The Russian prime minister’s visit to China to attend the Chinese International Import Expo and a regular Russian-Chinese heads of government meeting was certainly this year’s landmark event. First, it preceded yet another Russian-Chinese summit to be held soon on the sidelines of G20 in Buenos Aires. Second, as opposed to previous years, it took place at a turning point in world history, as the US radically overhauls its policy, making sanctions an integral element of a burgeoning new political and economic system. Today, like Russia a year ago, China has become a target of US sanctions and restrictions, and this also makes the visit distinct from its predecessors. This fact in itself should considerably increase the gravitational attraction of these two victims of sanctions.
As far as bilateral relations are concerned, the background for the visit was also most favorable. The Russian Armed Forces held major exercises involving units from the People’s Republic of China. Shortly before the visit, Shanghai hosted a joint media forum whose participants discussed how to form a common information space. Bilateral trade has been developing at a fast rate and has every chance to reach or even exceed $100 billion before the end of this year.
But the visit was devoted to resolving outstanding problems and removing obstacles to closer bilateral relations. As I see it, the parties focused on transitioning to the use of national currencies in bilateral trade so as to rule out US interference and on stepping up financial cooperation, along with defense industry cooperation and joint nuclear power projects, which were the subject of some important agreements that were signed. The Russian prime minister mentioned the national currency issue and the need to develop financial relations at practically every major event during the visit.
This focus is quite understandable, given that cooperation in this sphere is still running into problems unrelated to putative US control. The aim is to find a balanced option for cooperation in finance.
According to Russian financial experts, Chinese banks are weeding out Russian clients by closing corporate accounts on a mass scale, blocking payments and refusing to perform even the simplest operations like currency exchange. This is to say that if earlier the attack was against Russian companies on US and EU sanctions lists, now the banks regard the entire Russian business community as toxic and block corporate transfers and even cards belonging to private persons [1].
A no less serious problem is that the Russian government’s attempts to make a financial pivot to the East and start drawing yuan loans have bumped into, literally, the Chinese Wall. According to Deputy Finance Minister Sergei Storchak, “the project to issue sovereign yuan bonds, which has been discussed since 2014, when relations with the West deteriorated dramatically, remains up in the air. An issue worth about 6 billion renminbi ($1 billion), which originally was planned for 2016, was later postponed until 2017 and still lacks a final go-ahead from the Chinese authorities.” Dmitry Medvedev showed himself to be intent on solving these problems. His very first official remarks at the opening of the import expo in Shanghai were about the need for “Russia and China to step up reciprocal lending in national currencies.” [2]
During the talks Russia clearly made a point of trying to achieve some progress on these problems that are of such great importance for the Russian economy. It is now clear that these efforts were a success. “An agreement on mutual payments in national currencies can be signed before the end of this year,” Vneshekonombank head Igor Shuvalov said, adding that “both sides understand how this scheme should work.”
Another positive development is that the Russian prime minister not only urged China to attend to Russian interests but also demonstrated that Russia, too, was ready to support China’s interests. Dmitry Medvedev said that Russia was entirely supportive of China in its fight for open global markets. “Today we are facing common challenges of finding new sources of growth for the world economy and forming an open space of mutually beneficial cooperation, where there is no pressure or sanctions, and where there is no room for protectionism and restrictions.” [3] As is clear, fighting for open markets is not a priority for Russia. But it is a priority for China. As a result, a balanced Russian policy that respects both Russian and Chinese interests was on display during the visit. This negotiating agenda makes one optimistic because growing mutual trust is conducive to finding solutions capable of creating a new reality in Russian-Chinese relations.
[2] For more detail, See: https://regnum.ru/news/2513428.html
