Expansionist China and Russia Deepen Ties

http://www.worldaffairsjournal.org/blog/gordon-g-chang/expansionist-china-and-russia-deepen-ties

8 July 2016

Xi Jinping and Vladimir Putin met on the 25th of last month in Beijing and issued statements bound to upset their neighbors and the US. For instance, the two leaders, who are both using force to expand and secure their borders, drew upon Orwellian logic when they charged that the nations defending themselves are the ones destabilizing the international system, undermining “strategic stability,” as they put it.

Yet Putin and Xi typically issue provocative statements intended to intimidate neighbors and threaten the international order when they meet. The more important story of the one-day get-together is that the two countries remain on course tobecome “friends forever”—Xi’s words—and they are cementing that friendship with trade.

During Putin’s visit, his fourth since Xi took over in 2012, the two announced several deals. Russia sold interests in various energy projects to Chinese enterprises, while China took stakes in Russian petrochemical projects. They signed a one-year contract for Rosneft to sell crude oil to China National Chemical Corporation. 

With those inked, Putin also remarked there are 58 deals worth about $50 billion under discussion. Among them is a high-speed, 770-kilometer rail line that will connect Moscow with Kazan, to be built by China. Said Putin, “We are pursuing economic cooperation, as China is the first trade partner of Russia.”

Still, the drop in energy prices in recent years has prevented the two countries from reaching their trade goals, and it is unlikely they’ll meet their 2020 target of $200 billion. Last year, bilateral trade was only $64.2 billion, down 27.8% from 2014.

Yet, what is significant about Sino-Russia trade is not the fluctuations in volumes but rather that in a difficult period for both, they appear determined to entwine their economies.

Last year the Russian economy contracted 3.7%. The Kremlin, which has been notoriously overoptimistic, now suggests growth will be “near zero.”

China’s economy is rapidly decelerating, and declining trade is not helping. Last year, China’s trade of $3.96 trillion was down 8.0% from 2014. Exports dropped 2.8% while imports plummeted 14.1%. The trend line is holding. In the first five months of this year, exports were off 7.3% from the same period in 2015. Imports were down 10.3%.

The authoritarian and expansionist Dragon and Bear, which have much in common, need each other. By deepening trade ties and integrating their economies, China and Russia not only increase their ability to challenge the international system, they also increase the likelihood they will do so. As Ian Ivory, a China-Russia watcher notes, Sino-Russian trade is driven by geopolitical as well as economic considerations.

Everyone, therefore, has an interest in the persistent trade and investment efforts of the Kremlin and Beijing.