China-Russia trade likely to rise this year despite global stagnation
Published: Nov 25, 2020 09:38 PM

A woman and her child play around a sculpture of lion during the opening of the "Fairy Tales Path" at the "Residence of Grandfather Frost" in Moscow, Russia, Nov. 18, 2020. A total of 65 sculptures inspired by Russian and foreign fairy tales are installed along the path. (Photo by Alexander Zemlianichenko Jr/Xinhua)

Despite fallout from the pandemic and disruptions to the world economy, trade between China and Russia, driven by profound political mutual trust and cooperation even in hard times, is strongly resilient and could expand this year to exceed the record $110 billion in 2019, with energy and agriculture leading the trend, experts said.

These remarks came as the 24th session of the committee for regular meetings between the Chinese and Russian heads of government, co-chaired by Chinese Vice Premier Hu Chunhua and Russian Deputy Prime Minister Dmitry Chernyshenko, was held on Tuesday via video link, where officials pledged to promote mutually beneficial cooperation.

Hu said that China is ready to work with Russia to stabilize and expand trade cooperation to achieve growth in bilateral trade this year, the Xinhua News Agency reported on Tuesday.

China will also work with Russia to vigorously promote agricultural cooperation, deepen cooperation on strategic major projects and scientific and technological innovation, and promote China-Russia cooperation to achieve new progress, Hu said, according to the report.

Despite the impact of the pandemic on the economy, trade and flows of people, the idea that bilateral trade may grow this year is well founded, with China's share in Russia's overall foreign trade rising from 16.4 percent in the first nine months of last year to 18.9 percent this year, according to public data.

"China and Russia have entered into a comprehensive strategic partnership in the new era, which will not be easily affected by difficulties. After many years of comprehensive political mutual trust and economic complementarities, new trends in understanding and cooperation between the two sides have emerged, going against the trend of the global crisis," Song Kui, president of the Contemporary China-Russia Regional Economy Research Institute, told the Global Times on Wednesday.

But for trade to grow this year, there's still an estimated gap of $3 billion.

At current levels, bilateral trade may hit $108 billion this year, compared with around $111 billion last year, Li Ziguo, a senior research fellow with the China Institute of International Studies, told the Global Times on Wednesday.

The $3 billion shortfall could be offset once demand for Russian energy increases in winter, said Li, noting that energy accounts for the largest part of that shortfall, as 63 percent of China-Russian trade is in energy.

In addition, although some long-distance sea transportation to Europe and the US has been disrupted, with soaring costs and container shortages, China-Russia trade largely remains normal, thanks to the smooth operation of China-Europe freight trains, Song said.

As the pandemic spread around the world, many sea and air shipments quickly moved to railways, China's National Development and Reform Commission spokesperson Meng Wei said at a press conference on November 17.

As of November 5, the number of China-Europe freight trains running this year reached 10,180, exceeding that of the whole of last year, Meng said.

China-Russia trade is likely to expand because of structural adjustments, ongoing simplification and digitization of customs inspection, and local currency settlement, experts added.

The promising prospects for China-Russia economic and trade cooperation are in stark contrast with tensions between China and the US posed by the unfriendly approach of the US government during the Trump administration.

"Due to tension between China and the US, which worsened during the Trump administration, China began to look for more reliable agricultural import channels in its neighborhood," said Song.

Song noted that unlike the situation with the US, there is mutual political trust in China-Russian relations, and Russian soybeans are not genetically modified. They also offer good quality, and there is growing freight train service between China and Europe, which has brought much convenience to bilateral transportation.

Driven by demand from China, more Russian companies have entered the trading and agriculture fields.

Denis Paletskiy, spokesperson of Beijing Huanuo Exiang (REX) Trading Co, a Russian company facilitating local businesses to enter China, told the Global Times on Wednesday that soybeans and rapeseed used to be uncommon in Russia, but because of rising demand from China, more Russian companies are working this field.

"Especially in the Far East region of Russia, which is adjacent to China, Russian farms started to extensively produce soybeans, rapeseed and canola oil, as well as rapeseed meal and soybean meal, for the Chinese market, partly because of recent trends in bilateral farm trade between China and the US for various reasons, which means opportunities for us," said Paletskiy. 

He noted that Russian companies want to take advantage of these opportunities, and Russian and Chinese soybean companies are discussing a soybean alliance.

In the first eight months of this year, Russian soybean exports to China rose 9 percent year-on-year to 490,000 tons, while soybean oil exports to China rose 140 percent year-on-year to 216,000 tons, media reports said.

Although Russia still accounts for less than 1 percent of China's soybean imports, it is still a remarkable achievement in a world where global trade is almost stagnant, and shows that there is still great potential in China-Russia soybean trade.

China will still actively implement the first-phase trade agreement with the US, but with the steady development of China-Russia trade, the significance of that deal will be weakened, with more cooperation with China's neighboring countries such as Russia, analysts said.

"The demand for Russian agricultural products could increase by the end of the year, and there is a trend of China opting for supply chains from neighboring countries, which means a huge opportunity for Russia," said Li.