Valdai Club

Prime Minister Dmitry Medvedev’s visit to Beijing in the framework of Rus-sia-China intergovernmental meetings was striking evidence of a major im-provement in bilateral relations. The challenge of matching the high level of mutual political trust with the real state of Russian-Chinese trade and econom-ic ties is being met and at a fairly rapid pace.

This is clear enough from the practical results of this visit. Following the talks with Premier of the Chinese State Council Li Keqiang, the sides signed over 10 agreements, including a plan for developing agriculture in Russia’s Far East and the Baikal Region and China’s North-West and a memorandum of under-standing between Russia’s Ministry of Economic Development and China’s Ministry of Commerce on trade in services.  The Federal Customs Service and the General Administration of Customs of China agreed to upgrade customs clearance procedures and oversight of international e-commerce. The two coun-tries are completing their final agreements on the cooperative project to build the AHL heavy helicopter and will sign a relevant general contract in the near future.

It is gratifying that the marked decline in trade in the past few years has been replaced by solid growth. It may exceed $110 billion before this year expires and the sides are likely to bring their trade to $200 billion in the foreseeable fu-ture. It was clear that Dmitry Medvedev was intent on resolving outstanding issues during his visit rather than leaving them for later. Russian companies are keenly interested in gaining access to the Chinese agricultural market, for example, but a number of restrictions prevented them from doing so. This time, however, the governments of both countries managed to agree on lifting several remaining restrictions and now domestic producers will be able to sup-ply China with poultry and dairy products. Officials of the Russian Ministry of Agriculture said Russia may supply their first consignments before the end of this year. 

Another sore spot, China’s investment in the Russian economy, is also being resolved but not without effort. For the most part, the Chinese are interested in the oil and gas sector. According to Premier Li Keqiang, Chinese companies are weighing their participation in projects for the production, deep processing and transportation of fuel. They are also interested in developing innovation cooperation with Russian companies, in particular, creating a research and in-novation fund to support science and technology cooperation and joint pro-jects.

Importantly, Russia-China cooperation is making such headway despite the external pressure and attempts to destroy the international trade system. Dmit-ry Medvedev and his Chinese counterpart announced their intention to pro-mote global trade and exchange of investment. They noted that protectionism and unilateral approaches undermine the multilateral trade system based on the WTO, hurting the interests of specific states, including Russia and China – countries that are always ready to facilitate trade and investment and support regional economic integration.

Under the circumstances, Moscow and Beijing have to look for such coopera-tion mechanisms that will offset this negative influence on their economies. 

The word “sanctions” was not used when the United States unleashed a trade war against China earlier this year. However, its actions amount to the same. This is why China is beginning to understand much better Russia’s logic in countering US sanctions and the need to meaningfully bolster Russia-China ef-forts to resist sanctions pressure and illegal trade restrictions on our countries, which are becoming increasingly systematic and long-term.

The same conclusion is prompted by the similar situation in US-Russia and US-China relations. The US either tries to use economic pressure to achieve its political ends or resorts to non-economic methods in economic competition. In effect, Russia and China have found themselves in the same boat and have a similar experience of countering illegal sanctions and unfair trade practices.

As the US dollar increasingly becomes a sanctions weapon, which alas seems likely, Russia and China should substantially increase the share of settlements in national currencies in the realm of foreign trade, investment and finance, which at present does not exceed 15 percent of the total. This is why during the talks the heads of government largely focused on a draft agreement on transitioning to mutual settlements in national currencies, which will be signed before the end of this year.

It seems that the Donald Trump administration has been talking about the Russia-China alliance for so long that its policy regarding these countries may soon become a self-fulfilling prophesy. But if Russia and China establish an anti-sanctions alliance, it will primarily be a “modernized alliance” with a posi-tive agenda, which will facilitate the development of high-tech industries in cir-cumvention of Western (primarily US) restrictions. Such an alliance will also become a mechanism for coordinating bilateral and multilateral efforts to form a new, sanctions-free international order.