Panel Discussion "The Potential of "Confluence" and Imbuing the Russia-China Relations with Practice"
Moscow, Russian Business Week-2016

On March 23, the Valdai Discussion Club and the Russian Union of Industrialists and Entrepreneurs (RCPP) held a panel discussion entitled "The potential of "confluence" and imbuing the Russia-China relations with practice" in Moscow. The key topics of the discussions were the gist of the term "confluence" in the Russia-China relations, its practical content and prospects for development.

Opening the debates, Andrey Bystritskiy, Chairman of the Board of the Foundation for Development and Support of the Valdai Discussion Club, drew the participants' attention to the importance of interaction between members of the scientific community and reminded that the panel discussion was preceding a conference called "Cooperation between China and Russia: The Process and Prospects", which the Valdai Discussion Club will open in Shanghai on March 25.

Alexander Murychev, Executive Vice President of the RSPP, also highlighted the fact that the debates were the first joint event co-organized by the Valdai Discussion Club and the RSPP. He, as well as other participants of the discussion, tried to give his own interpretation of the term "confluence". To his mind, it includes not only countries, but also scientific communities. Russia and China have quite a consistent cooperation programme, also known as "One Belt, One Road". But the key element of realizing agreements is building trust between the countries, the executive vice president believes.

A.Murychev reminded about the foundation of the Business Council of the Eurasian Economic Union last year. The structure will focus on "confluence" in the field of economic cooperation between China and Russia.

Timofey Bordachev, Eurasia Programme Director of the Foundation for Development and Support of the Valdai Discussion Club, Director of the Center for Comprehensive European and International Studies (CCEIS) in the School of World Economics and International Affairs of the National Research University – Higher School of Economics (HSE), continued the topic of cooperation between the two countries and said that one and a half years ago Russia had had three options in responding to Chinese initiatives:

1) to refrain from any reaction to them;

2) to actively rail against them;

3) to welcome them.

Russia, T.Bordachev noted, had chosen the third one, because the projects of the two countries were structurally and principally different initiatives. They were not competing each other, unlike the projects proposed by the European Union and aimed at lifting tariff barriers. The expert emphasized the importance of institutional and legal conditions needed for their realization. The Silk Road idea in a nutshell is an investment project and a political instrument. Joint development in this line will promote beefing up of security and stability of both countries, especially in light of the challenges from the Middle East threatening Central Asia.

Confluence, the Club's programme director assumes, consists in intertwining China with Eurasian integration processes that include the problems of ecology, free movement, common market and many other fields. The main nuance is the institutional groundwork of cooperation. These problems are currently within the limits of Foreign Ministries’ authority, but they should be raised to the level of vice prime ministers.

Veronika Nikishina, Member of the Board on Trade at the Eurasian Economic Commission, described the practical content of the Russia-China cooperation. In her words, both states seek for large trade economic deals akin to the Trans-Pacific Partnership (TPP), against the backdrop of slugging rates of commerce. Such organizations resemble, V.Nikishina believes, closed trade clubs with preferential conditions for their member-states. They form a qualitatively new level of relations with unification of institutional pillars and standards. The Eurasian Economic Union is not part of any such "clubs".

The confluence of the Eurasian Economic Union and the Silk Road is a proactive reaction to modern economic challenges on the basis of preferences and in the interest of business, V.Nikishina explains.

Russia and China are not ready to consider the issue of preferences at the current stage, but the cooperation based on sector-wise interaction can break the ground for formation of preferences in the future and will give companies significant benefits.

The underpinning of cooperation between Russia and China, the expert goes on, is joint projects. A road map of projects and events is needed. Confluence, V.Nikishina supposes, takes into account commitments, their depth and dynamic. The criteria of realization, in her opinion, are routes through industrial centers of the two countries, i.e. the logistical centers for processing shipments, as well as analysis of problems and joint projects.

Andrei Bugrov, Deputy Chairman of the Board of Directors and Vice-President of Norilsk Nickel, considered cooperation between the countries through the prism of world development by 2050. He called the establishment of the TPP a major achievement, because the partnership covered a market with a population of about 1 billion people, as well as 35-50% of the world GDP. Russia has good prospects in that market. China, noted the vice president of the company, invested about $8 billion in Russia, Russia invested $1 billion in China. The list of their joint projects consists of 60 initiatives worth a total of $20 billion.

By 2050, A.Bugrov predicts, the volume of world economy will triple, mainly with the help of Asian states. The Earth's population will reach about 10 billion people, the middle class will double, the urban population will hit 6.3 billion people, propelling consumer demand and housing construction. The number of people of advanced age will reach 1.5 billion, which will increase consumer demand in the field of pharmaceutics and healthcare.

Norilsk Nickel makes its own contribution to confluence. Together with the government, the company is developing railways, which improve the investment climate, the company's vice president admits. Last year China purchased a share in the company's largest investment project – the Bystrinsky mining facility.

Vassily Kashin, Senior Research Fellow at the Moscow-based Center for Analysis of Strategies and Technologies, presented a report entitled "Industrial Cooperation – A Path to Confluence of Russian and Chinese Economies" and described the background of the Russia-China relations. In his words, the groundwork of the current relations was laid during the second presidential term of Boris Yeltsin in the mid-1990s, against the backdrop of disappointment over the relations with the West. The relations with China were based on cooperation in the fields of security and the military-industrial complex. The economy had secondary importance then.

Modern economic projects are an extension of the political initiatives and harmonious collaboration between law enforcers, diplomats and military manufacturers. The Russia-China heavy-lift helicopter, for instance, needed political willingness in order to progress since 2008.

Harking back to the theme of industrial cooperation, V.Kashin said that the sanctions had activated trade turnover. China, for example, substituted German diesel engines for warships. Similar progress can be seen in the space industry as well. China has 10 corporations focused on countries under the pressure of sanctions.

In general, V.Kashin concludes, the issue of cooperation should be raised to a political level. It needs an information structure and harmonization of standards for successful integration.

Alexei Bezborodov, Infranews Director General, specializes in infrastructure issues and associates the term "confluence" with logistics. Shipping by railway is approaching the volume of shipping by ocean. The volume of shipments reaches billions of dollars, but there is lack of advertising and marketing. The expert also pointed out the problem of equipment at logistical centers, i.e. the shortage of cranes to service containers. A.Bezborodov outlined successful logistical centers in Vladivostok, Transbaikal, Novosibirsk, Yekaterinburg, Moscow, but between them lies "empty space". Solving logistical problems is not that hard, the expert believes, but it will determine the fate of investment success. Russia and China have all the needed specialists for that. According to the expert, situation with tariffs is the main problem in this context.