Sheng FengLin, Intern at the Russian National Committee on BRICS Research – special for InfoBRICS
With the development and evolution of the world structure, the relations between China and Russia are getting closer. China and Russia are in the best period in history, and the economic and trade relations between the two countries are also developing in depth. There are different degrees of cooperation in many fields such as energy, science and technology, agriculture, and tourism. As an important country on the Eurasian continent and at the same time as an important country on the "One Belt and One Road" construction, Russia will surely promote economic cooperation between China and Russia.
Expand the scope of bilateral trade and optimize the industrial structure
China and Russia are both one of the largest developing countries in the world. China is the most populous country in the world. Each person has a relatively small amount of resources, but the per capita demand and consumption are large. Russia is the largest country in the world. It is rich in various resources such as coal, oil, and natural gas, and has a relatively high per capita resource. Therefore, China and Russia are highly complementary in the resource industry structure. As China and Russia joined the WTO successively in the 21st century, the scale of bilateral trade between China and Russia has continued to expand. In addition, bilateral trade will be promoted through the continuously strengthened bilateral economic and trade joint committee and bilateral free trade zone negotiations. At the same time, many expos between the two countries will also promote the increase of bilateral trade.
The expansion of the scale of Sino-Russian bilateral trade is not only reflected in the continuous increase in the total trade volume, but also in the expansion of the scope of Sino-Russian trade cooperation projects. For now, the types of imports and exports between China and Russia continue to expand. Energy cooperation includes oil, natural gas, electric power, coal, nuclear energy, power equipment and other cooperation projects. The field of economic and trade cooperation has also expanded from the original trade in goods and services to multiple fields such as logistics, transportation, tourism, science and technology, military, environmental protection, and infrastructure. There is huge potential for bilateral trade cooperation between China and Russia. Through the in-depth development of their respective resource comparative advantages, they can not only provide each other with most-favored-nation treatment, but also promote the smooth development of bilateral trade, so as to achieve the common goal of mutual benefit.
The expansion of the scope of trade cooperation is closely related to the complementary status of China's bilateral trade structure. In the bilateral import and export trade between the two countries, China's exports to Russia are mainly concentrated in labor-intensive products such as textiles and raw materials, mechanical and electrical products, and metal products. Most of them are industrial products, accounting for about 90% of the total export trade commodities. As a major energy country, Russia has abundant fossil fuel resources such as petroleum, coal, and natural gas. Its main foreign trade export products are also biased towards energy, such as mineral products and chemical products. In the Sino-Russian bilateral trade, the top three types of products that account for the proportion are mineral products, wooden products and chemical products and other resource-intensive products. Among the top ten commodities in export trade, energy products account for about 80% of the total export commodities. The above shows that China's exports to Russia are mainly industrial products including technology-intensive and labor-intensive products, while Russia's exports to China are resource-intensive products. The complementary features of the trade structure have laid the foundation for the expansion of the scope of trade cooperation between the two countries.
With the construction of the "One Belt One Road" strategy, on the basis of industrial complementary advantages, it will not only expand the scope of bilateral trade, but also optimize the industrial structure. The adjustment of industrial structure is an important issue in economic development. Optimizing the industrial structure can better allocate the available resources of the entire society, thereby playing a greater role and promoting the economic development of the entire society. Under the "Belt and Road" initiative, the cooperation between China and Russia has been continuously strengthened, and the scale of intra-industry and out-of-industry trade has continued to expand. The resulting economies of scale and the improvement of technological levels have formed the necessary conditions for promoting industrial upgrading. Trade cooperation continues to deepen, international exchanges of the same type of products are growing rapidly, multinational companies continue to be established, foreign products continue to enter the local market, and domestic enterprises are encouraged to learn advanced technologies and innovate existing technologies, improve their own technological level, and increase the country's technological stock. Ultimately lay the foundation for the upgrading of industrial structure. On the other hand, a large number of foreign products enter the domestic market, which will bring a certain degree of impact to local products. Some commodity markets with relatively backward technology are facing huge competitive pressure. This will encourage domestic enterprises to improve their production technology and optimize the industrial structure, thereby ultimately improving product quality and enhancing international competitiveness.
The implementation of the "Belt and Road" strategy is inseparable from sufficient funds, which will promote the continuous strengthening of financial cooperation between China and Russia. In terms of the data on China's direct investment in Russia released by China's National Development and Reform Commission, China invested more than US$700 million in Russia in 2014. In 2015, China's direct investment in Russia reached US$2.961 billion, a year-on-year growth rate of 367.3%. As of 2015, the stock of Chinese investment in Russia was about 33 billion U.S. dollars. The investment industry accounted for the following ratios: mining industry accounted for 47.6%, financial industry accounted for 25.9%, agriculture, forestry, animal husbandry and fishery accounted for 11.7%, and manufacturing industry accounted for 9.3%. During Premier Li Keqiang's visit to Russia in 2013, in order to achieve the purpose of promoting trade exchanges, the central banks of China and Russia signed a RMB and ruble swap agreement with an amount of RMB 150 billion. Since the signing of the agreement, the cross-border RMB settlement volume has increased sharply. According to statistics from relevant departments, the Bank of China in Russia handled 13.3 billion yuan in cross-border RMB settlements in 2014 alone, which is a five-fold increase over the original business volume. In the first quarter of 2015, the exchange volume between the ruble and the renminbi increased by more than five times, and the number of companies opening renminbi accounts in Russia also increased sharply.
In 2015, the Export-Import Bank of China and the China Development Bank signed loan agreements with many financial institutions such as the Russian Federal Reserve Bank, the Russian Foreign Economic Bank, and the Russian Foreign Trade Bank. The main purpose of the agreement is to support the development of large-scale projects. This is also the first time that renminbi loans have been used in a Russian construction project, marking a new stage of China-Russia financial cooperation. In October 2015, the second China-Russia Expo "Sino-Russian Financial Cooperation Conference" was successfully held in Harbin. This meeting marked the official establishment of the China-Russia Financial Alliance. The establishment of the alliance not only promotes the construction of the China-Russia Economic Corridor, but also benefits the development of the comprehensive strategic partnership between the two countries. In the context of the in-depth implementation of the "Belt and Road" initiative, the financial cooperation between China and Russia will surely be continuously strengthened.
In addition, China's economic and trade investment environment has gradually improved. China and China are both important members of the World Trade Organization and the two major BRIC countries. They should strengthen their role in maintaining trade order, accelerating national economic transformation, and promoting economic development. China and Russia are adjacent to each other geographically, and the bilateral economic and trade cooperation between the two countries has gradually deepened in recent years.At this stage, there are more than 600 border trade cooperation projects implemented by China and Russia. China has gradually realized the importance of establishing border trade with Russia's Far East, Eastern Siberia and other places. By establishing border trade with these areas, the trade volume has reached more than US$5 billion, accounting for more than 1/6 of the total bilateral trade between the two countries.
Due to the implementation of the "One Belt One Road" strategy, in addition to deepening financial cooperation methods, it is also necessary to attract more funds to support construction, which will promote the continuous innovation of financial cooperation methods between China and Russia. According to the forecast of the Asian Development Bank, the construction of infrastructure in Asia will require an investment of US$8 trillion from 2010 to 2020, and an average annual increase of US$800 billion will be required. However, the annual quota of development funds provided by the World Bank and the IMF for Asia is far from reaching the standard, and it is completely unable to meet the social and economic development needs of the participating countries of the "Belt and Road". The huge funding gap requires China and Russia to broaden financing channels, innovate cooperation models, and continuously promote higher-level financial cooperation. Therefore, continuously innovating financial products and financial mechanisms will become a major trend in the future. The issuance of various securities, the establishment of various funds and financing products will bring rich dividends and opportunities. China and Russia can also use the Internet financial platform to actively guide private funds from China and Russia to participate in the construction of the "Belt and Road". Governments of various countries vigorously support financial institutions, accelerate the construction of online financial institutions, and increase strategic support in the form of syndicated loans and cross-border M&A loans, so as to create the world's leading online financial transactions. At the same time, the innovative financial cooperation between the two countries can focus on the use of social idle funds for investment, thereby effectively using insurance funds, social security funds, pension funds and other civil society capitals with long investment periods and low returns to invest in the construction of the "Belt and Road".
As the most important source of energy consumption in the world today, oil production and reserves have a great influence on the energy situation. At present, as far as each country is concerned, oil energy reserves are sufficient, and oil production is rising steadily. Both China and Russia are major oil producers, but the gap between reserves and production values is relatively large. Russia is a truly big oil country with abundant oil resources. On the basis of meeting domestic oil demand, Russia can also earn foreign exchange through exports to other countries. The general distribution of natural gas reserves is similar to that of oil. Russia and the Middle East account for most of the world's reserves. China is short of natural gas and Russia is abundant. Importing natural gas from Russia is a good choice. Regarding coal output, China is the world's largest coal producer. In 2015, it produced 1.92 billion tons, accounting for 50% of the world's total output. Russia's coal resource output is not so impressive. Energy trade between the two countries can effectively solve this problem.
In short, Russia's energy output is far greater than domestic consumption, and coal, oil, and natural gas are Russia's main sources of foreign exchange earnings. Due to its large population and low per capita resources, China has long been a major energy importer and consumer country, and has been an importer of coal, oil and natural gas. Russia is rich in energy and can be exported to China. China's domestic energy demand is strong. In turn, it needs to import large-scale primary energy such as oil, natural gas and coal from Russia. The complementary energy structure of China and Russia provides the material basis for cooperation between the two countries.
With the strengthening of energy cooperation under the "One Belt, One Road" strategy and the lack of clarity in the existing energy cooperation mechanism, this will inevitably promote the overall planning and consideration of China and Russia in the process of advancing energy cooperation. At the same time, it will formulate comprehensive policies and mechanisms for cooperation in trade, investment, infrastructure construction and other fields, including strategic plans for energy cooperation, and issue a series of clear programmatic documents and laws and regulations. This will determine the strategic direction, focus and methods of energy cooperation between China and Russia, enhance energy cooperation, and expand areas of cooperation. It is an inevitable trend to strengthen the construction of legal systems in the field of energy cooperation, and actively promote the construction of related legal systems in energy trade, technical cooperation, investment and dispute settlement. Then further coordinate the interests and disputes in the Sino-Russian energy cooperation to ensure the smooth development of this mutually beneficial and win-win cooperation.
The volume of energy import and export trade between China and Russia is huge, but the impact on energy prices is very small. China and Russia can expand the scale of energy demand and supply by continuously deepening the energy cooperation mechanism, so that they can directly influence the international energy flow by controlling output or changing the direction of demand, and have a certain right to speak in the international energy pricing. Therefore, China and Russia can deepen energy cooperation through fair energy trading rules and pricing mechanisms, and form and build regional energy cooperation mechanisms. This is not only conducive to enhancing China and Russia's right to speak in world energy issues, but also building a fair, reasonable and efficient international energy order. On the other hand, due to the large number of countries participating in the "Belt and Road" initiative and its large radiation area, it is possible to establish an energy cooperation mechanism between China and Russia and neighboring countries, and use this to build a platform for strategic cooperation on the surrounding international energy. As a result, a unique energy supply sector between China and Russia is formed, which is of great significance to changing the international energy strategy that is seriously imbalanced.
Russia is at a critical stage of development. The economic development model that relied on exporting oil and natural gas in the past is no longer in line with or suitable for the needs of today's world economic development. Russia urgently needs to change its current economic development model. However, the biggest problem facing Russia's transformation of its economic development model is that the development of infrastructure is seriously lagging behind. With the construction of the "One Belt, One Road" strategy, China and Russia will resolve overcapacity by strengthening bilateral infrastructure cooperation in the Far East and realizing the "going global" of China's equipment manufacturing industry. At present, China and China have successfully launched the West Route Natural Gas Transmission Project and the Sino-Russian Crude Oil Pipeline Project. Cooperation in the construction of high-speed railways and the transformation of the Siberian Railway is also deepening.
Russia needs to strengthen cooperation with China in the "One Belt, One Road" strategy, so that China-Russia infrastructure construction will have broad development prospects, and Chinese investors can promote the development of remote areas in Russia. China's investment cooperation can become a development factor, enhancing the field of China-Russia infrastructure and creating new growth points. In short, there are many large-scale infrastructure construction projects in the Russian Far East. Under such circumstances, continuous strengthening of cooperation with China under the framework of the Belt and Road Initiative has become an inevitable choice for Russia. In China, with the continuous changes in market supply and demand, some high-quality excess capacity has been produced, which may happen to maximize economic benefits in Russia and bring huge benefits. With the continuous completion of infrastructure construction, these high-quality production capacity can be landed in Russia, helping Russia to achieve effective economic transformation.
Enhance the image of Chinese companies
China and Russia are two neighboring large developing countries, which provides a geographical advantage for the two countries to expand the "Belt and Road" strategic cooperation. Over the years, China has been actively carrying out technological innovation and continuous development. my country has been at the forefront of international development in high-speed rail, communications, nuclear energy, electric power, highways, ports, telecommunications and other fields. In some key areas, it has followed the pace of the world's same industries and launched simultaneously. In order to create attractive products, insist on product innovation and highlight highlights, so that products are not only high-quality made in China", but also unique "made in China", with great competitiveness in the world. However, Russia is affected by the depreciation of the ruble and the Ukrainian incident. The economic structure has not yet been adjusted, and the development of infrastructure has been seriously lagging behind. There is also a need for transformation and upgrading in all manufacturing industries. Strengthen Sino-Russian economic and trade cooperation under the "One Belt and One Road strategy, and deepen Sino-Russian cooperation in heavy industry, aviation, high-tech, infrastructure, tourism, and shipping. It can promote the effective output of China's independent research and development technology, and solve the problems of the backward development of Russian infrastructure and the lack of technology in certain industries. In addition, due to China's high population density, it has long been exporting labor-intensive products internationally, especially basic manufacturing products, and it has left an impression of "crude" in the international community. However, the export of these high-tech products and technologies will not only open up the international development of Chinese companies, but will also reverse the negative impact of the "cheap quality" of Chinese products in the past, thus establishing a good image for Chinese products and companies.
As two important emerging economies in the world, China and Russia are two important markets for world economic development. And the current stage is an important stage in the reform and development of China and Russia. The proposal of the "One Belt One Road" strategy has strengthened the economic and trade cooperation between China, which is undergoing transformation and upgrading, and Russia, which is undergoing economic recovery. In the new era when the economies of both countries need to develop rapidly, the two sides should continue to strengthen practical cooperation in the fields of economy, energy, science and technology. China and Russia should take the "Belt and Road" strategy as an opportunity to seize new opportunities for economic development on a global scale, and actively work to promote the strategic partnership of cooperation between the two countries, enhance the level of mutual political trust between the two countries, and strengthen economic and trade exchanges between the two countries. In this way, the economic strength and international status of the two countries will be enhanced, and a comprehensive win-win situation will be achieved.