«DEMETER»: Global solution
One step ahead
▪ In China-Russia economic and trade cooperation, trade cooperation has developed more than investment. In 2014, Russia faced Western economic sanctions and adopted a "look east" policy in its foreign economic strategy. Russian demand for Chinese investment has increased, China has gradually become a friendly policy for investing in Russia, and investment cooperation has begun to accelerate and expand in scale. But so far, the current status of China-Russia economic and trade relations has not exceeded the limits of the economic power structure of the two countries.
1 First, cross-sectoral trade between China and Russia dominates, while the final product and commodity trade remains the main trade. This shows that the industrial integration between China and Russia is very low and lacks intra-industry trade. Russia exports raw materials and energy for primary products to China. Importing cars and heavy machinery, equipment and consumer goods from China are the main structural features of the trade between the two countries. On the other hand, industrial cooperation and industrial division of labor between the two countries are very weak, so intermediate products in certain industries lack trade.
2 Second, there is no industrial separation between China and Russia. The deeper reason is that the scale of mutual investment between the two countries is still very small, making it difficult to increase the level of industrial cooperation. From 2013 to 2018, Russia’s foreign direct investment was only 0.8%, 0.9%, 1, 1% and 0.5% of total domestic investment, accounting for only 0.8%, 0.9%, 1.1% and 0.5% of total domestic investment.
China and Russia have never regarded each other as the main direction of opening economic relations. After 2014, China entered a period of agricultural structural transformation and foreign economic and trade growth. The “Belt and Road” strategy and the emphasis on economic growth have replaced the previous model of export cooperation. Due to Western sanctions, Russia began to "look east." This has created conditions for the two countries to strengthen mutual investment and industrial cooperation. Russia and China have also begun to provide more friendly business and political conditions for investment and cooperation.