During his trip to Beijing in June, Russian Minister for Atomic Energy Yevgeniy Adamov said Russia would "build as many uranium enrichment plants in China as the Chinese want". It was Adamov's first trip abroad after his appointment to the post, signalling the importance Russia attaches to nuclear trade with China. Attempts to develop overall trade links with Beijing have been disappointing, but Russia is making headway in its exports of nuclear technology.
Russia has already built one gas centrifuge enrichment plant at Hanzhung in Shanxi province. The first stage was completed in 1996, nearly a year ahead of schedule. The second stage will be commissioned later this year, and the third in 2001. Adamov notes that, "although we are not supplying China with Russia's most advanced technology, it is still high-technology and better than anything in the US". The plant, part of a 1993 agreement, is being built Continued on page 150 Russian nuclear fusion on a turnkey basis and does not involve the transfer of any technology to China.
Two 1,000MW units of China's Liangyungan nuclear power plant are also being built with Russian assistance at a cost of US$2.5bn per unit. Adarnov is pressing for further co-operation to include major projects "much wider in scope than those now under way in China". They could include theoretical physics research, uranium conversion and waste processing. In its way, Russia will have to withstand stiff competition from US corporations which are eager to enter the Chinese market now restrictions on high technology trade have been lifted by Congress.
"They have set themselves the task of conquering the Chinese nuclear power market," Adamov concedes, before adding that Russia can still offer better terms, including much cheaper credit. "Russia charges less, overall, for building power-generating sets than other countries. What is more, Russia is charging China only four per cent interest a year on the loan for building the station, rather than seven per cent, like France, and it is accepting part the payment in the form of Chinese goods. We are natural partners with China."
Adamov believes the chances of further Chinese nuclear contracts are high and is hoping to build another two power plants. "We will raise this question in a couple of years' time when the result of the construction of the first two sets is visible and we have learnt to work without interruption." By then, international competition for China's nuclear market will be in full swing.
Foreign competition is intensifying. Westinghouse Electric and General Electric of the US have already formed teams with Japan's Mitsubishi, Toshiba and Hitachi to bid for work. Westinghouse has promised to help China become an exporter of nuclear power. Other competitors include Framatome of France, which has already supplied four reactors to two nuclear power stations in China. Canada is also interested.
In future, Russia will probably have to withstand competition from two major groups: one, comprising Westinghouse, ABB-CE and Framatome, which use pressurised water reactors; and the other a consortium comprising GE, Toshiba and Hitachi which supply boiling water reactors.
Some Westem companies have decided that co-operation with Russia is the best way to penetrate the Chinese market. Siemens of Germany, for instance, has signed a US$165m contract to plan and supply instrumentation and control (I&C) systems for Lianyungan. Russian I&C systems are generally poor and over the past few years Siemens has been involved in upgrading various plants in Russia and former Soviet states.
Siemens' KWU engineering unit will supply the systems to plant operator Jiangsu Nuclear Power Corporation. China Nuclear Energy Industry Corporation is responsible for importing the equipment. Siemens board member and KWU chief executive Adolf Huettl said that the power station deal marked a major breakthrough. "With this order we have now gained afoothold in the Chinese market for nuclear technology, following on from our success in hydroelectric and coal power stations," he said. Huettl added that Siemens had worked closely both with the Chinese and Russian nuclear authorities to improve the reactor's safety features. China National Nuclear Corporation board member Chen Zhao Bo said China chose the Siemens control system because it was the most modern and had the best track record.
Dwindling trade record
Apart from nuclear, however, Russia's trade with China is not doing well. In 1996 it stood at US$6.8bn. In April 1997, when Russian President Boris Yeltsin and Chinese counter-part Jiang Zemin met in Moscow, they agreed to try to increase it to US$20bn by the year 2000. However, at the end of 1997 it had fall-en to just over US$6bn. According to Chinese customs statistics, in the first five months of 1998 total trade was US$2.23bn, which is 3.7 per cent below the figure for the same period last year. Russian exports to China during that period dropped by 23 per cent to US$1.356bn, while imports from China went up by 57 per cent to US$878m.
Russia continues to import Chinese consumer goods, meat and other foodstuffs, and to export mainly raw materials, metal products and fertilisers. However there are some signs that the share of machines and technical goods and equipment exported to China is increasing. Trade and economic co-operation were a focus of Russian Prime Minister Sergei Kiriyenko's meetings during his visit to China last month a trip designed to prepare for President Yeltsin's visit later in the year.
Russian newspapers highlight the poor trade performance. Nezavisimaya Gazeta wrote on June 30 that `against the background of the US-Chinese trade turnover of US$50bn, the Russian-Chinese US$6.8bn looks like some sort of misunderstanding'.
It is along that 4,300km border that most bilateral trade takes place. Both sides are eager to expand trade, but there are many obstacles. Most activity is on a small scale individual traders selling Chinese jeans or tennis shoes. There is also a flourishing illicit trade, including everything from endangered species to bootleg Chinese vodka. Illegal imports from China amount to at least US$3.6bn a year, trade officials say.
China's border towns are geared to Russian tourists who flock in regularly in bus-loads. Suifenhe, a city of 180,000, is typical of the Chinese cities at the crossing points. Russian money has helped create a boom town out of what was a village of 10,000 people in 1991. But when there are no Russians, the city is virtually empty. The trans-port stops running, electricity shuts down and all the shops are closed. The city basically operates only for Russians. In 1996 Russian tourists and traders bought an estimated US$l.5bn-worth of consumer goods in China, according to the Far Eastern branch of the Federal Customs Service. Tourists from Russia's Maritime Territory alone spent US$350m last year.
Chinese traders regularly make the opposite journey. However, many of the 13 border crossings between Russia and China in the Far East are still little more than dirt tracks on the Russia side, says Mr Sergei Remizov, the Vladivostok-based manager of the Association of International Road Carriers' Far Eastern branch. The Chinese are geared to doing business but Russia has no staff or facilities to process the trucks that ply between the two countries.
Hunters from a minority group close to the Russian border ask, 400km south of Khabarovsk, stopped three trucks containing alcohol worth US$250,000. Border guards periodically catch Chinese sneaking into Russia to catch endangered species ?used as food or in traditional Chinese medicine. This year customs inspectors seized everything from deer antlers worth US$400 a kilo to US$13,000-worth of illegally harvested ginseng.
But if direct trade holds out few prospects, Russia's far east is hoping to benefit from indirect trade by becoming a transport hub linking the US with Asia. In March a new 14-lane, US$13m border road crossing was opened linking Zabaykalsk, Chita region, with Manchuria. It is expected to handle up to 60 per cent of all road freight between the two countries.
Also in March the town of Bikin in the south of Khabarovsk Territory of Russia and Raohe in Heilongjiang province signed a co-operation agreement under which a new cross-border point will be opened at Pokrovka-Raohe and a ferry will be launched across the Ussuri . River.
Thriving black economy
China's trade with neighbouring regions of Russia is erratic. While it is increasing with some regions, it slumped in Maritime Territory, according to the regional administration. This is partly because the collapse of communism opened Russia to imports from other countries. But it is also because Russia, is not Beijing's top priority. "When the Chinese bosses .meet Yeltsin, they always talk politics and friendship," says Andrei Zagumyonnov, commissioner for the Mar itime Territory's Internal Trade and Foreign Affairs Committee. "But when they meet President Clinton, they talk economics and they sign a huge contract with Boeing."
Russia's complex tax code is a major obstacle to trade. There are 44 taxes which take more than 85 per cent of the profit from a company, trade officials explain. This encourages an economy based on under-the-counter cash deals. The head of the Suifenhe mayor's office department of foreign affairs, said business with Russia suffers because there is no reliable way to make wire transfers in the Russian Far East. And Russian law provides little protection for investors.
But not all the obstacles to trade are Russian in origin. A major problem is crime in China, in particular attacks on Russian traders. Remizov tells of a trucker who was stuck overnight at the Poltavka crossing last year. Chinese hooligans assaulted him and stole his cargo. Police did nothing. "There was even a recent case where a guy was eating lunch, and they stole his truck and drove away," he says. Russian truckers in protest refused to travel to China for a week earlier this year, and Chinese officials then agreed to crack down on crime.
While legitimate business remains slow, the black economy is thriving. Russian loggers illegally ship timber to China, where it is milled and sent on to Japan, depriving Russia of the added value from processing the lumber. And the export of scrap metal is increasing as thieves steal metal from factories, hot water pipes and Second World War monuments. At the same time,. bootleg vodka, counterfeit Russian currency, uninspected meat and undeclared consumer goods regularly enter Russia.
In February customs agents in Lesozavod- Shorter cargo routes
In May a regular cargo and passenger auto service began between the Kraskino station in the Maritime Territory and the Chinese city of Hungchun. The 80km road gives Jilin province access to the Maritime ports, and through them to Japan, the US, Canada and the countries of the Asia-Pacific region. The route is nearly 1,000km shorter than the ocean route round the Korean peninsula. It is supported by a new railway line between Russia's Zarubino port and Hungchun.
This year, ports in Maritime Territory are to handle lm tonnes of coal en route to Japan from Heilongjiang province. US trade bound for China may soon be routed through the territory, if officials here can work out a package tempting enough to American investors. Local Duma Chairman Sergei Dudnik is suggesting rerouting sea cargo through Vladivostok and Nakhodka ports, then sending it by land to China. This would cut transportation time by five days.
"The role the Russian Far East will play as a transportation hub is clear," says American consul to Vladivostok, Jane Miller Floyd. "If locals are able to demonstrate the economic efficiency of their alternative, there's nothing barring that move."