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Friday, March 16, 2018

Russia’s trade with China is again gaining momentum

A very negative trend of the fall of the Russian-Chinese trade is broken. January turned out to be in this sense: for the first time in recent years the trade turnover between the countries grew, and soon a third. But the most interesting not even that. A group of Russian goods with the most growing demand in China was not energy.

The trade turnover between Russia and China in January grew by 34% yoy to 6.5 billion dollars, is spoken in published on Friday the report of the General administration of customs of PRC. Exports from China to Russia increased by 29.5% to $ 3.4 billion, imports to China grew by 39.3% to $ 3.1 billion.

“If Russia is China stepping up trade here with their traditional major partners, the EU and the US, on the contrary, reduces”

If two years ago, and Russia exports and imports of China declined, but now there has been a steady tendency to growth, says a leading expert of the investment Bank “Jiuzhou jinzuan” Dan Seaview, reports TASS. “This plan 2014-2016 became a transitional period when foreign trade of our country has undergone dramatic changes”, – commented the expert.

In General over the past year for the first time in several years the trade turnover between Russia and China again shows growth. It grew by 2.2% compared to the year 2015 and made up 69,53 billion, according to the customs of China. Import from China to Russia increased by 7.3% to 37,23 billion dollars (for comparison: in 2015 was a drop of 20%). Russia’s exports, however, fell slightly last year – by 3.1%, to 32.2 billion dollars. However, the decline has slowed significantly: in 2015, our exports fell by more than a third. And January data give grounds to say that this year, Russian exports to China will show solid growth.

If Russia is China stepping up trade here with their traditional major partners, the EU and the US, on the contrary, reduces. The trade turnover between China and the EU last year fell by 3.1%. Although the money is still the largest trading partners, which sold last year for almost $ 550 billion. USA – in second place to China in terms of trade, which also decreased (by almost 7% in 2016) and amounted to about 520 billion dollars.

Russian-Chinese cooperation has again a chance to fulfill the previously set goal. Namely, to bring by 2020 the bilateral trade to $ 200 billion.

The improvement in trade with Russia Chinese expert Dan explains is an “ordering of the monetary policy of China and optimization of control and regulatory mechanisms”. And, of course, import growth helps the depreciation of the yuan against the dollar.

For Russia the falling oil prices and devaluation of the ruble, “turned to the opening of new possibilities for Russian goods in the Chinese market”, said the head of the diplomatic mission of the Russian Federation in Beijing Andrei Denisov. In the end, for a number of commodities, in particular for supplies of machinery, Russia was “in the area of competitiveness”.

However, the Russian ruble devalued in 2014, but exports to China are still falling. What has changed in 2016? For the success of our exporters is convenient not just a weak ruble, but the ruble is stable and that in 2016 we observed stable, and not too fast strengthening of national currency, explains chief analyst GK TeleTrade Peter Pushkarev.

In addition, decreased to a reasonable size, inflation, and the Bank of Russia confirmed the commitment to the floating exchange rate policy. “It helps companies that our products are ready or intend to import, or set to plan joint projects – to calculate in advance the costs and profits from trading operations, plan delivery, including returns at a new level the idea of the growth of settlements in rubles and yuan”, – adds Alexey Pushkarev.

In addition, it required time to build the infrastructure, supply chain and strengthen business ties between the two countries, added the first Vice-President of “OPORA Russia” Paul Segal.

“We have supported their agriculture and have been able to increase production of grain, China’s grain, and therefore on the border, built huge grain hub,” said Pushkarev. Actively work in the regions of the Russian export centre, which reveals potential points of export growth, and supports them at all stages, until the conclusion of the contract, he adds.

Energy cooperation

Currently, more than 50% of Russian exports to China account for energy. Although a few years ago, the share of oil and gas accounted for more than 70%. The supply of Russian energy resources has not decreased, but rather, grow.

Last year Russia even for the first time surpassed Saudi Arabia, becoming the main supplier of oil to China. Russia has all the chances to consolidate the lead. In particular, Beijing is actively preparing the infrastructure for increased reception of oil from Russia from 1 January 2018 by pipeline Skovorodino – Mohe – Daqing. At the height they will grow to 30 million tons per year. Plus will increase deliveries of Russian oil through the territory of Kazakhstan – additional 70 million tons per year from 2017 to 2023.

In the long term will grow and the supply of gas to China, which are in the form of LNG. But in 2019 will have to start gas supply on the “Power of Siberia – 1” (the Eastern route). And then the parties must agree on gas supplies via the Western route, “the Power of Siberia – 2”.

In addition, Russia sells to China coal. Negotiations with Chinese partners on gasification of coal, the production of chemical products based on hydrocarbon raw material for use in the Chinese and Russian market in the future – and in third countries. There is also potential for electricity if the demand will increase in China.

Non-oil exports

In 2015, Russia managed to increase its exports of engineering products to China by 13%, to 2.14 billion to $ 1.89 billion in 2014. In 2016, the trend is entrenched. Only seven months of last year exports increased by a quarter in money terms. In recent years, in China there are many enterprises, which are equipped with Russian equipment. Mechanical engineering has become the largest point of growth of non-oil exports of Russia to China.

For example, Russia is actively supplying the turbines, small-scale equipment for LNG and other energy equipment, special equipment for space and nuclear power projects and more. One of the largest exporters of hardware in China are, in particular, Rosatom, Ural turbine plant, combined engine-building Corporation, Power machines and others. Plus, of course, Beijing has traditionally buys Russian round timber and non-ferrous metals.

However, the rapidly increasing share of the agricultural sector in the export structure. “Russian products are popular in domestic market of China. Most likely, it was the export of agricultural products to China in the coming years to increase rapidly. Now export growth is hindered by the lack of infrastructure and an established supply chain,” says Paul Segal.

According to the Russian export centre, for 11 months in 2016, the exports of agricultural products amounted to about 11%, or $ 1.5 billion, which is 8% higher than a year earlier. The main trading products are frozen fish, sunflower oil and soy.

Traditionally, China is buying a lot of fish products, molluscs and crustaceans, salmon, Pacific cod and herring. But in the last two years there has been an explosive growth of export of the Russian vegetable oil, honey, chocolate and beer. The Chinese also fell in love with Russian ice cream, which shows an unprecedented growth of its supplies to the country.

After very long negotiations in December 2015, China opened its market for Russian grain. However, while the borders are open only for Siberia and the Far East, and have yet to remove the restrictions for the European part. But it has already helped to increase the volume of trade. According to estimates of the Russian grain Union, in 2-5 years, Russia will supply China with 3 million tons of grain.

In China, indeed there is a growing demand for high quality products from Russia. A new growth point of export shall be the export of poultry and pork.


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