While four countries, Brazil, Russia, India, and China, form the acronym BRIC, the first two are often overlooked in favor of the latter. While Brazil too deserves its moment in the sun, this piece will focus on Russia, its growing relationship with China, and its ever-increasing attractiveness as a destination for foreign investment.
At first glance, Russia may seem like a den of iniquity. Corruption abounds, laws are squishy, and state enterprises prowl the business landscape with unfettered access to capital and resources. Thankfully, however, this gloomy picture is a little distorted.
A snapshot of Sino-Russian trade
For Russia and China, this year marks the 10th anniversary of their signing the China-Russia treaty on good neighborliness, friendship and cooperation, as well as the 15th year anniversary of the establishment of mutual partnership.
Over the past five years, Sino-Russia trade has nearly tripled in value. Trade has been mainly composed of natural resources: in 2010, crude oil and natural resources made up 48.5 percent of overall bilateral trade (something which will likely remain consistent as China continues demand energy inputs to fuel its rapid growth). China has then used those inputs, and then sent low to medium-value equipment back to Russia. Machinery and electronic products accounted for 68 percent China’s exports to Russia in 2010.
In November, both nations pledged to drop the dollar when trading bilaterally, opting instead to use local currencies. That same month, a 866 kilometer-long railway opened, connecting Russia’s largest port city on the Pacific Ocean, Vladivostok, with Northeast China.
In January, an oil pipeline linking Daqing in China’s Heilongjiang Province and Skovorodino, a Russian city, officially began production, and is expected to transport 15 million tons of crude oil per year, with a 30 million ton per year benchmark set for the immediate future.
In February, EuroSibEnergo PLC (Russia’s largest independent power company) and China Yangtze International (China’s largest listed hydropower producer) announced an official JV–YES Energo Ltd–to develop hydro and thermal power projects in Russian Siberia.
Bilateral ties have been strong for quite a while, and will likely only get stronger.
A glimpse into Russia’s economy
By nominal value, Russia’s economy is the 10th largest in the world. By geography, Russia is the world’s largest country. According to UNESCO, it also has the world’s largest supply of energy and mineral resources (e.g., natural gas, oil, coal, precious metals, arable land).
Growth rates have been fairly impressive since the Soviet Union’s collapse in 1991. Under Putin, Russia’s GDP doubled, and rose from being the 22nd largest economy in the world to the 11th. The size of Russia’s middle class has grown from 8 million to 55 million people during those same years. However, Russia’s massive geography, untapped natural resources, and relatively low position on the global value chain indicates a huge potential for growth that is still yet to come.
During Russia’s transition from a command economy to a market-based one, many industries were privatized. Nevertheless, privatization schemes often fell short as previously state-owned enterprises were simply transformed into politically-connected behemoths. Today, most sectors in Russia are vertically integrated, and heavily concentrated in the hands of a few powerful firms.
While such a picture may seem daunting, it’s precisely how China’s economic landscape looked not too long ago.
The site was established by Chris Devonshire-Ellis.
By barbos2514 from Pixabay