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Sino-Russian trade: record scale and obsolete structure

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MOSCOW. (RIA Novosti political commentator Dmitry Kosyrev.) - The report about the record scale of Sino-Russian trade, which reached $29 billion in 2005 (a 37.1% increase), came out in December and was supplemented in the first two months of this year.

Importantly, during this period bilateral trade has been scrutinized in the context of the upcoming visit of the Russian president to China.

The conclusion is that during Putin's presidency Sino-Russian trade has more than tripled. The point of departure is 2000 with the volume of trade amounting to $8,3 billion. The Russian economy has also grown, but not to such an extent. In other words, Sino-Russian commerce is surpassing Russia's economic growth as a whole.

China is not the only case in point. Trade with France has also almost tripled, reaching $9 billion a year.

But these rates have not turned France into Russia's second trade partner after Germany. This place is occupied by China. It is difficult to quote accurate data because Russia and China have always engaged in border trade, which is estimated at several billion dollars on top of the official figure and makes the statistics extremely confusing.

It is no surprise that Asia's importance for Russia is rapidly growing. Asia is attracting increasing attention of the rest of the world as well. The question of who it is better to trade with - East or West - does not depend on political preferences but is the choice of the market's invisible hand. Otherwise, why was there so much talk under former President Boris Yeltsin about the need to cross the $10 billion mark in Sino-Russian trade, a target which seemed unrealistic and was not achieved at that time?

But after the year 2000 the situation underwent a dramatic change. Bilateral trade virtually doubled between 2003 and 2005, a rare case in world practice.

Nevertheless, although China has become Russia's second partner after Germany, the reverse is not true. Russia's share in China's entire trade is a little over 2%. In other words, Moscow depends more on Beijing than the other way round. It is not easy to level out this imbalance.

Mutual economic dependence is a coveted target in international relations because it makes them stable, peaceful and predictable. Sino-U.S. relations are one example. In theory, they should be extremely tense because many in America are horrified by the prospect of China replacing the U.S. as the world's economic leader within the next 25-45 years. But de facto Beijing and Washington treat each other with care. Out of China's 863 aircraft 534 are Boeings, for which the U.S. received $40 billion, not to mention the fact that a considerable portion of spare parts of other Boeings all over the world are assembled in China. Moreover, China has already credited the U.S. economy with $300 billion, having bought securities of the U.S. Treasury. Even if the two countries are strategic rivals, this does not prevent them from being locked in a strong economic embrace.

Despite its records in trade with China, Russia is not as economically important for China as the U.S. But China certainly needs Russia.

The latest statistics of bilateral trade show the share of raw materials (oil, timber, fish, metals) in Russia's exports to China is on the upsurge. In 2005, this figure almost reached 90% of Russia's overall exports to China. As for oil deliveries, Russia is China's fifth partner after Saudi Arabia, Iran, Oman and Angola.

To the contrary, China has been exporting more and more equipment to Russia. The structure of trade whereby one side sells raw materials to the other in exchange for machines was described in the past century as a colonial pattern, where the former side had invariably stood to lose.

But China cannot export raw materials because it has none. Instead, it has recently become the world's assembly shop. Both Moscow and Beijing are trying to find out a roundabout way of overcoming this unpleasant trend. Both sides want to make even Russia's exports of raw materials science-intensive.

Russian President Vladimir Putin and his Chinese counterpart Hu Jintao agreed to draft a program on bilateral trade and economic cooperation for 2006-2010. Today, the Russian Ministry of Economic Development and Trade and the Chinese Ministry of Trade are working on this program. The document will be practically completed by the time of Putin's forthcoming visit to China.

The main goals of the plan are to at least double trade again to reach $60 billion by 2010 and attract $12 billion worth of Chinese investment to the Russian economy. These objectives require a change in the entire pattern of bilateral trade.

Russia does not give up the intention to increase oil supplies to China. Their amount, carried by trains alone, will be brought to 15 million tons. But apart from exporting oil, Russia is capable of offering energy generation technologies. These questions are now on the agenda.

The same applies to timber exports. Chinese investments in Eastern Siberia will make it possible to process timber on the spot into products required by China, such as cellulose for paper. For the eastern part of Russia this is one step up on the technological ladder.

To sum up, Moscow wants to focus on science-intensive and technologically advanced projects in cooperation with China, even in the sphere of raw materials. The two countries will achieve the new record targets in trade only if they upgrade it technologically, which in turn will promote their political contacts.

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