South China Morning Post
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President Xi Jinping (left) and Russian President Vladimir Putin hold a toast during a reception following their talks at the Kremlin in Moscow on March 21. While the diplomatic and security aspects of the talks have received a great deal of attention, economic cooperation is an equally important part of the China-Russia relationship. Photo: AFP
Opinion
The View
by Mikhail Karpov
The View
by Mikhail Karpov

China-Russia relations: economic cooperation provides foundation for thriving strategic partnership

  • Political and strategic security concerns are vital, but without well-established economic cooperation, the bilateral strategic partnership can struggle
  • Xi Jinping’s visit to Moscow signalled that companies are encouraged to seize the business opportunities the new economic and geopolitical reality has created
Mikhail Karpov
Mikhail Karpov
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President Xi Jinping, who was reappointed for a third term last month, paid his first overseas visit in this capacity to Moscow, signalling a new era of cooperation between China and Russia. A major topic of discussion between Xi and Russian President Vladimir Putin was economic cooperation.
Political and strategic security considerations are vital, but without well-established cooperation in the economic sphere, the bilateral strategic partnership can sometimes sag. It is business cooperation between the two countries that creates the foundation for a solid and flexible strategic partnership.

In its current form, the China-Russia economic partnership aims to reach the kind of depth, structure and quality in trade and investment interactions that would enable it to have at least a regulating influence – and perhaps a determining one – on the two countries’ approaches to political issues.

Trade turnover between China and Russia rose by about 30 per cent last year to US$190 billion and could surpass the targeted level of US$200 billion as soon as this year. Trade is strongly driven by energy cooperation. Russia is a strategic supplier of oil, liquefied and pipeline natural gas, coal and electricity to China. Under a joint programme, Russian engineers are also helping to build nuclear power plants in China.
During their meeting, Xi and Putin also discussed a new gas pipeline project, the Power of Siberia 2, which will pass through Mongolia. Putin said he and Xi had agreed on “most of the deal’s parameters”. The new pipeline link is expected to ensure reliable supplies of an additional 50 billion cubic metres of gas per year from Russia.
Sino-Russian cooperation is not limited to energy. The two countries’ economies structurally complement each other. Russia trades basic commodities, while China produces various goods ranging from automobiles to industrial equipment.

The joint statement from Xi and Putin regarding the plan for Chinese-Russian economic cooperation through 2030 also mentions supplies of Russian metals, fertilisers and chemical products, as well as the deepening of the partnership in energy technologies and equipment.

Other priorities include developing online trade, overcoming logistical barriers and strengthening financial cooperation. Two-thirds of payments for trade deals between Russia and China are made in roubles and yuan, without any reliance on the US dollar.

Bilateral trade in agricultural products reached US$7 billion last year, and Russia sees further possibilities to increase grain and meat supplies to China. Accordingly, Xi and Putin agreed to strengthen agricultural cooperation to ensure food security in both countries. This will include a gradual expansion of mutual market access to agricultural products and joint investment projects.

What is the trade, investment relationship between China and Russia?

Amid growing geopolitical uncertainty, Xi’s visit signified that Chinese firms have a green light to continue cooperating with Russian companies, something they had become cautious of doing in recent months. Now, working with Russia is no longer a questionable activity, but a profitable one that is approved and encouraged at the highest official level.

Although the growth of China-Russia business cooperation faces several constraints – such as the overall size and structure of their national economies, as well as differences in the way their financial systems and banking institutions function – they do not seem to be significant from a strategic perspective.

With trade restrictions coming from Europe, the United States and beyond, more Russian companies are shifting their focus to China, each for their own reason. For example, Russian petrochemical producer Sibur has been gradually expanding its cooperation with China during the past 10 years.

The company, which closely cooperates with Chinese firms such as Sinopec, supplies products ranging from polypropylene to synthetic rubber to the Chinese market. While the company was an early adopter of working with China, the number of Russian businesses turning to the Chinese market is increasing.
Aluminium ingots sit stored at the foundry shop of the Rusal Krasnoyarsk aluminium smelter in the Siberian city of Krasnoyarsk, Russia, on November 9, 2017. Photo: Reuters
Rusal, Russia’s largest aluminium producer, has nearly doubled its sales to China over the last 12 months. The company aims to supply more low-carbon aluminium to China amid increasingly friendly ties and rising demand for the metal from electric vehicle firms. Many Chinese electric vehicle makers are working to lower their carbon footprint in anticipation of growing pressure from overseas consumers to decrease emissions.
Another notable project is Udokan Copper, Russia’s largest copper greenfield. The massive copper deposit, which is located on the border with China, is expected to be able to satisfy a large share of China’s demand for the metal, a key component in electrification and China’s shift to a green economy.
After Western brands stopped selling their goods on Russian e-commerce giant Ozon, the company opened its marketplace for Chinese sellers to keep diversifying its product range. As a further indication of this shift away from the West and towards China, the company also opened a representative office in China to strengthen cross-border trade.

With Russia re-routing its trade and supply chains while China moves to decrease its dependence on the West, bilateral trade and business ties between the two are likely to keep developing in a positive direction, thereby enhancing political and strategic cooperation. Xi’s visit to Moscow was a signal that companies are encouraged to take advantage of the business opportunities the world’s new economic and geopolitical reality has created.

Mikhail Karpov is a PhD candidate of historical sciences at Moscow State University, Institute of Asian and African Studies and an associate professor at the School of Asian Studies, Faculty of World Economy and International Affairs, at the Russian Higher School of Economics

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