Beijing interested in investing in Russia
by Nina Achmatova
China’s need for steady energy supplies, foreign investments to cool an overheating economy and search for new markets for its exports lead Beijing to buy Russian assets.
Moscow (AsiaNews) – Despite the long running Sino-Russian rivalry and mutual diffidence, Chinese investments in Russia are bound to grow, bringing the economic relationship beyond just bilateral trade, experts say.
This comes after the recent visit by Russian Prime Minister Vladimir Putin to the former ‘middle kingdom’ where he got China to agree to contribute US$ 1 billion to a joint state fund that will inject most of the capital into Russia.
This is big money, about equal to the value of all Chinese direct investment in its neighbour since the fall of the Soviet Union.
Lou Jiwei, chief of China Investment Corporation, said that Russia's investment climate was unfavourable compared with the global landscape, but recent developments suggest a growing interest for Chinese companies to hold assets there.
For example, the China Huadian Corporation is investing US$ 323 million in the construction of a gas-fired power plant in Yaroslavl that began last month. Huadian holds 51 per cent in the joint venture, with Russia's energy company TGK-2 to build and operate the plant.
Earlier this year, China signed on to another project that will hand it partial ownership of Russian assets: construction of multiple power stations in Siberia with Russia's private EuroSibEnergo. The effort to generate electricity for consumption in both Russia and China requires hundreds of millions of dollars. In fact, energy needs are pushing the Chinese to put aside their traditional biases towards their neighbour as a supplier.
Chinese pursuit of energy resources in Venezuela, Libya and Sudan has recently run into a worrisome stretch, said Dmitry Abzalov, a foreign trade analyst at the Centre for Current Politics, a think tank. On the one hand, Venezuelan President Hugo Chavez is ailing; on the other, a pro-Western provisional government has been set up in Libya, whilst the dust has not yet settled from Sudan’s split-up. These hindrances could prompt an even closer look at Russia.
Putin mentioned last week that China could explore for natural gas in Russia's Far East, off Sakhalin Island, and on the mainland near Magadan. China has also expressed interest in mining coal in Siberia and the Far East.
Interviewed by The Moscow Times, Abzalov said that Moscow is especially interested in Chinese investments in manufacturing because "Russia is interested in expanding its industrial base”.
China, with its overflowing investment capital, is willing to unload the money abroad in order to avoid overheating its own economy. At the same time, it has to seek new markets for its products and secure access to natural resources.
China is also investing in assets that could boost trade with Russia, expected to reach at least US$ 70 billion this year. In a deal that has already come to fruition, state-owned China Chengtong Holdings Group became the proprietor of the sprawling Greenwood business park outside northwestern Moscow, the country's biggest investment in Russia to date.
China's top legislator, Wu Bangguo, arrived in Russia last month to open the park after Chengtong spent US$ 350 million since October last year to buy and complete the project, which has not become a giant showroom for Chinese products.
Other Chinese investment that could materialize includes a deal, signed in July, to set up a joint venture to produce cars and light commercial vehicles in Ulyanovsk.
This comes after the recent visit by Russian Prime Minister Vladimir Putin to the former ‘middle kingdom’ where he got China to agree to contribute US$ 1 billion to a joint state fund that will inject most of the capital into Russia.
This is big money, about equal to the value of all Chinese direct investment in its neighbour since the fall of the Soviet Union.
Lou Jiwei, chief of China Investment Corporation, said that Russia's investment climate was unfavourable compared with the global landscape, but recent developments suggest a growing interest for Chinese companies to hold assets there.
For example, the China Huadian Corporation is investing US$ 323 million in the construction of a gas-fired power plant in Yaroslavl that began last month. Huadian holds 51 per cent in the joint venture, with Russia's energy company TGK-2 to build and operate the plant.
Earlier this year, China signed on to another project that will hand it partial ownership of Russian assets: construction of multiple power stations in Siberia with Russia's private EuroSibEnergo. The effort to generate electricity for consumption in both Russia and China requires hundreds of millions of dollars. In fact, energy needs are pushing the Chinese to put aside their traditional biases towards their neighbour as a supplier.
Chinese pursuit of energy resources in Venezuela, Libya and Sudan has recently run into a worrisome stretch, said Dmitry Abzalov, a foreign trade analyst at the Centre for Current Politics, a think tank. On the one hand, Venezuelan President Hugo Chavez is ailing; on the other, a pro-Western provisional government has been set up in Libya, whilst the dust has not yet settled from Sudan’s split-up. These hindrances could prompt an even closer look at Russia.
Putin mentioned last week that China could explore for natural gas in Russia's Far East, off Sakhalin Island, and on the mainland near Magadan. China has also expressed interest in mining coal in Siberia and the Far East.
Interviewed by The Moscow Times, Abzalov said that Moscow is especially interested in Chinese investments in manufacturing because "Russia is interested in expanding its industrial base”.
China, with its overflowing investment capital, is willing to unload the money abroad in order to avoid overheating its own economy. At the same time, it has to seek new markets for its products and secure access to natural resources.
China is also investing in assets that could boost trade with Russia, expected to reach at least US$ 70 billion this year. In a deal that has already come to fruition, state-owned China Chengtong Holdings Group became the proprietor of the sprawling Greenwood business park outside northwestern Moscow, the country's biggest investment in Russia to date.
China's top legislator, Wu Bangguo, arrived in Russia last month to open the park after Chengtong spent US$ 350 million since October last year to buy and complete the project, which has not become a giant showroom for Chinese products.
Other Chinese investment that could materialize includes a deal, signed in July, to set up a joint venture to produce cars and light commercial vehicles in Ulyanovsk.
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