Why Taking Economic Ties to a New Level Is a Crucial Task for Russia and China

Trade and economic issues will be the focus of Russian Prime Minister Dmitry Medvedev’s visit to China, scheduled to take place on November 5-7. It’s quite often heard that economic relations are the weak part of the China-Russian relations, contrasting their excellent political relations. I agree with it. Comparing with the quickly developing political relations, economic cooperation and trade look less impressive. 

However, it gives different pictures when one looks at the China-Russian trade and economic relations from different angles. 

If one looks at the trade between China and its major trade partners, the trade volume between China and Russia appears small. In 2017, the trade turnover between China and Russia reached the record-high of $84.4 billion, while the amount of trade between China and the US was $637.9 billion; between China and Japan – $297.2 billion; between China and Korea – $239.9 billion; between China and Germany – $180.5 billion. Russia ranked as the 10th largest trade partner for China, close to the level between China and Singapore, Vietnam and India. 

But, when viewed from the point of Russia’s trade with its major economic partners, the trade volume between China and Russia seems large. China has been the top trade partner for Russia for the past 8 years. As noted above, China-Russian trade totaled $84.4 billion in last year, far ahead of Germany and Holland, Russia’s second and third largest trade partners, with trade levels at $50 billion and $39.5 billion, respectively. China constitutes 15% of Russia’s foreign trade, while Germany and Holland’s shares are 9% and 7%. 

China and Russia Join Forces
Li Xin
On November 5, 2018, Prime Minister Dmitry Medvedev will make an official visit to China, during which he will attend the opening of the first China International Import Expo (CIIE 2018) and hold his 23rd meeting with Prime Minister Li Keqiang. On the one hand, the visit is designed to boost China’s reforms and openness amid the rise of international protectionism and trade tensions between the United States and China. On the other hand, Russia will have an opportunity, which it is ready to use, to take over the US niche on the Chinese market.

Finally, when seen from the aspect of the size and structure of Russia’s foreign trade, the China-Russia trade and economic relations come out not only on the normal level and state, but even better than that of between Russia and its other trade partners. Except for Australia, all the other top 5 trade partners of China are big foreign trade bodies with foreign trade volume beyond $100 billion, among them, the US’s total foreign trade is $3,956.2 billion; Germany’s – $2,615.3 billion; Japan’s – $1,370.1 billion; Holland’s – $1,226.2 billion; Korea’s – $1,052.2 billion. 

In the same year of 2017 Russia’s foreign trade amounted to $590.9 billion. Obviously, in terms of foreign trade Russia is not a big but a medium-scale country. To a great extent, one country’s total trade defined the scale of its trade with its individual partners. So, to expect that the China-Russia trade will reach the same level as between China and the US or Japan is unreasonable while Russia’s total trade is much less than that of these two states. Russia’s position in China’s foreign trade is on the same level as of Singapore, Vietnam and India, at the same time the total trade volumes of these states are also close to each other. It may be no coincidence. 

The structure of China-Russia trade is also a subject that is frequently criticized for excessive focus on energy. It is true that energy constitutes the bulk of Russia’s exports to China. However, it’s not a phenomenon specific to China-Russian trade but the character of Russia’s foreign trade in general. Last year energy and oil products made up 59% in Russia’s export in value terms. Against this background, the structure of China-Russian trade is no better and no worse but just like the Russian trade structure in general, though it does not mean China and Russia could be satisfied with it and the trade structure should not be optimized. Optimization of the trade structure is much needed, but the right path should be through increasing industrial and technological segments but not by downgrading energy cooperation. Energy cooperation has huge significance to both China and Russia. Currently Russia is the largest oil provider for China; it could be the largest natural gas provider for China as well, if the gas deal is implemented. As a large gas producer and exporter, Russia may face increasing pressure from the US both in European and Asian markets. To ensure China, one of the biggest gas consumer, as a stable market is also strategically important for Russia. 

There is also a question frequently asked: why do China-Russian economic relations lag behind their political relations? 

People do not understand why China and Russia as strategic partners could not raise the level of economic relations. The answer is simple. Good political relationship serves as a very important incentive for advancing economic cooperation, but it does not spontaneously lead to prosperity of bilateral trade because politics and economy follow different laws and logics

It also implies that, under the condition of excellent political relationship, the key to booming China-Russian trade and economic relations, or the main obstacles to it, should be found in the economic area.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.