The purpose of these meetings was to build economic ties which have lagged behind the considerable progress made in the political sphere. In April this year Russian President Boris Yeltsin and his Chinese counterpart Jiang Zemin signed a declaration confirming their broad agreement on geopolitical issues.
Demand for raw materials
Russia is currently China’s eighth largest trading partner, far behind the likes of Japan, the US and South Korea. China’s growing demand for raw materials and high technology presents a significant opportunity to Russian exporters. In 1996 bilateral trade amounted to US$6.84bn, a 25 per cent increase on the previous year. Russian exports to China grew by 35.6 per cent to US$5.15bn, while imports from China went up by just 1.6 per cent to US$1.69bn.
Despite a big fall in trade after the dissolution of the Soviet Union, China re-mains ,Russia’s largest business partner in East Asia. China accounts for 4.7 per cent of Russia’s foreign trade, putting it well behind Germany and the US.
During Yeltsin’s visit to China in April last year, the two sides signed 15 agreements designed to develop co-operation in the use of nuclear power, the protection of intellectual property rights, mutual assistance in currency control, assessment of the quality of traded commodities, power engineering, transport, space exploration and scientific-technical ex-changes. They also decided to formaliseregular meetings between the two prime ministers, which was set into motion on December 27 last year when Premier Li Peng visited Moscow.
Russian exports to China are dominated by raw materials. Ferrous and non-ferrous metals, fertilisers, machinery, chemical goods, oil and sea foods accounted for 90 per cent of Russian ex-ports. Imports from China 梞ostly consumer goods and foods ?are still largely delivered by shuttle traders. Last year, the import of Chinese foods dwindled to US$427m, while the import of consumer goods grew to US$893m.
Replacing shuttle trade
Mutual investments are modest. Nemtsov described as “ridiculously low” the total of 1,500 joint ventures in Russia involving Chinese capital. These joint ventures comprise eight per cent of all projects in Russia involving foreign in-vestment. The export of Chinese labour to Russia, however, has grown considerably of late. Russian investment in China fell from US$40m in 1993 to US$23m in 1995.
Both countries recognise that government action is needed to transform the nature of economic exchange which is still dominated by barter and shuttle trade. Shuttle trade has been affected by the imposition of tighter visa requirements, which has seriously impeded the flow of Chinese goods into Russia. Bar-ter trade has been hit by the high import duties exacted by Russia and by the perceived low quality of some Chinese goods. In the course of the latest meetings, both sides stated their intention to replace this archaic system with trade by more sophisticated methods based on world prices.
The main purpose of Chernomyrdin’s visit was to promote several projects for bilateral economic co-operation intended to increase the annual volume of bilateral trade to US$20bn by early next cen-tury. A co-operative agreement was signed between the Russian Ministry of Fuel and Energy and the Chinese National Oil and Gas Corporation to include the construction of oil and gas pipelines from the Kovytkino fields in Russia’s Irkutsk Region via Mongolia to the Pacific coast of China. These pipe-lines will make it possible to exploit the idle East Siberian oilfields whose aggregate reserves are estimated at more than 1.5 billion tonnes. The gas pipelines, which are expected to cost US$4bn-5bn to build, will pump 20-30 billion cubic metres of gas to China every year. Ac-cording to preliminary estimates, the oil pipeline will be put into operation in 2005 and the gas pipeline in 2003. An additional contract is about to be signed between the Russian joint-stock company Gazprom and the Chinese Natural Oil and Gas Corporation on the development of gas fields in China.
Power projects
Other major joint projects discussed by the two prime ministers include the construction of a high-voltage power transmission line from eastern Siberia to China. A con-tract worth US$1.5bn is to be put out to tender, according to Viktor Borovskiy, head of Irkutsk-based generating company Irkutskenergo. The line, to be built over the next two years, will extend over 2,500 km from Bratsk to Beijing via Mongolia. When it is operational by 2001, northern Chinese provinces will receive up to 20bn kilowatt-hours of electricity annually for 25 years and Russia will earn “tangible” foreign-currency revenues, he said. Irkutskenergo and a Chinese company intend to set up a joint company to implement the project in conjunction with foreign investors. A range of multinational corporations including Siemens and Hyundai and also international banks have expressed interest, Borovskiy said.
Mutual trade turnover is planned to be increased through Russia’s participation in big energy projects in China. Moscow is supporting a consortium of Russian entrepreneurs participating in the inter-national tender for the supply of equipment for the Three Gorges hydropower station on the Yangtze River. The overall value of the contracts may be as high as US$10bn. Competition from other consortiums is strong, with bids by major energy companies from Japan, Canada, Germany, France, Norway and Sweden. However, Russia expects to win orders for Despite the political warmth that now exists between Russia and China, trade exchanges have shown no marked recent improvement. High-level government missions are being organised to bring about such a change.
turbines and generators
The two premiers also discussed projects involving the export to China of equipment for atomic power stations, passenger planes and hydrofoil vessels. They signed a memorandum to establish a Russian-Chinese co-ordination committee on regional border trade and economic co-operation. Over the first four months of this year, trade along the 3,000km border between Heilongjiang province and Russia totalled US$220m, which is one-third higher than the same period of last year. This year Heilongjiang and the adjoining Russian regions have already signed over 70 agreements on the implementation of various projects.
Much of the work was concluded during Nemtsov’s visit to China, with a delegation which included representatives from Russian ministries, enterprises and banks. Businessmen signed a series of important documents. In particular, the International Machine-Builders’ Union of the Russian Federation and the Machine-Builders’ Chamber of China agreed to set up a joint Russian-Chinese Machine-Building Association. The Ministry of Railways from both countries concluded an agreement on co-operation in railway transport. A deal was also reached on the establishment of a joint venture in Shanxi province for the assembly of heavy-duty Ural trucks.
Military co-operation
Negotiations on the prospects for future military co-operation were conducted by the Russian state company, Rosvooruzheniye. Discussions were believed to cover questions of deliveries to China of super-modern Russian armaments and military equipment, including jet fighters, the world’s fastest destroyers equipped with Mosquito missiles, S-300 and Tor-M anti-aircraft systems and Varshavyanka submarines. The US and Japan have voiced their concern over the increase in Russian-Chinese military-technical co-operation and especially over the possibility of the export to China of sea-launched cruise missiles.
The possible delivery of Russian-made civilian aircraft to China was also discussed during the talks, according to Nemtsov, who suggested that China could acquire a licence to manufacture Ilyushin I1-86 passenger airliners, once the plane eventually receives international certification.
Talks are also under way on settingup a joint airline following a visit to China in April by Russian Transport Minister Nikolai Tsakh. The Volga-Dnepr airline is proposing to set up a joint venture with China’s State Aviation Corporation which operates from the city of Taiyuan in Shanxi province. Plans for the joint venture include freight and passenger flights inside China and between the two countries. It is also expected that a technical service centre for Russian civil aircraft operating in China will be set up there.
Other projects include possible Chinese investment into the Krasnoyarsk metallurgical factory’s production-expansion programme. That enterprise would be expected to supply China with aluminium and aluminium rolled stock.
Business for shipyards
Boris Nemtsov suggested using Russian technologies for eliminating chemical weapons left by Japan during its occupation of China earlier this century. He stressed that Russia viewed this multi-billion-dollar contract as highly important.
Among the members of Nemtsov’s delegation was Nuclear Energy Minis-ter Viktor Mikhailov, who has already succeeded in signing contracts for the supply of a nuclear power plant and uranium enrichment facility. During the June talks, Mikhailov discussed issues related to the conversion of a nuclear weapons complex. He is hoping to negotiate the establishment of joint ventures, “which will help to bring goods produced by the nuclear weapons complex to the Chinese market”.
China may also provide business for Russia’s troubled nuclear shipyards on the Pacific coast where strikes and pro-tests have erupted because of delayed wage payments. Chinese diesel submarines are to undergo repairs at the Zvezda shipyard in the town of Bolshoi Kamen, Primorye territory under an agreement reached between the Russian Rosvooruzheniye company and China’s defence ministry. The Zvezda shipyard intends to repair Russian-made Varshavyanka diesel submarines which were sold to China three years ago.
Clearly both China and Russia are determined to increase co-operation in all spheres, and to put trade on a more conventional footing. More high-level visits are in prospect for the rest of this year as the improved relationship develops further.
Border trade rade between Heilongjiang provnce and south-eastern Russia more than doubled between 1995 and 1996, shooting up from US$170m to US$350m.
China has specialised wholesale markets selling goods such as fruit and light industrial products in a number of bores der towns. Trade along this border thrived in the 1980s, but fell away after’ both the Russian and Chinese governments started to bring in restrictive laws which made life difficult for entrepreneurs.
Now, these have been eased and the Chinese authorities have encouraged small traders by exempting tariffs on items valued below US$120 for each trader. Tighter quality controls have also been brought in on both sides of the border, creating greater trust between dealers.
Trade growth has continued into 1997, with US$220m of trade conducted between January and April this year–an increase of US$133m on the same period in 1996. The share of Chinese ex-ports in this total of US$$220m was a little under US$50m.
In order to open up trade between north-east China and Russia, the Chiina’s ministry of Foreign Trade and Economic Co-operation recently held a trade fair in the provincial capital of Harbin, attended by trade representatives from over 60 countries. The objective was to promote the city as a bridge to the Russian market for Western.and South-east Asian business interests.
Focal point
Manzhouli, on the Inner Mongolian border with Russia, is fast building a reputation as a reliable and efficient land port. Last year it handled over seven million tonnes of traded goods, valued at US$230m. This was up by 48 per cent on the value of goods traded in 1995.
Already a focal point where a rail line from Beijing to Moscow crosses the border, Manzhouli has set up a Sint-Rus-sian Border Trade Zone. It is also working hard to improve its infrastructure through various projects. These include building an airport and an international telecommunications building, computerising its customs procedures, renovating railway stations and constructing new roads.
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