts, are capable to overcome the negative consequences of the sanctions pressure and trade wars unleashed by Washington.
Russian Far East in Sino-Russian trade and economic cooperation
The program of accelerated development of the Russian Far East is a “permanent” object of cooperation. Russian government has tried to do its part by setting up the so-called Territories of Accelerated Developments offering fiscal and administrative privileges beyond those generally accruing to the Special Economic Zones dispersed over the Russian Territories as access to leasing and/or ownership of land for productive use.
The Chinese business have been interested in building materials, oil refineries, metal scrap processing, frozen fish and other food stuffs. Interested investors have applied from South Korea, Japan, Australia and Singapore. Work has just started or is in process. Other projects concern infrastructure. So far, the largest share of investors attracted by these special arrangements has been the Russians.
In November 2017, Bystrinsky mining complex has been put into operation in Transbaikal. This is one of the world’s largest copper deposits and the full-scale production capacity of 10 million tons per year is to be achieved in 2019. In a few months, the first batch of copper-gold and iron-ore concentrate will be delivered.
This complex is again evidence of major economic integration between Russia and China. Investment up to multi-billion dollars as roads, rail spurs and enormous infrastructure have been set up in what was previously untouched wilderness. This is the largest private venture in Eastern Russia. The complex will be mining gold, copper and silver ore and magnetite concentrate.
Russia-China Investment Fund (RCIF), launched jointly by RDIF and its Chinese counterpart China Investment Corporation in June 2012, has already approved ten joint investment projects in metals, tourism and infrastructure sectors and is mulling 32 new projects with total investment of up to $75 billion in 2018.