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On the visit of the Chinese delegation to Russia
What are the economic results and directions of movement of the two countries?
There were not so many specifics, but the priority areas are quite clearly marked.
It is planned that by 2030 gas exports to China will grow to 98 billion cubic meters plus 100 million tons of LNG, where 50 billion of gas is supposed to be delivered through the planned Power of Siberia 2 pipeline, while simultaneously bringing the Power of Siberia to full capacity.
This plan looks unrealistic and even absurd. The fact is that the Power of Siberia was built for 5 years from 2014 to 2019. The first commercial deliveries began in 2020, accelerating from 5 billion, then a little more than 10 billion cubic meters in 2021 and about 16 billion cubic meters in 2022. It is planned that only by 2025 will the Power of Siberia reach its design capacity of 38-40 billion cubic meters in the best case.
Power of Siberia 2 with a capacity of 50-55 billion cubic meters can only be built in 2024, and completion is closer to 2028 with the first deliveries in 2029, which will not even theoretically allow reaching the supply plan by 2030. Therefore, the realistic volume of supplies by 2030 is closer to 40 bcm.
What about LNG? 100 million tons of LNG is 138 billion cubic meters and only to China, while Russia's current supplies to all countries amount to 43-46 billion cubic meters. This plan assumes an increase in LNG capacity by at least 4 times in 5 years and joining the world leaders in LNG exports, overtaking Qatar and Australia, performing at the US level, which, of course, is impossible.
A very limited period, there is no appropriate infrastructure, technology and funding for such capacities. Probably, in the statement it was about 10 million tons, and not about 100.
Otherwise, there were few specifics and rather abstract, declarative plans.
However, the direction is formulated: transport infrastructure, logistics, energy, finance, technological cooperation/experience exchange, IT technologies and cyber security, tourism.
Potential winners: Gazprom, Rosneft, Novatek, Sberbank, VTB, Phosagro, Acron, VSMPO-Avisma.
▪️Development of transport infrastructure, especially in Siberia and the Far East due to the limited capacity of the BAM and the Trans-Siberian Railway. Expand railway and highways, build new transport corridors? So far there is no clarity.
The development of the Northern Sea Route (NSR) without any specifics about the timing, scale and volume.
▪️Increase in the turnover of the yuan and the ruble in cross-border settlements. At the same time, nothing was said about the most important thing - the interconnectedness of the Russian and Chinese financial systems, which implies the participation of Russian economic agents in funding, using the Chinese financial system through lending and issuing bonds in yuan.
So far, there is no movement on the trajectory of the participation of the Chinese financial system in lending to Russian companies.
There is no understanding of the range of Chinese financial instruments available to Russian residents on the devaluation trajectory. What we have now is absolutely not suitable for reserving and diversifying the foreign exchange assets of Russian residents, both because of the closed nature of the Chinese financial system and because of the unwillingness of Chinese banks to cooperate more closely with Russian financial institutions.
Without the removal of these barriers, the growth of yuan integration will be impossible. the existing crutch to have too many infrastructural constraints. This will facilitate the flow of excess currency into other currencies.
▪️It was announced about trade cooperation, but nothing was said about the investment cooperation of Chinese business in the Russian economy.
The share of China's direct and portfolio investments in the Russian economy is at the level of statistical error (about 1% of all direct investments, including Hong Kong) or less than $6 billion. There is no certainty about strategic cooperation and the participation of Chinese businesses in large-scale investment projects in Russia.
So far, there are more questions than answers; it is impossible to calculate the economic effect.
On trade cooperation between Russia and China. In 2017, the trade turnover (export + import) of Russia and China was about 80 billion dollars, in 2019 it was already 110 billion, in 2021 - almost 150 billion and a new record in 2022 - over 185 billion of trade turnover (export - 112 billion, import - 73 billion).
China has become an unconditional and uncontested trading partner of Russia. In 2023, the turnover may exceed 200 billion rubles.
In accordance with the structure of exports of goods from Russia to China, it follows that approximately 78% of the export structure is fuel and energy products, about 4-5% is wood (where almost 3.5% is unprocessed wood), 8-10% is metals (about 3.3% is ores). and concentrates) and 5% agricultural products and fertilizers, where mainly fish at 2.5%.
In the structure of Russian exports, about 98% is occupied by raw materials in value terms, and mostly zero and low processing, i.e. crude oil, not oil products, gas, not petrochemical products, unprocessed wood, not wood products, metal in primary forms, not metal products and so on.
From the draft strategic cooperation between Russia and China for 2030, it follows that the raw material export model is fixed in its current state with virtually no changes. Everything comes down to the construction of oil pipelines, gas pipelines, increasing the capacity of transport routes for the export of coal, metals and agricultural products.
In line with the trends, it is assumed that the export potential of fertilizers (the highest priority) can be increased as part of the reorientation of flows from Europe to Asia.
The agro-industrial complex (AIC) in Russia is on the rise. In the period from 2012 to 2016, exports amounted to about 17 billion dollars a year, by 2020 it increased to 30 billion, in 2021 - 37 billion and over 40 billion in 2022. In the export structure, almost a third is grain, 20% - oil and fat products, 18 % - Fish and seafood.
The main trading partners for 2021 were (deliveries of more than $ 1 billion): the EU, Turkey, China, Kazakhstan, South Korea, Belarus, Egypt. In 2023, the main customers may be: China, breaking into first place, with a potential supply of up to $ 5 billion, Turkey, Kazakhstan, the EU and Egypt.
It is likely that China in 2023-2024 will become the absolute leader in Russian supplies and will strengthen its leadership in the products of the fuel and energy complex, agro-industrial complex and agricultural chemistry.
Given the closed foreign markets, the raw-material model of the Russian economy will, at a minimum, be preserved, focusing on a single large client, which imposes a number of restrictions, primarily a hard dumping of long-term prices, as is the case for gas.
In the high-tech segment, local cooperation between Russia and China is possible in the aerospace industry (construction and development of aircraft engines, spacecraft), nuclear energy and IT.
Technological cooperation should not be counted on. China has not invested trillions of dollars in science and more than twenty years of strenuous effort to share technology with someone.
On the direction of cooperation between China and Russia. What does China need from Russia?
If in 2008 the commodity structure of Chinese exports consisted of 75-80% of products with intellectual property of foreign companies, then in 2023 no more than 1/3 of exports are the property of foreign companies (products manufactured in China by order of foreign companies).
15 years ago, technologically, China was critically dependent on the West, but has come a long way to ensure technological sovereignty. From replicating and reengineering foreign products, China has consistently moved towards its own innovations, and in 2025 it can claim to be the world leader in the export of cars of its own brands.
There are vulnerable segments in China: biotechnology, information technology, microelectronics (mainly the production of memory and processors using advanced technical processes), the aerospace industry (aircraft engines, high-precision weapons), where China is inferior to world flagships, but the pace of China's development is so high that any information becomes outdated in moment of exit.
Before the creation of a full-cycle economy and almost complete autonomy from the West, China needs another 5-7 years, i.e. by 2030, China will reach such a level of development, closing gaps in vulnerable and lagging industries, that Western sanctions restrictions on China will not be fatal.
At the same time, China needs an instrument of influence to promote the interests of Chinese companies in the international arena in order to conquer sales markets.
The world is definitely moving towards the polarization and crystallization of a new center of development in the person of China, which will close on itself countries that are alternative to the West.
In this sense, China needs time and allies, including to deflect the blow from China itself.
China needs Russia as a lightning rod against the aggressive geopolitical influence of the collective West and as a raw materials appendage, which is confirmed by the structure of exports and the project of strategic cooperation until 2030.
Since 2010, China has been increasing its presence in Africa, in South Asia and forming three flanks: the northwestern flank (Russia), the southwestern flank (Iran) and the eastern flank (DPRK).
The current configuration of the Ukrainian conflict is beneficial for China, because places Russia under high economic, technological and political dependence on China, while simultaneously tying down the forces of the collective West in this theater of operations, without giving resources and opportunities to actualize the issue of Taiwan and the aggressive US-China economic confrontation.
At the same time, China cannot allow the defeat of Russia, because. this will endanger China itself in the long run.
A purely pragmatic function, just as Ukraine is the shock fist of the collective West against Russia, so is Russia for China, as an outpost and a shock fist against the collective West.
Will China support Russia? There is no doubt (economically and partly politically), which is confirmed by the most warm and friendly visit of the Chinese delegation to Russia (the first international visit since Xi's re-election), which is defiant for the West.