Alexey Gruzdev: the advent of online shopping from China to Russia opens up their market for our goods

In mid-October in Harbin hosted the Second Russian-Chinese EXPO. According to its results, the trade representative of Russia in China Alexey Gruzdev spoke about the impact of the difficult economic situation in the trade between the two countries, prospects of mutual settlements in national currencies, joint projects, bilateral supply and development of Internet Commerce.

– What is the impact on trade the crisis phenomena in the economy, devaluation of currencies? Can we expect growth in trade between Russia and China by the end of this year?

– I am an optimist and always expect the positive momentum, but we must rely on facts and reality. This year we have seen a reduction in the volumes of mutual trade. This is quite an objective situation. Impacts and the situation in world markets, primarily the oil price – in this sharp drop is hard to expect growth of Russian-Chinese trade turnover, given the predominant share of energy resources in Russian exports. The devaluation of the ruble affects the solvency of Russian consumers, which also leads to slower trade.

But in Chinese economy, there are tendencies towards the slowdown in both industrial output and foreign trade. This including affects Russia. According to the FCS of Russia for the first eight months of this year, the decline in bilateral trade turnover amounted to approximately 29% to $42 billion of Russian exports to China during this period declined by 26% to $19 billion, imports more pronounced negative bias of about 32%.

– How did the complexity in the economies of the two countries on the behavior of investors? Whether some Chinese companies from the Russian market? Are there any stalled projects?

– For the projects which tracks the trade mission, we have not yet documented cases of closures or cessation of cooperation. Moreover, the implementation of major projects and negotiations are underway on a number of new arrangements, Chinese investors continue to show interest in investing in Russia. As an example: during the visit of Russian President to China 3 September 2015, an agreement was signed between JSC “KAMAZ” and the Chinese automobile manufacturer “Huatai motors”, providing for the establishment of a modern automotive plant in Tatarstan. In addition, signed an agreement on joint development of data centers in the Irkutsk region, as well as a number of documents on investment cooperation in the energy sector.

And economists, and entrepreneurs understand that certain crisis phenomena not only risks but also potential benefits. When you invest in the economy, where everything is stable and peaceful, then you are one among many. And when you go under reduction, we have the opportunity to become the first in the queue you will be lined up during the recovery phase. Chinese entrepreneurs are well aware of this advantage, taking into account the significant factor of cost of the Russian assets and lower production costs on the investment.

This interest is further supported by the improving investment climate. This solution for the territories of advanced development (TOR) in Russia already there are eight such zones. Of course, this and the free port of Vladivostok: we have noted significant interest from Chinese partners. None of our gathering is without question of the far East and offer preferential regimes.

Therefore, according to our data, projects not closed, and the Chinese capital are not going away. Another thing is that now investors may be less active in implementing its decisions, because the strategy of every entrepreneur should be adjusted to reflect the current situation. Only in the portfolio of the Russian-Chinese intergovernmental Commission on investment cooperation, which is supervised by first Deputy Prime Minister Igor Shuvalov and Vice-Premier of the state Council of the PRC Zhang gaoli, there are 58 projects. Discussion on these projects is carried out regularly.

On October 22-23 in Beijing hosting the seventh China overseas investment fair (COIFAIR-2015). In the framework of this event under the auspices of the intergovernmental Commission held a round table devoted to the development of infrastructure projects with a focus on the transportation component, where Chinese investors are offered a number of projects, as approved by the intergovernmental Commission, and entirely new ones.

– At what stage is the issue of transition to settlements in rubles and yuan? When this mechanism can make?
Legal-the legal basis for these settlements have existed for a long time, between the Central banks of two countries signed the necessary agreements. Auction a pair of “ruble-yuan” on the Moscow and Shanghai stock exchanges. Last year the volume of transactions conducted via genevie accounts of Russian banks in the Chinese credit institutions exceeded $20 billion the Volume of transactions in rubles banks in China exceeded $18 billion.

If you take the service of mutual trade in the first half of 2015, about 6% of Russian export contracts are denominated in national currencies. The indicator for importing a little more – 12%. Averaged it turns out that the share of national currencies in mutual settlements is 8%. Yes, it’s not 50%, but, nevertheless, not 2%, as it was a few years ago.

The decision on settlements, for example in RMB, each company independently taking into account features of a commercial transaction, as well as the cost of attracted Bank financing. When it comes to Chinese banks, the cost of their loans is not always acceptable for Russian companies. Therefore, consultations are currently under way with financial institutions to make products that are more in demand by Russian and Chinese companies. Cheap loans in the yuan would create more incentive to use this currency in mutual settlements.

Agreement on currency swaps between Russia and China was signed including the creation of the necessary liquidity, which could be used by Russian banks to provide loans to Russian companies in RMB and Vice versa. If a company on a long term basis working with China, it is easier to take from a Russian Bank, the yuan and pay them with their counterparties. Now the issue of how to grant Russian banks the limit, what principles will be used to attract companies. And most importantly, on what financial conditions the Russian banks can give out such loans in the yuan and the Chinese in rubles. On 20 October in St. Petersburg held a regular meeting of the Subcommission on financial cooperation, the topic was discussed.

– Over the past year the market for several Chinese e-Commerce players. Do You see more pluses or minuses for Russia?

– From the point of view of the interests of final consumers and the development of free competition, see only positive moments in entering the Russian market, Chinese online shopping sites. At the first stage it can be a blow for the domestic players, however, subsequently create an additional incentive to quality development. It is always better to compete with strong – it makes you grow stronger.

The arrival of Chinese players in Russia are interesting because they simultaneously open the Chinese market for Russian producers: these channels can go counter flows of domestic goods. Here in China there is a huge consumer demand. First of all, this concerns Russian food: chocolate, honey, ice cream, sausages, beverages. Chinese consumers may be interested in interesting, innovative solutions of Russian manufacturers. In particular, the on-site Chinese Alibaba has a special project to promote foreign brands and products in China, and also Russian manufacturers can participate in it.

At a recent meeting of the Subcommission on customs cooperation were discussed the issues of cross-border e-Commerce. Customs services of the two countries look positively on this phenomenon, ready to assist. This will provide strict control to prevent abuse. Should not form of the scheme, when under the guise of retail purchase is created a wholesale order.

– Recently, the company Yota Devices has agreed with China’s ZTE on production of the Russian YotaPhone smartphone at the facilities in China. What other companies are interested in localization of production of Russian products in China?

– These companies, I think, a lot. The question is to decide on localization, you need to seriously prepare a feasibility study and to understand whether these products are in demand here. In addition, China is constantly increasing the cost of production, which inevitably affects the competitiveness of domestically produced goods. In China, high demand for smartphones, users constantly change the model as innovations to the market. The market will show the real demand for these products.

I think there is a good chance the Russian high-tech enterprises with advanced, innovative product – China imposes a serious demand for such goods. Have with partners and the need for international cooperation because, despite a major breakthrough in the innovative development, the country is not all can make their own. Speech can go about IT products, software. Now this direction is actively working Russian ABBYY Production. Just the other day with our support, in Shanghai hosted a presentation of the company. They are actively supported by the Russian venture company (RVC). In addition, China is presented in Perm the company Prognoz, which makes software solutions for industrial companies. Not to mention the successful experience of the virus. In our portfolio of applications there are a number of such companies that offer products for automation for the steel industry and other major industrial sectors.

As regards the industrial sphere, there is an interesting project in the field of aluminum industry. This group of companies VI holding, doing business in Henan province for a long time. Created a number of modern enterprises, total investment of the group in China has already exceeded $3 billion.

There are more than a dozen Russian companies who want to work in China, because localization is a feature to simplify entering the market. If finished goods “does not pass”, you can think about how to organize production.

The other day the Vice-Governor of Heilongjiang province said that they don’t see the problem, if we share expertise. In his opinion, it is not necessary to produce in China finished product. It is necessary to analyze the competitive advantages of Russian enterprises, first of the border (this is due to convenient logistics and cheap), and, for example, a part of the product to produce in Russia, and final Assembly is in China. Agreed that Chinese colleagues will analyze the industrial structure of their companies to identify those elements of interaction that could be of interest to Chinese manufacturers. We together with regions in the far East to start with, could understand, what are our competencies and try to match industrial cooperation on the example of individual territories.

– Previously signed a Memorandum creating the Russian-Chinese Alliance economic development cooperation “silk Road”. What are the main activities on this document? What is the project period?

In may it was decided to mate the important integration process-development of the Eurasian economic Union (EEU) and the initiative of formation of “Economic belt of the silk road”. The joint statement was signed by leaders of Russia and China. But the EEU is the five countries, therefore, now referred to as part of the agreement to promote dialogue in the “5+1”. In this statement, there are no specific deadlines, it is prepared in principle to work on mate. Cooperation will ripen as the formation conditions. The statement identified areas of cooperation: creation of maximum favorable conditions for strengthening trade, technological cooperation, innovation, infrastructure improvement.

At the end of September in Beijing held the first expert consultation of scientific community, where representatives of all five countries of the EEU and China discussed the preconditions and possible areas of cooperation.

This work will be a major addition to the investment cooperation in the bilateral format. The task is to find those areas and projects that meet the interests of all countries of the EAEC.

From the point of view of Russia is very important in the context of pairing, the development of international transport corridors “Primorye-1 and Primorye-2”. We are also interested in the maximum use the transit potential of the Russian Federation. It and the Baikal-Amur mainline (BAM) and Transsiberian (Transsib). There is a program for their modernization and connection of China in the framework of the initiative for the development of “Economic zone of silk road” can speed up this process. Already have a freight train coming from Central and Eastern China to Europe via Kazakhstan and the European part of Russia. And North-Eastern provinces of China (Heilongjiang, Jilin) are interested in organizing transit through the territory of our country.

– At the time, the Soviet Union built in the North of China several companies. Recently appeared information, that they can be upgraded with the participation of the Russian side. Is this really true, and what kind of enterprises are we talking about?

– This idea originated last year in preparation for the first Russian-Chinese EXPO. China remembers the assistance that the Soviet Union had in the early formative years of the PRC. With the assistance of Soviet specialists was laid the basis of young branches of the economy. Only 156 were built industrial facilities, some of them in Heilongjiang province (automobile and tractor plants). Chinese colleagues suggested that in conjunction with our relevant agencies to find a in Russia those companies (unless, of course, they are functioning), which participated in the construction of these objects, and see what is left can be mutually beneficial cooperation already at the present stage. It is only an idea, without entering a specific agreement. Be aware that since the creation of the industrial objects in China has been more than half a century. Modernization of many of those businesses were conducted without the participation of our specialists. So it probably should go on the comprehensive analysis of how technical standards and technology are compatible, as can be used Russian equipment or know-how.

– What are the main issues of Russian-Chinese economic cooperation were discussed in the framework of the Second Russian-Chinese EXPO?

– Russian-Chinese the EXPO is held for the second year in a row. This universal exhibition of achievements in economy, in joint cooperation. Rich business program (only in the official program of – 13 events) allows us to consider the most topical aspects of bilateral cooperation: trade, customs cooperation, veterinary and phytosanitary control. Was considered another important issue is a technical regulation. The issue of compatibility, harmonization of standards is directly linked to market access, including and Russian equipment in China.

Increased attention was paid to agriculture – it is now extremely important. We have some achievements, but not yet realized potential from the point of view of supplies of Russian agricultural products to the Chinese market, particularly pork and beef. In recent years in Russia have significantly increased the potential of production of meat products, were created by contemporary holdings, and a number of domestic enterprises are showing great interest in deliveries to the Chinese market.

Currently, such exports were prohibited, the competent authorities of the two countries working hard to solve the issues of market access. In the near future we are waiting for the inspection of Chinese specialists to Russia for a number of companies. It is a mandatory procedure, involving, in particular, the assessment of the technology of production and processing. I hope that after the completion of this work will begin the first deliveries of Russian products. The end of the year should also reach an agreement on the supply to China of grain products from Russia.

In addition to agriculture, discussed the issues of deepening cooperation in the field of development of forest resources with an emphasis on their deep processing on the territory of our country.

The theme of transport accessibility and cross-border communications especially relevant here, in the northeast of China. Therefore, the EXPO showcased projects in the field of port infrastructure, road and bridge messages to co-invest with Chinese partners.

Another area is innovation and high technology. At the EXPO hosted a meeting of the Russian-Chinese chamber of trade facilitation machinery and technical and innovative products. The Russian exposition presented their projects RUSNANO, Schwab, United engine Corporation and “Helicopters of Russia”. An agreement on cooperation in the field of satellites for civilian use.

Mutual interest is undoubtedly growing. I am convinced that the Third Russian-Chinese EXPO, which will be held next year in Russia will be not less successful.

Talked Alexey Selishev, Ksenia Petrova