Russian and Chinese are brothers forever, but tobacco is still apart
Since Russia established trade relations with China, Russians are well aware that the Chinese love to envelop a business partner in a cloud of Asian-scented compliments, but they always behave very pragmatically, trying to benefit from literally everything.
On September 14, speaking at the Harbin forum “Russian-Chinese financial cooperation as a factor of economic development,” the head of the Bank of Russia representative office in China, Vladimir Danilov, literally stunned the public with a report that contradicted the loud statements of recent years about the strategic partnership between Russia and China in all areas of activity :
“A number of credit institutions in the Middle Kingdom are delaying transfers to Russian bank accounts or are refusing to make payments altogether.” At the same time, according to the Russian financier, the Chinese side refers to the sanctions imposed against Russia by the United States and the EU. Which in itself is strange, since official Beijing did not join other people’s sanctions, nor did it announce its own restrictive measures against the financial system of the Russian Federation.
Danilov characterized the behavior of individual Chinese banks as “an expanded interpretation of restrictive measures of third countries against Russia.”
Danilov’s words are confirmed by the vice-president of the Association of Russian Banks, Anatoly Kozlachkov. According to him, Chinese banks block transactions including those of Russian companies that are not included in the US and EU sanctions list, and difficulties arise for Russian legal entities even at the stage of opening correspondent accounts.
It is interesting that there is not a word in the Chinese media at all levels that Chinese banks have joined the sanctions against Russia. On the contrary, as soon as an article appears in the official mouthpiece of Xinhua about the unprecedented prospects for Russian-Chinese cooperation, all Chinese media, including village dazibao, replicate it as a carbon copy.
However, from informal conversations with Chinese businessmen, Russians discover the mood of their partners, which is radically different from the official party line.
Chinese partners believe that the trade war unleashed by Trump against China is a temporary phenomenon. A year or two, and everything will settle down, returning to normal. So why irritate a tiger by pulling its whiskers? But, after the end of the trade war, the loyalty shown in time by Chinese banks will be taken into account by the “world hegemon”. And in general, the Russian market for China is not comparable to the markets of the USA and the EU, and therefore the costs of joining the sanctions will not be very great.
If you think about it, the statement made by the head of the Bank of Russia branch in China, Danilov, is not such a discovery. Back in June 2015, the first deputy chairman of the VTB Group, Yuri Solovyov, complained about the reduction in the participation of Chinese banks in foreign trade transactions of Russian companies. Already after the first wave of Western sanctions, a number of Chinese credit institutions refused to conduct financial transactions of some Russian companies.
Another alarm bell is clearly audible: despite constant statements about the withdrawal of dollars from mutual settlements, the Chinese side is in no hurry to switch to trading in rubles and yuan. Time is running,
and the dollar remains the main means of payment in trade between Moscow and Beijing. In specific figures, 88% of Russian export transactions to China and 73,6% of imports from China are carried out in dollars. At the same time, China de facto refuses to receive rubles for goods sold to Russia: the share of Russian currency in import payments is only 3,8%. This is slightly less than in 2013 (3,9%). China is more willing to pay in yuan - at the end of last year, 8% of export transactions were carried out in Chinese currency compared to 1,7% in 2013.
It is clear that the Chinese comrades are trying to twist their partner’s arms a little and make money from the confrontation between Russia and the West, as was the case during the Cold War. They are quite happy with the situation in which China becomes Russia’s monopoly benefactor in the field of finance and a number of critical technologies.
After reading and listening to the opinions of respected orientalists and experts on China, the following conclusion was made: the Russian leadership in this situation needs to play very subtly and at the same time not make a fuss, which the Chinese leadership really does not like and does not forgive.
The fact is that not all credit and banking organizations in China have joined Western sanctions against Russia. From which it follows that the Russians need to look for more reliable partners and constantly consult with the Chinese leadership. Actually, the head of the Association of Russian Banks also speaks about this, claiming that the search for a solution with the Chinese side has been going on for the last three years.
There is no doubt that a compromise will be found, because the Chinese economy, in turn, needs constant supply of raw materials, which it can only receive from Russia. And Mother Russia is rich in more than just raw materials. The PRC still depends on foreign markets for a number of key know-how in aviation, astronautics, engine building, fine chemicals and other technologies.
And further. In early November, the Minister of Natural Resources and Environment of the Russian Federation, Dmitry Kobylkin, officially demanded that Chinese loggers working in Russia begin restoring deforested forests by building 10–20 forestry complexes on the territory of our country.
“You need a forest - restore the forest for us,” the minister officially declared to representatives of the Chinese side.
Otherwise, the export of Russian timber to China will be stopped, and the PRC will have nowhere else to receive large volumes of timber.
That is, bargaining is still appropriate.
The only conclusion that can be drawn from this whole not very pleasant situation is that Russian decision-makers should not indulge in their favorite national pastime - resting on their laurels, having treaties, contracts and declarations in their hands, more often recalling Putin’s words about what it actually means strategic partnership:
“We need to understand what we will get in return. This is very easy to understand if we remember our childhood. You go out into the yard, you hold a candy, they say to you: give me some candy. He squeezed it into his sweaty fist: what do you mean to me? We want to know: what do they mean to us?”
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