China-Russia Economic Alliance

The Sino-Soviet communist alliance of old has been transformed to a 21st century economic alliance now that they have resolved all their border disputes in 2005 ─ for the first time in 40 years. The Chinese and Russian economies are complimentary. Many of the products they generate do not compete directly. That is why Russia is not as concerned about China’s rising economic might as the U.S., Europe and Japan.

Little Russia in Beijing makes Chinatowns in America look like one horse towns. Hundreds of square blocks with stores of Russian made merchandise, restaurants, residential towers and direct factory outlets. Russian is spoken everywhere by Russians and Chinese alike.

Russia’s Primorsky Territory, with Vladivostok as its capital, borders three provinces in Northeast China that have century-old trade ties with each other. Heliongjiang and Jilin provinces are in the forefront of the cross-border trade. Suifenhe, a mountain city in China’s northeast Heliongjiang, is a booming border town because 5000 Russians cross the border each day to shop. Not just personal good but substantial trade deals involving textiles, shoes, fur coats, watches, appliances, electronics and food. They spent $1 billion in 2006. It is not one way trade. China buys timber, fertilizer, cement, steel and frozen fish. Heliongjiang spent $135.6 million in 2005 promoting its business ties with Russia with the aim of boosting the bilateral trade volume between the two countries to between $60 billion and $80 billion by the end of 2010. The provinces trade volume with Russia jumped from $1.79 billion in 2001 to $20 billion in 2004.

Vladimir Putin launched the “Year of Russia” in China in 2006, with more than 200 political, economic, military and cultural programs planned to highlight the warming ties. When Russia took on the presidency of the G8 summit, Putin invited China’s Hu Jintao to attend as Russia’s guest. China reciprocated with China’s Hu launching the “Year of China” in Moscow in 2007 with its largest ever overseas exhibition of 200 events, with a cultural festival, business forum and investment conference. Both countries have agreed to cooperate in the exploration of Mars. The relationship is purely strategic. It is a marriage of convenience without any passion.
Russia is not only China’s main defense partner, but is fast becoming China’s primary source of energy. A 2,300km multi-billion dollar oil pipeline from eastern Siberia to China was started in late 2005 and will become operational in November 2008. It will carry 30 million tones of oil, over three times the current volume of Russian oil being exported to China by rail. Russia has pledged to expand the flow to 50 million tones a year, roughly 1.2 million barrels a day. The alliance is a natural one. They share a peaceful common border and both want to extend their influence in central Asia and reduce U.S. influence there. They are succeeding ─ America is becoming isolated.

Given the huge gap between the populations and the very distant interest of Moscow compared to the close involvement of China, the Russian Far East risks being transferred, in all but name, to a form of Chinese control. There are several hundred thousand Chinese, if not millions, living and doing business in the country. Russia is acutely aware of this and has started cracking down on Chinese migrant communities in its retail and farming sectors.