Analysis of Economic and Political Relations between China and the Russian Federation

Maksim Vetrik, School of Governance and Politics, MGIMO University;

Ivan Kabanov, School of Governance and Politics, MGIMO University.

Abstract. Economic and political interests are balanced in relations between Russia and China, and, taking into account the geostrategic features and problems, the respective interests are not only mutually intersecting, but also mutually determined. The theme is important because of the priority value of deepening and expanding economic and political relations between China and the Russian Federation as a factor in ensuring the national interests of the two countries, the formation of regional and global economic and political security, a guarantee of the stability of the world order and the sustainable formation of a multipolar world, taking into account the influence of states with emerging economies. Despite the numerous differences in the state and trajectories of development, the economies of Russia and China shape the contours of global economic cooperation, including within the framework of numerous integration associations such as the SCO, BRICS, APEC, and the geopolitical role of the two countries cannot be overestimated. The historical sinusoid has been replaced in recent decades by sustainable development based on pragmatism and respect for bilateral interests in the economic, political, social and cultural spheres.

Research methods: analysis, synthesis, induction, deduction, abstraction, modeling, dialectics, methods of statistical analysis, case studies and others.

Key words: mutual bilateral relations, economic relations, international trade, cooperation, partnership.

Introduction

Currently, China is the main foreign trade partner of Russia. According to the Federal Customs Service of the Russian Federation, trade between the Russian Federation and the China in 2020 decreased by 6.27% compared to 2019 and amounted to 103.969 billion dollars USA. The pandemic factor undoubtedly affected negatively the indicators of foreign trade between almost any pair of countries, but in case of Russia and China, the corresponding deviations turned out to be comparatively less significant than between other strategic foreign trade partners of the two countries, and, moreover, the key indicators of bilateral trade Russia and China are growing in relative terms.

Main Part

China's share in Russia's foreign trade turnover in 2020 was 18.31% against 16.64% in 2019. In terms of its share in Russian trade in 2020, China took first place (in 2019 - also first place)[1].

China occupies a leading position among the countries of the world in the export of goods and services to Russia, keeping it for a number of years in a row. At the end of 2020, China's share in gross imports of goods and services in the Russian Federation amounted to 14.58% (13.43% in 2019)[2].

The most important achievement of this policy was the fact that, since 2017, China has come out on top among the countries of the world not only in terms of imports of goods to Russia, but also in terms of Russian exports.

It should be emphasized that the corresponding moderately positive trends in foreign trade are taking place against the background of a general decline in international trade during the COVID-19 pandemic, which characterizes the development of bilateral economic relations as sustainable, not inertial.

It should be noted that raw materials traditionally dominate in the structure of Russian exports to China - mineral products (65.45%) and wood and pulp and paper products (8.75%). It is easy to see that non-resource exports to China account for only slightly more than 1/4 of all Russian exports to this country[3].

At the same time, for obvious reasons, Chinese imports to the Russian Federation are more diversified. Thus, more than half (57.04% in 2020) of Chinese imports were machinery, equipment and vehicles, which reflects the significant dependence of Russia on imports of high-tech engineering products. In second place are textiles and footwear (11.32%), followed by chemical products (10.14%), metals and metal products (8.22%), food products (2.53%).

Analyzing the growth in imports of goods from China by commodity groups, we note that the most significant growth was observed in the group of nuclear reactors, boilers, equipment - by 0.7 billion dollars USA[4]. In this particular case, there is a substitution of imports from countries that have imposed sanctions against the Russian Federation[5].

In general, it can be stated that most of the national interests of the two countries in mutual foreign economic cooperation at the current stage are being fully realized. China receives from Russia raw materials and goods of certain categories on favorable terms, and also has access to Russian markets, which in many cases is preferential, as well as freedom of investment. The Russian economy receives numerous goods and services from China that meet the needs of the population and entrepreneurs at a fairly low price level and a steadily growing level of quality. At the same time, in the context of the crisis and sanctions, the Chinese market is becoming a priority for the sale of Russian raw materials and other exported goods.

Undoubtedly, Russian interests in economic partnership with China could be provided more broadly; negative aspects remain the high level of counterfeit products and low-quality goods coming from China to Russia; difficulties in constructing long-term business relationships with Chinese partners; restrictions on technological cooperation associated with the desire of individual Chinese partners to copy technologies on their own outside the framework of contracts; limiting direct financing of foreign economic transactions by transnational financial institutions registered in the jurisdiction of China and some others. However, these considerations did not diminish the degree of Russian interest in economic cooperation until the events of 2014 and subsequent years; all the more, they do not decrease in a situation of essentially forced turn of Russia to the east - in the current conditions, Russia's foreign economic interests in the sphere of cooperation with China, thus, can be called balanced.

The effectiveness of foreign economic interaction is largely associated with the political and economic power of supranational integration associations, the ability to jointly develop preferential conditions, rules and procedures for foreign direct investment, the implementation of cross-border trade in goods and services. With regard to the national interests of China, such is the organization of the "Free Trade Zone" in Southeast Asia (Regional Comprehensive Economic Partnership (RCEP)[6]. Investment simplification is one of the three key areas of negotiations within the RCEP forming the contours of this cross-border economic partnership.

Trade and customs cooperation between the Russian Federation, as well as the EAEU in general (represented by the Eurasian Commission) is implemented through the mechanism for concluding regional trade agreements (RTAs) with third countries, using the advanced capabilities of this regulatory toolkit. Before the creation of the Customs Union, RTAs were used by the Russian Federation to develop economic ties with the former Soviet republics. In 2000, the Russian Federation entered into a Free Trade Agreement with Serbia, which, however, involves limited trade liberalization. Within the framework of the EAEU, an agreement was approved on the establishment of an FTA with Vietnam[7]. At the same time, it seems appropriate to consider the RTS with the participation of the EAEU as a tool for the liberalization of investment activities, and not just trade in goods and (much less often in practice) services.

In this regard, there is a mutual interest of the two parties to intensify trade and economic cooperation on interstate integration platforms, which is also closely related to political cooperation in regional integration associations such as the SCO, BRICS, APEC[8].

Results of the Study

Summing up the results of the study, it seems appropriate to state that the goal of the study has been achieved, and the tasks have been completed, which is confirmed by the following results.

Bilateral political and economic relations between China and Russia are characterized by a rather complex historical evolution, but they remain important both for each of the countries and for stability in the Asia-Pacific region and, in general, for the formation of the modern world order. When developing bilateral relations, one should take into account not only achievements, but also contradictions and problems, on the overcoming of which the long-term development of a truly mutually beneficial and comprehensive partnership depends.

Conclusion

It is difficult, if not impossible, to assess political contacts on the basis of statistical indicators; in this regard, it seems appropriate to carry out the assessment according to the criterion of achieving the interests of the two countries in bilateral relations. In particular, as noted earlier, political contacts between the two countries are characterized by stability and develop on the basis of mutual bilateral interests, supported by a mutual desire to create a productive environment in a multipolar world. Political contacts between China and Russia are developing, which is facilitated by the intensification of bilateral economic and cultural exchange. Despite the mandatory need to take into account risk factors in the development of bilateral political relations, we can talk about their productivity and dynamic development in recent decades.

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