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Foretelling future prospects of Sino-Russian cooperation

Editor: Li Kun 丨CCTV.com

09-14-2015 17:02 BJT

By Pavel, Beijing-based sinologist, China-Russia relations expert

Geo-political and global economic analysts have widely discussed Russia's "Turn to the Far East" policy in recent months. Yet, it is worth knowing that Moscow had already touted this initiative a few years ago even before the onset of the Ukrainian crisis.

Russian President Vladimir Putin introduced the "Strategy of economic and social development for the Far East and Baikalsky Region up to 2025" by issuing a Presidential Decree back in 2012, while a package of other related measures, collectively referred to as the "Turn to the Far East", was put to implementation even earlier – starting from 2009 and on.

At that time, these proposals were considered quite surprising, because for many decades the Russian business community had focused much of their attention on the West.

Let's also not forget that Russia is the world's number one ranked country in territorial size and the sixth world's biggest economy in 2014 with its key economic activities concentrated mainly in its European part.

Accordingly, possibility to "unplug" from the West and re-plug to the Asia-Pacific region had been scrutinized and occasionally mocked by the media and political observers. Nevertheless, Moscow went ahead on a slow implementation progress, which had largely been ignored by the public ever since.

Until the year 2014; when the Western-imposed sanctions hit Russia, Moscow urged to intensify its "Eastern" initiatives.

Understanding the Sino-Russian partnership

Russia's turning to the East is not simply reaching out to China and other Asian partners for trade and cooperation, but it is actually a sensitive question for China and other Asia-Pacific countries, due to an overall rebalancing of the political and economic landscape of the region.

With China the story is different, as it really has close historical ties and huge borderlines with Russia. But as the Chinese Minister of Foreign Affairs Mr. Wang Yi noted during the Forum Vostok in Russia on September 5, 2015 – "cooperation should be based on fair economic principles where both parties benefit".

This phrase contains actual concerns of the Chinese. Investors are eager to develop trade and economic ties with Russia, but they question whether the economic situation in the country would remain under the state's control.

Recent crisis  in Russia have alerted investors as they are to put a hold on many potential projects. The CAGR (cumulative annual growth rate) of China's investments in Russia stood at 117% for the period of 2011 to 2014, but just in Q1 2015 it had dropped by 20%, giving rise to opinions that Russia and China are withdrawing from each other.

Such opinions are quite premature; in fact, ties between the two countries have continued to deepen, strongly supported by both governments. This has often been highlighted by the media in recent months.

Additionally, from geo-politics we understand governments do not enjoy the option of freely choosing the best-of-the-best scenarios, but they are often compelled to select from the least-of-the-worst prospects.

Fortunately, Russia-China relations, despite current uncertainties, are actually far from the least-of-the-worst scenario, which helps to make this relations grow more powerful and influential, but at an incremental pace.

And while everybody is saying the word "crisis" in a negative sense, let us remember that a "crisis" in Chinese consists of hieroglyphs "risk/crisis" and "possibility". In Russia's case, they see that being applied in real life:

The Ruble devaluation, negative prognosis from key market analysts and other factors in Russia have led to a strong underpricing of its assets. In 2012, the total capitalization of 30 Russia’s biggest companies, listed in the Forbes Global Fortune, was close to USD 800 bln. What do we see in 2015? Their total value has dropped to USD 407 bln.

Also, specifically from Chinese media we could hear that Sino-Russian cooperation has more and more often been touted as a “strategic cooperation”, meaning that it is not about capturing some short-term economic momentum, but a long-term development plan well thought of and promoted by both states.

So even if there is a hold-on every now or then, it is clear that the overall trend is further development, beneficial for both parties.

Geopolitical forecast

Obviously, world trade and political channels are re-shifting with new connections made on the opposite side of Eurasia – which is mainly conducted through the tremendous efforts of Russia’s (Turn to the Far East policy) and China’s (New Silk Road) initiatives.

Both countries are pushing towards each other, back-to-back, making new steps to merge its trade, economic and political channels, bringing their "strategic cooperation" to a whole new level in order to effectively manage the challenges of unstable economic times.

Hence, the future of Sino-Russian economic cooperation and relations has quite a bright outlook. And for quite long perspective.





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