Commentary: Sino-Russian Economic Cooperation Needs to be Upgraded

Relative to the established strategic partners relationship, the present economic cooperation between China and Russia obviously lags behind their political relationship, which needs to be a great concern for the governments and enterprises of both countries.

When meeting with Russian President Putin yesterday, Chinese President Jiang Zeming made strengthening bilateral economic cooperation as one of the major topics of discussion. Jiang said that both nations should use enhanced economic cooperation as the basis for the Sino-Russian strategic partner relationship.

The Soviet Union was once major trade partner of China in 1950s. With China breaking the trade embargo imposed by western nations and the deterioration of Sino-Soviet relation, the role of the former Soviet Union in China's foreign trade declined for a period. After the normalization of relation between the two countries in 1989, bilateral trade experienced a period of great development, hitting a record US$7.7 billion dollars in 1993. The prosperous trade between the borders of Heilongjiang, Xinjiang and Russia was once a unique scene in China's border trade.

The prosperity did not last long. Due to the flood of fake and inferior goods in the border trade, sluggish economic growth in Russia and the impact of Asian financial crisis, the bilateral trade has fluctuated since the mid-1990s. Last year's trade value was US$5.72 billion dollars while the first half of this year was US$3.56 billion dollars. Despite growing nearly 32% compared with the same period last year, it is still far from the 20 billion dollars bilateral trade goal by the year 2000 set by the two heads of states.

Over half of China's exports to Russia are light industry products, textile, and food, Russia's exports to China are mainly chemical fertilizer, chemical products, timber, paper pulp and steel. The high tech mechanical and electrical products with high added value still account for a very small proportion of the bilateral trade.

With respect to investments, by the end of last year, there were 1,100 Russian investment projects in China, mainly concentrated in the projects such as automobile and farm machinery assembly, chemical industry, and construction material. The Russians pledged US$610 million dollars in contractual foreign capital but actual investments totaled only US$220 million dollars. China's investments in Russia are smaller. By the end of last year, 422 Chinese enterprises registered with the Ministry of Foreign Trade and Economic Cooperation to invest in Russia. Chinese firms signed US$140 million dollars worth of contracts pledging to invest in Russia. The investments mainly went into commerce, processing and agricultural development.

Compared to the big automobile, petro-chemical, electronic, machinery projects set up by western countries, the investment between China and Russia is still at the early stage.

Russia has traditional advantage on energy, technology, aviation, and machinery while China has leaped over its northern neighbor in the fields of electronic, light industrial products, household electrical appliance and telecommunication. The potential for economic cooperation between two countries is tremendous.

Experts point out that with economic globalization in the background, Russia and China must have new ways to expand their trade and to increase the level of economic cooperation.

Professor Lu Nanquan of the China Academy of Social Science argues that economic cooperation should viewed from the long-term strategic perspective to overcome short-term behavior. Lu Nanquan suggests that major Sino-Russian joint venture projects be launched. First fuel joint ventures started, including oil pipeline, natural gas, nuclear power station. Second, the high-tech cooperation should be strengthened. Third, the role of local and frontier trade should be expanded. Fourth, new economic growth points such as timber processing, farm produce, household electrical appliance, labor export should be found.

The governments should play the role of improving economic laws and regulations, economic order and investment environments to make them compatible with international practice.





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