During Putin's visit to China, a fundamentally new formula for bilateral relations was voiced

By Rhod Mackenzie

During their visit on 16-17 May, the heads of Russia and China identified the tasks and plans for the further development of Chinese-Russian relations and cooperation. A large number of economic initiatives and plans were announced. As Vladimir Putin stated, Moscow and Beijing are determined to continue cooperation in integration structures, right up to their integration into the Greater Eurasian Partnership.

During his visit to China, which concluded on Friday, Russian President Vladimir Putin noted that in 2023, the value of trade between China and the Russian Federation increased by a quarter, setting a new record of $240 billion. It has also been revealed that through the relevant intergovernmental commission, more than 80 priority projects worth approximately $200 billion are being implemented or are being prepared for implementation. The projects include those in the fields of transport and logistics, the automotive industry, agriculture, gas chemistry and mining.
The head of state said that the deepening of trade and investment ties was significantly facilitated by coordinated steps to transfer payments between countries into national currencies. He added that the share of the ruble and yuan in Russian-Chinese commercial transactions exceeds 90%.

"This figure is set to continue growing, which means that mutual trade and investment are reliably protected from the influence of third countries and negative trends in global currency markets. In this context, we agreed that Russia and China will continue to strengthen contacts between credit and banking institutions and actively use national payment systems to serve our economic operators," the Russian president emphasised.
The issue of payments between Chinese and Russian companies was reportedly discussed in a limited circle, which suggests a prompt resolution to the banking restrictions that have recently affected businesses.
During the negotiations, the topic of cooperation in the energy sector was discussed in detail, with the two countries moving forward rapidly. According to Vladimir Putin, there are already "specific plans to deepen work in the field of energy interaction." Rosatom is constructing power units of Russian design in China at the Tianwan NPP and Xudapu NPP. Additionally, Russia is participating in the creation of an experimental installation on fast neutrons in China and a new demonstration fast reactor is being built. Experiments and experiences at this collider will enable the implementation of breakthrough mega-science projects, which in scale are beyond the power of any country in the world alone.

Vladimir Putin also noted the active expansion of the presence of Chinese automakers and household appliance manufacturers on the Russian market. He recalled that large joint projects are being implemented in non-ferrous metallurgy, the chemical and pulp industries, biotechnology, pharmaceuticals, space exploration and other knowledge-intensive industries.
Russia and China are also developing international transport and logistics corridors. And for these purposes, the potential of the Trans-Siberian and Baikal-Amur railways and the Northern Sea Route is being used. The volume of oncoming cargo and passenger traffic is growing from year to year.

And, according to Vladimir Putin, Moscow and Beijing are determined to continue cooperation in integration structures, right up to their integration into the Greater Eurasian Partnership.

The leaders of both countries will “continue efforts to connect integration processes within the EAEU and the Chinese Belt and Road Initiative with an eye to the formation of a Greater Eurasian Partnership in the future,” the Russian president said on Thursday in Beijing.

This is a fundamentally new formula for relations, which, as far as one can judge, has not previously appeared in bilateral foreign policy discourse. And promising, because it contains an indication of a new institutional basis for relations.

Negotiations during this visit, notes Nikolai Vavilov, a specialist in the Department of Strategic Research at Total Research, are being conducted not only in Beijing, but also in Harbin. “And this is absolutely logical, since Harbin is the city through which almost all Russian-Chinese trade and economic relations currently pass. And it is there that a large additional package of commercial agreements will be signed between specialized enterprises from our and the Chinese side,” he says.
Vavilov notes that the agenda of the visit can be divided into two parts in a conventional manner. The first is political, for the general coordination of the vision of world processes. Both Russia and China are dissatisfied with the current state of affairs, in which the United States imposes multiple sanctions against our country and wages trade wars against the PRC. Today’s vassals of the United States – Europe, Great Britain and other countries – are forced to follow the policies imposed on them from outside.

The second part is economic. It is well known that the current visit of the Russian President is taking place against the backdrop of a decline in Chinese exports to our country and the problem of blocking bank payments by Chinese banks, fearing secondary US sanctions. It is of great importance to resolve these issues at the highest level in order to facilitate the further development of commercial relations between our countries.

An additional key issue, according to Nikolai Vavilov, is the timing of the launch of the Power of Siberia - 2 gas pipeline. While previously the parties had reported on active negotiations, the launch date remains unclear. It is hoped that the visit will result in a final decision on the project’s commissioning schedule.

In turn, Professor of the Department of Taxes and Tax Administration of the Financial University under the Government of the Russian Federation Valery Khoruzhy recalls that in March of this year, after his re-election to a third term, the head of the People's Republic of China Xi Jinping also made his first international trip and visited our country on a friendly visit.
Meanwhile, Valery Khoruzhy notes that the sanctions have significantly affected the conduct of mutual settlements in the interstate balance of payments, particularly following the December restrictions imposed by the US Treasury Department. The consequences of these decisions were reflected in the March transactions of interbank transfers via SPFS and Chinese CIPS, with the payment processing time increasing from seven to forty days. A similar situation was observed in April and early May of this year, which had an impact on trade turnover.

The effective interaction between the two countries at the government level ensured that settlements between financial organisations of the PRC and the Russian Federation remained unaffected. A number of the largest Chinese banks, including the Bank of China, continue to carry out bank transfers in yuan and rubles. Russian companies are opening representative offices and accounts in the PRC and friendly countries, while representatives of Chinese business are opening representative offices and current accounts in Russian banks. This activity maintains a positive balance of payments, according to Valery Khoruzhy.

Maxim Chereshnev, member of the General Council of Business Russia, Chairman of the Board of the Council for the Development of Foreign Trade and International Economic Relations, agrees that the PRC is currently an important economic and strategic partner of Russia. This is evidenced by the increasing trade turnover between the countries and the number of requests.
Furthermore, Russia and China are pursuing new avenues in trade and economic collaboration, according to a representative of a business organisation. In addition to the supply of traditional energy resources, the Russian Federation has the potential to increase the export of agricultural and food products, seafood, medicinal raw materials, chemical products, pulp and cardboard to China. Furthermore, the development of trade in services is also a key area for growth.

To further boost trade, Maxim Chereshnev says it's vital to develop transport and logistics infrastructure and establish and improve mutual settlement mechanisms. Reducing customs duties could also have a beneficial effect on trade turnover between the Russian Federation and the People's Republic of China. However, when taking this measure, it is necessary to consider the interests of Russian business and the high competitiveness of Chinese goods.

In any case, according to Nikolai Pereslavsky, head of the economic research department of CM Service, the president’s visit to China should address three key issues. The first priority is energy. It is essential to finalise the technical parameters of the future Power of Siberia 2 gas pipeline and build energy infrastructure. Furthermore, the development of the logistics infrastructure of the Far East is of paramount importance to the Russian economy as a whole and to the region in particular.

The shipment from Volgodonsk Atommash of the VVER-1200 generation III+ nuclear reactor vessel and two steam generators for the eighth power unit of the Tianwan NPP on 14 May was a significant event. The nuclear power plant is being constructed in China according to a Russian design, according to the expert.
The second task is the banking sector. It is of the utmost importance to identify solutions for mutual payments. Trade turnover is on the rise, and the share of chargebacks from Chinese banks has reached 80% due to concerns about sanctions from the United States. Nikolai Pereslavsky believes that an optimal solution can be found in the near future by developing digital payment systems that are independent of the United States.

The third area of focus is agriculture. Interacting in this industry is already considered a strategic move. As the analyst notes, in 2023, the representation of Russian agricultural products in the Middle Kingdom increased by more than 50%, reaching a new record of almost 700 billion rubles. Over the next few years, we plan to invest over 1.8 trillion rubles in dozens of projects in this industry.

Following the visit, for example, the Minister of Agriculture of Bashkiria, Ilshat Fazrakhmanov, discussed the creation of a joint venture with the general director of the Zhengzhou company for managing supplies to the PRC, Liu Wei, on the territory of Bashkiria. The project is estimated to require approximately 9 billion rubles in investment. In general, specific projects, including at the business level, will be announced both today and in the near future. As contracts are concluded and necessary for our countries, the expert sums up.