07/13/2015, 00.00
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Putin appeals to Chinese executives to invest in the Russian Far East

by Nina Achmatova
Once a thorn in the side of Sino-Russian relations, the 'Dalni Vostok’ region is now the stage for a Moscow-Beijing alliance. At the recent BRICS summit, Putin called on Chinese executives to visit the upcoming Economic Forum in Vladivostok. The Russian leader wants foreign capital to develop the region’s vast riches. For analysts, Beijing is not interested in owning Russian companies but wants access to raw materials to fuel China’s growth.

Moscow (AsiaNews) – Despite historical rivalries and bloody territorial disputes, Russia’s Far East (Dalni Vostok in Russia) is becoming a place of Sino-Russian rapprochement, a trend boosted by the Kremlin’s frosty relations with the West over the Ukrainian crisis.

Neglected for decades, this Russian region is becoming the cornerstone of Russian President Vladimir’s pitch for Chinese investments.

At the recent summit of BRICS nations (Brazil, Russia, India, China and South Africa), in Ufa, Russia, the Russian leader said he hoped to see Chinese companies play a role in the development of Russia’s Far East.

With this in mind, he invited Chinese business executives to the Far-Eastern Economic Forum in Vladivostok on 4 and 5 September.

"I think that Chinese companies could make a significant contribution to the development plans and objectives that we set for ourselves in the region (of Siberia and the Far East)," Putin said at a press conference after the BRICS and SCO summits, held on 8 and 9 July.

The Russian president and his Chinese counterpart, Xi Jinping, discussed the matter on the sidelines of the summit. They also talked about Putin’s upcoming visit to in Beijing on 3 September and the volatility of Chinese stock markets. Although concerned, Russian authorities have expressed confidence in the measures taken by Beijing to deal with that latter.

Still, whilst the two presidents see eye to eye, the same cannot be said for many Russians, who view with suspicion China’s move into Russia’s Far East.

The announcement in mid-June that Russia’s Trans-Baikal Territory in East Siberia had signed a letter of intent with China’s Huae Sinban to lease out land in exchange for an investment of about 24 billion roubles (about US$ 500 million) sparked criticism from nationalist lawmakers.

Although the proximity of the Russian Far East to the Chinese border favours trade between Russia and China, Sino-Russian relations are no longer confined to trading alone.

In fact, many Chinese entrepreneurs are investing in Russia’s most remote and neglected territory, which is rich in natural resources like iron ore, gold, coal, base metals, and rare earth minerals, to fuel China’s economic growth.

With thousands of miles of unexplored land, the Russian Far East is a sparsely populated region, with only 7.4 million people against 90 million Chinese who live in the border areas.

In the past, Sino-Russian relation were fraught with suspicion. The two countries fought a border war in 1969. However, the benefits of trade and investment are eroding old enmities as Chinese investors rush in in and invest in various industrial developments in the Russian Far East.

Thanks to special economic zones in the Amur Region, Jewish Autonomous Region, and the Primorye and Khabarovsk territories, Chinese investment reached US$ 3 billion in various new projects in 2013, the China Daily reported.

Overall, Sino-Russian trade reached US$ 95.3 billion last year. "China is our 'number one' trade partner,” said Putin. “I think that in the next few years we will be able to reach the 0-billion turnover."

For Boris Krasnojenov, metals and mining analyst at Renaissance Capital, “Russia needs to cooperate with another country to open up the Far East and the natural partner is China, which has far more financial resources than either Japan or South Korea”.

However, the major problem is infrastructure, and China’s funds are the answer to that problem.

“China has never been interested in acquiring controlling stakes in Russian companies. What they want is to secure a steady supply of the raw materials they need and build the infrastructure to get it back to the home market. That is their development model everywhere,” Krasnojenov said.

If China gets its supply of raw materials, and Russian companies are given their much-needed foreign investments, “It’s a win-win for everybody,” said Svetlana Kostromitinova, a mining analyst.

For many, however, the renewed Sino-Russian alliance and Chinese investments are not the end of it. The Russian Far East is slowly becoming China’s safety valve, since China has more than 1.34 billion people, around eight times Russia’s population.

Increasingly, Chinese expats are crossing the border to work in more labour intensive activities like agriculture, which is often a steadier employment compared to street kiosk trading, logging and construction, which are typically transient jobs. This could lead to more Chinese migrants to consider permanent settlement in the Russian Far East.

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