Volume 45 Number 176,
January-March 2014
The Scope of Economic Cooperation between Russia
and China and Future Prospects
Tatiana Sidorenko *
Date received: April 8, 2013. Date accepted: August 8, 2013.

Since the beginning of the twenty-first century, economic cooperation between Russia and China, especially in terms of bilateral trade, has grown rapidly. In 2009, China became the top trade partner of Russia. The structure of commercial links between these two countries is characterized by the expansion of Russian hydrocarbon sales, on the one hand, and pronounced growth in Chinese exports of manufactured products, on the other. Investment cooperation between the two nations is of little relevance. Among the challenges facing Russia is the need to diversify its exports to China, as well as intensify ties in tourism, transportation and innovations.

Keywords: Russia, China, Sino-Russian trade, energy cooperation, investment cooperation.

Since the break-up of the Soviet Union, Russia has become an independent player in international economic relations and has actively sought to integrate within the world economy. At the beginning of the twenty-first century China has become an area of special interest for Russia. Various factors, including the following, provide an explanation for this: Firstly, Russia and China are neighbors with a common border of over 4,300 km. This is mutually beneficial for developing trade relations and for cooperation. Secondly, China is a highly promising market owing to the high economic growth rates achieved there since the beginning of the 1990s and the increasing spending power of its population of over 1.3 billion people. With a gdp of 7.3 billion dollars in 2011, the country is now the second world power. If the same level of growth is maintained, analysts believe that in a decade the Asian giant will become the world’s leading economy, to the detriment of the United States. Thirdly, in 2010 China became the world’s biggest energy consumer, overtaking the U.S.A. However, the national production of hydrocarbons, particularly oil and gas, is not enough to meet growing demand. Faced with this situation, China has increased its energy imports and put into practice a policy of diversifying energy providers and of creating new transport routes for energy. The aim is to strengthen national energy security. Fourthly, as the world’s leading exporter of gas and the second exporter of oil, Russia is seeking to diversify energy sales to other countries with the aim of reducing her dependency on oil and gas exports to European Union countries, Russia’s main market for hydrocarbon sales. This would contribute to the socioeconomic development of Eastern Siberia and the Far East, regions which are rich in hydrocarbons, and create a solid foundation for energy cooperation between the two countries.

Finally, it is important to highlight that the signing of the Treaty of Good-Neighborliness and Friendly Cooperation by Russian and Chinese Presidents Vladimir Putin and Juang Zemin in 2001 institutionalized a strategic link between the two countries and reinforced bilateral economic cooperation.

The aim of this work is to analyze the key directions of economic relations between Russia and China, that is bilateral trade and cooperation for investment, highlighting the achievements. The challenges facing the development of these relationships are emphasized, while taking into account Russia’s accession to the World Trade Organization (wto) in 2012.


The main feature of economic cooperation between these two countries is trade. Since the beginning of the twenty-first century, the dynamics of Sino-Russian relations have been highly positive. While in 1995 trade exchange between both countries amounted to 4.3 billion dollars, in 2005 this rose to 20.3 billion, and in 2008 to 55.9 billion dollars. However, in 2009 the value of Sino-Russian trade dropped to 39.5 billion dollars owing to the international economic crisis. Nonetheless, the development of trade relations between the two countries regained its positive dynamic in 2010 and bilateral trade exchange reached 59.3 billion dollars. China became Russia’s main trading partner with share equal to 9.5%. In 2011 and 2012, bilateral exchange continued on an upward trend reaching 87.5 billion dollars in 2012. In this final year, China’s share in Russia’s trade exchange reached 10.5%, overtaking the Netherlands and Germany, whose quotas of Russian foreign exchange were 9.9% and 8.8% respectively. Whereas in 2012, Russia’s exports to China represented 6.8% of total sales abroad, imports from China constituted 16.6% (see Table 1).

During the first official visit of China’s new leader Xi Jinging to Moscow in March 2013, it was agreed that the volume of bilateral exchange would be raised to 100 billion dollars in 2015 and 200 billion dollars in 2020 (Kremlin, 2013). In this way, the leaders of both countries expressed the importance of trade cooperation between both economies.

Official data from Russia’s Federal State Statistics Service shows that from 2000 Russia’s trade with China rose considerably more than exchanges with all its trade partners. From 2000-2012, the value of Russian foreign exchange rose 6.1 times and Sino-Russian exchange rose 14.1 times. Russian exports rose 5.1 times, whereas sales to China rose 6.9 times. However, the difference is more pronounced in the increase of Russian imports. From 2000-2012, Russian purchases abroad rose 9.2 times, whereas imports from China rose 52 times. This shows the growing importance of Russia in trade with China.

Russia’s accession to the wto in 2012 resulted in a reduction in the average import tariff level from 10.3 to 7.15% by the end of the transition period. It is important to note that the average import tariff level in Russia rose more than in developing countries, to 4.4% in 2010. This has proved a significant obstacle to sales of imported products in the Russian market, protecting national producers from international competition. The maximum import tariff levels on products China sells to Russia, that is machinery and electronics, as well as textile products and footwear also dropped considerably. The import tariff rate for wool and cotton dropped from 15 to 10%, while for clothing it dropped from 3-5 Euros per kilo to 1.88-2.25 and for footwear from 1.8 Euros to 0.34-1.5 (Portanskiy, 2012:54).

The reduction in import tariff levels in Russia will clearly make the national market more open and therefore facilitate the expansion of manufacturing products to other countries, China among them. This could contribute to the growth of imports from China.

It is also important to highlight that according to 2011 statistics from the World Trade Organization, Russia’s share of Chinese exports represented 2.0% of total sales. Chinese imports to Russia constituted 2.3% of total purchases from other countries (see Table 2). The Asian giant’s main trading partners were the European Union, United States, Hong Kong, Japan and South Korea. We can conclude from this that trade relations between Russia and China are asymmetric in nature and that China is an important trade partner for Russia, more so than Russia is for China.

Another issue for Sino-Russian trade is that since 2007 Russia has had a negative trade balance with its neighbor, which represented 18.4% of the value of China’s in 2012. For now, this situation has not affected the total balance of Russian foreign trade for Russia’s total exports are more dynamic than her imports. As a result, Russia’s trade surplus from 2008-2012 was around 200 billion dollars, with the exception of 2009 when it was only 134.4 billion dollars and in 2010 when the trade surplus balance was 168.2 billion dollars.

There are essentially two explanations for the deterioration of the Russian-Chinese trade balance: one is the lack of diversification in the sectoral structure of Russia’s exports in international markets which consist mainly of hydrocarbons, fertilizers and arms. The other is an overvalued ruble and undervalued Yuan, which plays a significant role in trade exchanges between the two countries. Thus the overvalued ruble discourages Russian exports of products with high added value because they prove more costly than foreign products, while encouraging imports as it is cheaper to buy abroad. Conversely, the low value of the Yuan makes Chinese products more attractive to the international market for they cost less. Russia’s accession to the wto could further aggravate this situation.


In terms of the sectoral structure of Russian sales in China, there have been radical changes since the beginning of the 21st century. In 1998 the main Russian exports to China were machinery and equipment (29.6%), ferrous metals (21.2%), wood and cellulose (12.2%) and fertilizers (13.6%); whereas oil and petrochemical products played an insignificant role and their share within total sales to China was just 4.2% (Trinich, 2009:43). However, from the beginning a dramatic drop in the importance of machinery and equipment sales to China can be observed, and in 2012 its share is only 3% of sales (see Table 3). The cause was a decline in national manufacturing industry, a rise in the importance of the energy sector in Russia’s economic development and the presence of an overvalued ruble. Thus the weight of this sector in national gbp was 30% in 2011. Furthermore, half of income from the state budget is made up of taxes from this sector.1 The growth of the Russian economy towards hydrocarbon production has made this country increasingly more dependent on international energy market cycles and therefore on world oil and gas prices.

The reduction in the weight of machinery and transport equipment could not compensate for Russian sales of arms to its neighbor. As is known, Russia is the second seller of arms in the world, with a 24% share during the 2007-2011 period, according to the Stockholm Peace Research Institute (spri). During this period China was the second buyer of arms, with a 16% share. However, from 2005 a clear reduction in these exports to China is noted. Thus in 2010, they reached only 14% of the level in 2005 and this index rose to 26% in 2011. From 2005-2010, China’s share of Russia’s total armament sales dropped from 68 to 8%. In 2011 there was an 11% increase.2

Various factors provide an explanation for the above, one of which is Russia’s reluctance to sell China its latest arms models for fear of them being copied. The production of arms and technology helped China reduce its dependency on arms purchases abroad and also to increase sales of arms to other countries. Thus from 2007/2011 China became the world’s sixth exporter of arms (Holtom, Bromley et al., 2012:5).

Oil and Gas Cooperation

Another important change in the sectoral structure of Russian exports to China is the dramatic increase in Russian sales of hydrocarbons. The share of mineral products in Russian transactions to its neighbor increased from 7.1% in 2000 to 73.2% in 2012. Hydrocarbons increased from 6.7 to 67.3% in the same period. As previously mentioned, this situation reflects the increasing importance of the energy sector for the Russian economy. On the other hand, it is important to mention that the changes taking place in the sectoral structure of Russian exports to China are the same as those of exports to other countries. Russia is the world’s main supplier of hydrocarbons. According to data from the wto, Russia’s share of total hydrocarbon exports to other countries was 59.1% in 2011 (United Nations 2011).

Increased energy cooperation between the two countries is the result of the Russian and Chinese’s economies complementing each other. While Russia needs more and more energy resources to satisfy the needs of its national economy, Russia has large deposits of oil and gas located in regions close to China. 20% of national oil resources and 23% of gas resources are thought to be located in East Siberia and the Far East (Bogdanchikov, 2007).

Considering the importance of the energy sector for the current and future development of the Russian economy and for Russia’s geopolitical standing, the Russian government approved the “Russian Energy Strategy up to 2030” in November 2009. Given that Russia will continue to be one of the world’s most important energy exporters up to 2030, the document outlines the plan to diversify Russian energy sales abroad. Asian countries are highlighted, particularly the Asian Pacific, that is China, Korea and Japan. The intention is to increase the share of Russian exports of oil and petrochemicals to these countries from 8% in 2008 to 22-25% in 2030 and of gas from 0 to 19-20% in the same period. In total, the share of Russian energy exports to the Asian Pacific countries will increase to 26-27% by 2030 (Sidorenko, 2012:50).

Among the causes explaining the growing importance of the Asian projection for Russian energy policy, the following are worth highlighting:

  • Russia’s wish to reduce its dependence on the European Union market, where Russia’s hydrocarbon sales are traditionally made, while making the most of the opportunities afforded by the Asian market, where dependency on energy imports is on the increase. Currently, 80% of Russian oil exports and 70% of gas exports are destined for EU countries. According to forecasts by the International Energy Outlook 2010, China’s consumption of energy alone will represent 25% of world consumption in 2035 (US Energy Information Administration, 2010:20). Faced with this situation, Asian countries will seek to diversify their sources of hydrocarbon supplies, creating a fairly solid base for cooperation between Russia and these countries for energy, while opening new possibilities for Russia to exploit hydrocarbon deposits in East Siberia and the Far East.
  • The geographical closeness of Asian countries and Russia’s Eastern regions, that is the East Siberian and Far East region, rich in oil and gas deposits.
  • Cooperation between Russia and Asian countries is facilitated by oil and gas pipelines, transporting Russian hydrocarbons to these countries, without the need to pass through third country territory, avoiding potential conflicts between Russia and transit countries.

In terms of the Asian projection for Russian energy policy, a solid base is created for energy cooperation between Russia and the countries of the Asian Pacific, particularly China. Regarding this final point, Russia’s national energy production cannot satisfy increasing demand, for only large deposits of coal are available. Only the national production of this energy can satisfy the needs of the expanding economy. Therefore, according to data from the bp Statistical Review of World Energy 2012, China became the first producer of coal and its weight in world production was 49.5%. At the same time, China consumed 49.4% of global coal consumption (bp, 2019:9). However, it is forecast that this will drop from 63% in 2008 to 55% in 2035 (US Energy Information Administration, 2011:71). This is assuming a rise in the importance of oil and gas in satisfying the energy needs of this Asian country.

China is currently the world’s second exporter of oil after the U.S.A. and in 2011 her imports represented 58% of consumption. Forecasts for the next decade all predict strong growth in demand and, above all in imports. According to the International Energy Outlook 2012, consumption could rise from 7.8 million barrels per day (mbpd) in 2008 to 13.6 mbpd in 2020 and 16.9 mbpd in 2035 (ibid.: 162). It is interesting to note that in 2011China’s oil consumption reached 9.8 mbpd (bp, 2012:32-33).

It is also calculated that China’s consumption of gas will rise from 2700 billion cubic meters in 2007 to 6800 billion in 2020. In 2035, China will consume 11500 billion cubic meters, a third of which will be met through imports (US Energy Information Administration, 2011:163), while exports will meet 22% of its needs in 2011 (bp, 2012:22-23).

The above leads us to conclude that oil and gas imports will play an important role in supplying China’s energy needs in the medium term. The diversification of energy purchases should therefore be an energy policy priority, along with the penetration of other countries into the energy sector through stock purchases of national companies and the construction of oil and gas pipelines to transport these hydrocarbons, with the aim of strengthening the energy security of the country. In these circumstances, energy cooperation with Russia is becoming a necessity for China.

Russian sales of oil play a key role in Sino-Russian energy exchanges. According to data from Russia’s Federal State Statistics Service, Russian sales of crude oil abroad rose from 145 to 247 million tons from 2000 to 2010 (1.7 times). However, they dropped to 239.9 million tons in 2012. It is important to mention that Russia exports approximately 50% of the oil it extracts and that Chinese exports rose from 8.1 million tons in 2005 to 20 million in 2012 (2.5 times).3 In this final year Russian oil sales to China amounted to 7.4% of China’s total energy purchases, and Russia became the third supplier after Saudi Arabia and Angola.

The rise in oil sales to China in recent years can be explained by the fact that Russia is no longer exporting crude oil solely by rail thanks to the construction of a pipeline between the two countries. With the aim of driving her energy strategy until 2030, Russia built the East-Siberia-Pacific Ocean Oil Pipeline (espo) linking oil deposits in East and West Siberia with Kozmino along the Pacific Ocean coast. This initiated sales with Asian Pacific countries such as Japan, China, Taiwan, Thailand, Singapore and the U.S.A.

In 2010, the espo pipeline diversion was inaugurated linking Skovorodino with the Chinese city of Daquing, a petrochemical center in the northeast province or Heilongjiang. It has a capacity of 15 million tons of petroleum a year. Russia commenced its supply of crude oil to China on January 1st, 2011. The pipeline is part of a bilateral “loan for oil” agreement signed between China and Russia in 2009, whereby Beijing provided Moscow with a long term 25 billion dollar loan in exchange for 300 million tons of crude oil from 2011 to 2030.4

During the official visit of China’s president to Russia in March 2013, it was agreed that energy cooperation between the countries would intensify and that exports of Russian crude oil to China would be doubled. To drive this objective, China’s Development Bank would give the Russian State oil company Rosneft two billion dollars worth of credit over a 25 year period.

Gas, another important line in Russian exports is still not particularly relevant for Sino-Russian trade. This is because until now, neither country has been able to reach an agreement and begin construction of the gas pipeline that would join both territories, despite the fact that since 2006 Russia and China have been considering the possibility of building a gas pipeline to transport gas from East Russia to China. The main reason little progress has been made on this project is because the Russian company Gazprom and the National China Petroleum Corporation (cnpc) cannot agree over the price of Russian gas (Rautava, 2011: 53).

Meanwhile, China endeavored to diversify its gas purchases abroad and achieved close cooperation with the ex-soviet republics in Central Asia. Chinese analysts believe that the inauguration of the Turkmenistan-Uzbekistan-Kazakhstan-China gas pipeline in December 2009 has been advantageous to negotiations with Russia because construction of the gas pipeline broke the Russian gas transport monopoly in the region. China will buy 30 billion cubic meters of gas from Turkmenistan until 2030, the equivalent of 50% of its energy needs. As the Chinese researcher Pang affirms, once the Central-Asia China gas pipeline is constructed, Russia will lose its advantage for negotiations on the price of gas for China (Jakobson, Holtom et al., 2011: 35), making the future of sales to this country uncertain.

However, it should be pointed out that because of the inability to agree a fixed price for gas for almost a decade, the Russian gas consortium Gazprom and its Chinese counterpart cnpc chose to sign a deal when the Chinese leader Xi Jinping visited Russia. This is a long term thirty year contract, with supply starting in 2018. The annual volume of Russian gas supply will be 38 billion cubic meters, which could increase to up to 60 billion and Russia will be paid in advance.5

Coal Cooperation

Bilateral trade in coal has grown significantly since 2009. Although China is the world’s leading supplier of this energy, her imports of coal have grown steadily and in 2009 China became a net importer of coal. The reason for this is the dynamic development of sectors of the national economy such as the cement industry, car manufacturing and metallurgy. The rise in demand for coal driven by these sectors of the Chinese economy led to a rise in coal prices on the domestic market, compared to the international market. As a result, Chinese purchases of coal abroad increased. In 2009, China imported 126 million tons and in 2012 purchasing rose to 290 million tons (a 2.3 fold increase).6 Most coal imports are from Australia, Indonesia and Vietnam.

The increase in China’s coal purchases abroad brings new possibilities for cooperation between Russia and China in this industry. Two main factors provide and explanation for this. Russian coal is cheaper than Australian coal and logistic costs are lower.

As a result, Russian coal exports to China increased from 0.4 million tons from 2001-2011 to 10 million tons (a 25-fold increase). According to forecasts, Russian sales of coal could reach 15 million tons in 2013.7

In August 2010, Russia and China signed an agreement in which Russia would sell China 15 million tons of coal a year for the next five years and over the next twenty years sales would increase to 20 million tons annually. In exchange, Russia would purchase credit from China for 6 million dollars to buy mining equipment, as well as mine coal in the far Eastern region and build the necessary infrastructure, including railroads to strengthen the transport of coal from Russia to China.

Other significant Russian export lines to China are fertilizers and wood. The weight of metals and metal products reduced in the new century. The reason for this was the introduction of import duties for steel in 2002. Also, in 2009 China introduced anti-dumping duties for processed steel, Russia’s main line in metal and metal product sales to China. As a result, Russia lost an important market at the beginning of the century.

The flip side of the coin is that China began to produce its own steel and managed to increase sales to other countries, including Russia. In 2011, Chinese steel exports to Russia, expressed in value, were 25 times those of Russia to China.8


There have also been significant changes in the sectoral structure of Russian imports from China in the last decade. At the end of the last century, the most significant Russian purchase lines from China were food products (from 15 to 20%) and textiles and footwear (30%), whereas machinery and equipment was only a 10% share (Trinich, 2009:45). However, as Table 4 shows, the weight of machinery and equipment was 53% of Russian purchases from China in 2012, making it the most important sales area. This trend in Sino-Russian trade can also be seen in Russian trade with all other countries worldwide. According to official data from Russia’s Federal State Statistics Service, the weight of machinery and equipment in Russian imports in 2012, excluding those of the ex-soviet republics reached 52.1% (Russia’s Federal State Statistics Service, 2013). China currently exports not only electro domestic equipment to Russia but also computers, telephone appliances and equipment for industry. At the same time, Chinese sales of cars and trucks increased.

This change is clear evidence of China’s success in the Russian market, in turn the result of China’s economic policy. Not only has China’s economy experienced very high growth since the 1990’s, there have also been profound changes leading to a rise in the importance of high technology industries. As a result, China has increased its exports of these products to other countries, including Russia. This leads to growth in the technological level of China’s exports. Thus, according to data from the World Bank, the weight of high technology products in total sales of Chinese manufacturing products rose from 13% in 1997 to 28% in 2010 (The World Bank, 2012). On the other hand, according to data from the U.N. Statistics Division, the weight of machinery and equipment in total exports reached 47.5% in 2011 (United Nations, 2011). As a result, China has managed to increase it exports to the Russian market, making the most of both its low manufacturing costs and technological advances. It is also important to mention that the under valued exchange rate of China’s national currency has contributed considerably to strengthening exports to all countries, including Russia.

According to data from the Federal Customs Service of Russia, the second most important line of Russian imports from China is clothing and footwear. From 2000, the share of this merchandise in Russian purchases was approximately 15%. Russia’s accession to the wto could offer new opportunities for China’s exporters because of the reduction in import duties.

Third in the ranking of Russian purchases from China are chemical products, and fourth metals and metal products. It is also important to mention that there was an increase in the importance of metal and metal products in Russian imports from China from 2000 to 2012. In 2000, the share of these was 5.5%, rising to 8% in 2012. As previously noted, China continues to increase its exports of steel to all countries. Of all China’s metal and metal product exports to Russia, the galvanized sheet steel line is the most important. Chinese sales of this product increased four-fold from 2010 to 2011 and are currently equivalent to national Russian production. Chinese exports of plastic coated galvanized sheet steel currently represent 30% of Russian production, which is a threat to national production. According to calculations by Russian producers of this product, the damage caused by Chinese sales of plastic coated galvanized sheet steel is 9.3 billion rubles.9 China also increased exports to Russia of stainless steel fasteners for construction and plumbing and is gaining its place in the Russian market.


It should also be noted that both China and Russia are becoming important players in the international foreign direct investment market (fdi) both as recipients and issuers. Chinese and Russian companies are currently internationalizing their activities abroad. According to data from the World Investment Report 2012, Chinese transnational companies exported 65 billion dollars of fdi in 2011and its worldwide share of exports was 3.8%. Russia exported 67.3 billion dollars of fdi in 2011, with a 4% share of exports (unctad, 2012).

China’s growing dependence on energy imports has led to energy expansion in the country through the purchase of shares in companies abroad or participation in foreign company capital. Over the last decade, China’s main oil companies, Sinopec, PetroChina and cnpc have made joint venture agreements or acquired part of the share package of companies in the Middle East, Africa, North America, South America, Russia and Central Asia to gain more secure access to energy resources. China currently has oil investments in more than fifty countries across the globe. The most important investment projects in the energy sector abroad are in Africa (Sudan and Angola), Latin America (Ecuador and Venezuela) and Central Asia (Kazakhstan).

The main interest of Russian transnationals lies in oil and gas extraction. Almost half of direct Russian investment abroad lies in the oil and gas sector and more than a third in ferrous and non-ferrous metals.

As recipients of fdi, China and Russia are also competitors and looking to attract greater volume to attract modern technology. Thanks to China having a more favorable business climate than Russia, the Asian country has managed to attract more foreign direct investment than Russia. According to data from unctad, the Chinese economy attracted 25 times more fdi than Russia from 2009 to 2011. At the end of 2011, China’s accumulated fdi reached 711.8 billion dollars, whereas the same index for Russia was 457.5 billion dollars or1.6 times less than that of its neighbor (ibidem).

The size and importance of Sino-Russian cooperation for investment is modest for both countries. According to data from Russia’s Federal State Statistics Service, China amassed 27.9 billion dollars in Russia at the end of 2012, the equivalent of 7.7% of total foreign investment in the country. Thus China ranks fourth place after Cyprus, the Netherlands and Luxemburg. However, China’s share of total fdi in Russia was only 1.1%. The greater part of China’s investments are credits granted to Russian companies. China’s share of the total volume of credits granted to Russia reached 12.2% (Russia’s Federal State Statistics Service, 2013). On the other hand, the importance of Russia as a destination of Chinese investment abroad is insignificant, representing less than 1%. China does not feature either in the most important destinations of Russian investment abroad. According to data from Russia’s trade representation in China, total Russian direct investment in this country at the beginning of 2012 was 817.79 million dollars.10 The Russia-China Investment Fund, worth 4 billion dollars, was established in this same year to facilitate cooperation.

The most important projects receiving Chinese investment on Russian territory are the Baltic Pearl Real Estate Complex in St. Petersburg, the Greenwood Business Center in Moscow, with Chinese investment worth 350 million dollars, and the glass production plant for cars in Kaluga with 200 million dollars of Chinese investment. At the same time, China is investing in the wood industry, cement production, the brick, truck and elevator industry, among other branches of the Russian economy. The closest cooperation is taking place in the neighboring regions of both countries.

China is seeking to access natural resources in Russia to meet its need for raw materials and hydrocarbons. However, there are restrictions for foreign investment in strategic sectors. Also, Russian companies have little interest in selling shares to foreign companies. On the other hand, according to some Chinese scientists, Russia is more inclined to cooperate with companies from the West (Jacobson, Holtom et al, 2011: 32). As a result, cooperation in investment in the Russian energy sector has been fairly modest up to now.

To date there are few cases of Chinese participation in shares of Russian energy companies. In June 2006, therefore, Sinopec bought Udmurtneft, which belonged to the Russian- British company TNK-bp, in partnership with the Russian State oil company Rosneft. The Chinese company owns 49% of the shares and Rosneft 51%. Udmurtneft produces 120,000 barrels a day ( 5,976,000 tons a year) and has reserves of 1 billion barrels. This operation proved a significant step for the Chinese company, both in terms of entry into the Russian energy sector, and improving its ranking on the international scale (Rubilolo, 2010:71). Additionally, Rosneft and cnpc created a joint company Vostok-Energy, with the aim of obtaining a license for exploiting oil deposits in the Irkutsk region.

In October 2010, the energy company and the Russia-China investment company announced the acquisition of 51% of shares in the Russian company Surgutneftegaz. Thanks to this purchase, the joint company obtained the right to exploit gas deposits in East Siberia, whose reserves are estimated at 60 billion cubic meters. Furthermore, construction of a refinery in China began in September 2010, a Rosneft and cnpc project for which the joint company Vostok-neftejimiya was created. In 2007, construction was completed on Blocks 1 and 2 of the Tianvan atomic center by the Russian company Atomstroy export. In November of the same year, Russia and China signed a contract to build two more blocks at the center. Interestingly, this is the most important center in China. During the visit of Chinese president Xi Jinping to Russia in March 2013, Rosneft proposed that the Chinese company Sinopec participate in joint development projects on the Russian continental platform, in particular the oil and gas project Sajalin-3.

There are various explanations for the precarious nature of Sino-Russian investment. Chinese investment in Russia faces obstacles from restrictions to fdi in strategic sectors, particularly the Russian energy sector. Additionally, for the time being, Russia is not a priority for the expansion of transnationals in China. According to a BBVA report, Russia ranked twelfth place as a destination of direct investment in China out of twenty main destinations, whereas in terms of total fdi acquired abroad, China ranked ninth place. It is worth noting that whereas Chinese fdi in Hong Kong amounted to 199 billion dollars, in Russia it was only 2.8 billion dollars (bbva, 2011:4). China is not a priority either for Russian company investment abroad. However, it is important to mention that Chinese and Russian transnationals compete in the international fdi market. Both China and Russia seek access to mineral resources in other countries. Ultimately, their economic interests are focused on the ex-soviet union republics in Central Asia, particularly Turkmenistan and Kazakhstan, countries rich in oil and gas.


Economic cooperation between Russia and China developed rapidly at the beginning of the twenty-first century and has become an important part of strategic cooperation between the two countries. However, the cooperation model is not as efficient as it should be.

Profound disparities in bilateral economic cooperation have developed. The main problem with trade relations between the two countries is that the sectoral structure of Sino-Russian trade is highly unfavorable for Russia. Russia is selling increasingly more primary material, including oil, coal, wood and gold, among others. Thus Russia has taken on the role of natural resources supplier for China’s growing economy. On the other hand, China is increasing its sales of manufacturing products, machinery and transport equipment among others, and these have become an important line of China’s exports to Russia. This creates a much needed base for Chinese expansion in the Russian market and represents a threat to the development of many branches of Russian industry, causing problems for the economic security of the country.

One of the main causes of this situation is the overvalued ruble which encourages imports and discourages the potential development of national companies. Likewise, the undervalued Yuan encourages Chinese exports to Russia. The overvalued Yuan is one of the factors leading to deindustrialization and therefore decreases the export potential of Russian companies in the manufacturing sector. To drive economic development in Russia and bring about progressive changes in the sectoral structure of the national economy, it is important to reduce the gap between the real and nominal exchange rate of the ruble, as well as promote structural reform.

According to the authors of research carried out at Russia’s Academy of Sciences, a new division has emerged recently between Russia and China, placing Russia in a situation of strategic disadvantage. As an energy exporter, Russia’s interests are the opposite of China’s who imports energy (Mijeev, 2009: 55).

The relationship between both countries is gradually changing in terms of the arms trade: from one of cooperation to rivalry, for China is becoming an important player in the global arms market, with an increasing share of the market. Russia currently faces the risk of losing this market forever. Since 1990, China has been Russia’s main buyer of arms, with trade reaching a peak in 2005 at almost 4 billion dollars.

Energy cooperation between Russia and China, the key element of bilateral cooperation, is characterized not only by the complementarity of the two economies, but also the increasing rivalry between the two countries. Chinese companies compete with Russian ones to access natural resources in other countries, including the ex-Soviet republics in Central Asia, specifically Turkmenistan and Kazakhstan.

On the other hand, an obstacle to energy cooperation between Russia and China is China’s domestic energy policy, which prioritizes the development of alternative energy sources, as well as energy saving. It should be stressed that China has made significant progress to this end. Thanks to the 2005 Renewable Energy Law, the wind energy industry has developed rapidly. Since then, the capacity of wind energy installed has increase by more than 100% making China the country with the most wind energy installed in the world, overtaking the United States. This meant that in 2010, 31.3 million metric tons of coal were saved, reducing carbon dioxide emissions by more than 90 million tons (Sidorenko, 2012: 60-61).This strategy reduced China’s energy dependency undermining the base of energy cooperation between the two countries.

Cooperation with regard to gas has stalled because Russia and China cannot reach an agreement on price. During the last visit of the Chinese President to Russia in March 2013, neither party could resolve the discrepancies between the two countries.

Investment cooperation between Russia and China is not relevant because both countries compete for foreign investment and for access to markets and natural resources abroad. The economic divide between China and Russia continues to grow, which is not conducive to promoting joint investment ventures in high technology industries. Development perspectives on economic cooperation between the two countries will intensify over the next few years, because both countries have many economic interests in common. However, we believe Russia will face many challenges and threats to its economic relationship with China in the long term, particularly with regard to economic cooperation with Russia’s Far East and regions neighboring China. As a result, Russia needs to create an economic cooperation model more in line with her interests. To achieve this objective, Russia must diversify the sectoral structure of her exports to China. Among the products that Russia could sell China are agricultural products such as wheat, dairy, as well as strengthening tourisms and transport ties. Finally, it is important that there is scientific and technological cooperation between Russia and China, as well as cooperation on innovation in the 21st century.


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* University of Finance of the Russian Federation, tsidoren@yandex.ru


2 Calculated based on: http://armstrade.sipri.org/armstrade/html/export_values.php

3 http://www.gks.ru/wps/wcm/connect/rosstat_main/rosstat/ru/statistics/ftrade/

4 http://www.minergo.gov.ru/china/oil/

5 www.invertia.com/noticias/rusia-china-avanzan-negociaciones-gas-firma-memorandum-2833499.htm

6 http://www.metcoal.ru/news.asp?action=item&id=17112

7 http://kemcnti.ru/about/news_detail/35219/

8 http://www.metaltorg.ru/analytics/black/?id=525

9 http://www.metaltorg.ru/analytics/black/?id=525

10 http://www.russchinatrade.ru/ru/ru-cn-cooperation/investment

Published in Mexico, 2012-2017 © D.R. Universidad Nacional Autónoma de México (UNAM).
PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 48, Number 191, October-December 2017 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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