Economic Relationships between

RUSSIA

CHINA
and

Introduction
Sino-Russian relations refers to the bilateral relations between the People's Republic of China and the Russian Federation. China and Russia first came into direct contact about 1640 in far eastern Siberia. From 1640 to 1729 they gradually worked out stable diplomatic and commercial relations. Their relations became a serious problem after 1858 when Russia annexed the Amur River basin and Vladivostok. The People's Republic of China and the Russian Federation currently maintain close and cordial diplomatic relations, strong geopolitical and regional cooperation, and significant levels of trade.

 After the dissolution of the Soviet Union, relations with Russia have dramatically improved, both countries found common interests and a common free market orientation, and related to these, a common opponent: the United States as the sole superpower. In 1991, the Sino-Russian Border Agreement was signed apportioning territory that became contested during the Sino-Soviet border conflict. In coordination with other emerging economies the the second BRIC summit was helf in Brasilia in April 2010.

 In 2001, the close relations between the two countries were formalized with the Treaty of Good-Neighborliness and Friendly Cooperation, a twenty-year strategic, economic, and controversially, (arguably) an implicit military treaty. A month before the treaty was signed, the two countries joined with juniorpartners Kazakhstan, Kyrgyzstan, Tajikistan and Uzbeki stan in the Shanghai Cooperation Organization. The PRC is currently a major Russian customer of imports needed to modernize the People's Liberation Army, and the foremost benefactor of the under construction Russian Eastern Siberia Pacific Ocean oil pipeline.

 Tang Jiaxuan, a member of China's State Council, said Russia and China have similar positions on regional and global issues. Sources say, China and Russia have formally joined hands to stop expanding American and European military as well as economic global influences. The partnership between China and Russia actually started 8 years before, just after the start of the Iraq war. The two countries came close to each other in terms of supporting each other. Russia now provides significant amount of Chinas energy needs. China now provides financial guarantee and loan to Russia without announcing the same explicitly. Soon Russia-China strategic partnership will form a NATO type military and G7 type economic alliance. India and Brazil will be invited to join the alliance. Russian and Chinese military are having secret joint sessions to create the strategy of self defense in case of any invasion from other countries

Russias top export partners

United States Germany United Kingdom Finland France Switzerland China Japan Netherlands Turkey Italy Austria South Korea Poland Denmark Estonia Latvia Lithuania Sweden Norway Exports - 2009 $ 1,211,453.00 $ 1,206,491.00 $ 1,100,652.00 $ 649,527.00 $ 522,491.00 $ 477,384.00 $ 382,488.00 $ 359,394.00 $ 336,838.00 $ 331,475.00 $ 310,424.00 $ 278,546.00 $ 256,297.00 $ 245,249.00 $ 242,569.00 $ 205,331.00 $ 160,128.00 $ 156,652.00 $ 135,824.00 $ 126,174.00 Imports - 2009 $ 2,323,623.00 $ 2,073,436.00 $ 1,302,091.00 $ 1,580,183.00 $ 715,930.00 $ 728,380.00 $ 788,979.00 $ 223,009.00 $ 435,041.00 $ 2,001,295.00 $ 420,344.00 $ 326,052.00 $ 218,740.00 $ 276,517.00 $ 129,219.00 $ 162,965.00 $ 166,834.00 $ 130,168.00 $ 176,931.00 $ 200,640.00

Russias top import partners

United States Germany Turkey Finland United Kingdom China Switzerland France Netherlands Italy Spain Austria Poland Japan Greece South Korea Bulgaria Czech Republic Ireland Norway Exports - 2009 $ 1,211,453.00 $ 1,206,491.00 $ 331,475.00 $ 649,527.00 $ 1,100,652.00 $ 382,488.00 $ 477,384.00 $ 522,491.00 $ 336,838.00 $ 310,424.00 $ 66,642.00 $ 278,546.00 $ 245,249.00 $ 359,394.00 $ 58,181.00 $ 256,297.00 $ 52,419.00 $ 75,502.00 $ 79,823.00 $ 126,174.00 Imports - 2009 $ 2,323,623.00 $ 2,073,436.00 $ 2,001,295.00 $ 1,580,183.00 $ 1,302,091.00 $ 788,979.00 $ 728,380.00 $ 715,930.00 $ 435,041.00 $ 420,344.00 $ 417,879.00 $ 326,052.00 $ 276,517.00 $ 223,009.00 $ 219,581.00 $ 218,740.00 $ 210,632.00 $ 204,468.00 $ 201,268.00 $ 200,640.00

 In Russias trade with China, energy, which accounts for half of all Russias exports to the PRC, is king. While Russia may be only Chinas fifth largest oil supplier, the money it has earned from a China hungry for energy and flush with cash (Chinese foreign exchange reserves totaled $1.4 trillion in 2008) has soar from $500 million in 2001 to a high of $6.7 billion in 2007.33 Those figures reflect of course the upswing in oil prices during this period rather than increased volume alone; indeed, the latter figure has actually declined, by 9 percent during the rest of 2007, because of disagreements over price and reduced Russian production. While there are grand plans to pump additional Russian oil and gas to China despite the current global economic slump, the ballooning debt of Russian energy companies, and declines in Russian energy output created by insufficient investment and shopworn infrastructure, could create a wide gap between aspirations and achievements, and not for the first time.

 Moreover, despite the importance of Chinas energy market, the Kremlin is leery of long-term, exclusive deals with Beijing. The tangled history of the East Siberia Pacific Ocean Pipeline (ESPO) makes this evident. Initially, the project envisaged a 2,300-kilometer pipelinewith an estimate price tag of $1.7 billion and an initial capacity of 400,000 barrels per day, that would be linked to Chinas pipeline network at Daiqing. Another energy project, is the Altai pipeline. Russia pledged $10 billion to build the project, which is supposed to carry 30 to 40 bcm of natural gas from the Russia to China and to attain a capacity of 68 bcm by 2020.

While energy dominates Sino-Russian economic transactions, it is complemented by others. Trade, which by the time the Soviet Union had all but fallen from the heights of the 1950s, has increased steeply. By the end of 2007, bilateral trade had reached $35 billion, a 17 percent increase over the previous year and five times the figure for 1990; and trade across a border that had essentially been closed for twenty-five years reached nearly $6 billion at the end of 2006, a significant proportion of total trade.

 There is an opinion that the Chinese and Russian labour is very cheap but in comparison with other developing countries and the countries in transition it proves to be a myth.

 The liberalization of Russias external economic activity in the 1990s resulted in the removal of barriers impeding the entrance of national manufacturers to foreign markets and the penetration of imported goods and foreign investment into the domestic market. This led to a substantial increase in external turnover. Since the earliest 1990s, Russian exports and imports were growing. After a temporary reduction in 19971998 due to the financial crisis (which, at the same time, increased the competitiveness of Russian goods), there was a new upsurge in the countrys external turnover.

 Moscow and Beijing have long discussed electricity trade. In the mid1990s, they discussed a joint project to build a 2,600-kilometer power transmission line from the Irkutsk region in Siberia to China at a cost of $1.5 billion. However, no pricing agreement was reached and the project was later abandoned. In November 2006, Moscow and Beijing reached a deal to raise annual exports of electricity from Russia to China to 3.6-4.3 billion kilowatt hours (kwh) per year in 2008 to 2010, and 18 billion kwh in 2010 to 2015, and eventually up to 60 billion kwh.
China is Russia's second largest trade partner after the European Union. Trade with the EU totaled $382.1 billion last year, or 52 percent of Russia's $735 billion foreign trade while trade with China totaled 7.6 percent. Russia has a trade deficit with China of $13.6 billion, its biggest trading deficit. China and Russia say they have plans to increase bilateral trade to $60-80 billion by 2010.

Nowadays economic relationships between Russia and China

 Recently Prime Minister of Russia talked with his Chinese counterpart and they signed more than 20 agreements on projects involving bilateral cooperation. A joint communique was signed announcing the start of cooperation on ballistic missiles and missile delivery vehicles, as well as the establishment of cultural centers. There also were agreements on improving customs controls, developing high-speed train lines in Russia and cooperation between Russian and Chinese special economic zones.

 The results of this visit are extremely important because it is precisely in the area of trade and economic cooperation that the greatest number of problems exist. Since early this year, bilateral trade volumes have dropped by more than 35 percent compared with the same period last year. And although Chinas trade volume has also dropped with most other countries as a result of the crisis, it is falling at the greatest rate with Russia. The global economic crisis has caused problems in bilateral trade and economic relations, leading to the current situation. As a result, it is now clear that the goal set by the leaders of both countries to increase the trade volume to $60-80 billion by 2010 will not be met. The same is true regarding investment targets. It is possible that Russia will drop from being Chinas eighth-largest trading partner to the 15th or 16th largest, falling behind countries such as Malaysia, Singapore, India, the Netherlands, and possibly Britain, Brazil, Thailand and France. That would further decrease the mutual importance of Russia and China as trading partners.

 The unfavorable investment climate in Russia. Chinese businesspeople complain about Russias confusing laws and other regulations, corruption in regional administrations and law enforcement bodies.

Truck industry that cannot effectively compete against vehicles available to Chinese buyers and made by other countries. The low quality of vehicles produced by the Russian automobile

Russian business people's lack of familiarity with the Chinese market and business culture services. As a result, the number of Chinese tourists visiting Russia has steadily declined since 2004, while the number of Russian tourists visiting China has increased. The underdeveloped condition and high prices of Russias tourism.