The Far East is waiting for Chinese investment in industry and transport. The official website of the Ministry of the Russian Federation for the Development of the Far East reported on April 5 that the Chinese side came up with an initiative to transfer a number of its enterprises in such industries as metallurgy, construction and cement production, energy, mechanical engineering, shipbuilding, chemical and textile to the territory of the Far Eastern regions industry, telecommunications and agriculture.

At a meeting of the directors of the departments of the Ministry of Eastern Development and the State Development Committee of the Russian Federation, Rustam Makarov and Zhou Jianping, a document was signed on the creation of a mechanism for regular consultations and exchange of information in the field of investment cooperation. Issues of attracting public and private Chinese investment into the regions of the Far East were discussed.

“We are ready to accept Chinese enterprises and create joint export-oriented production facilities in the Far Eastern territory”- said Rustam Makarov following the meeting.

“I am confident that through joint efforts we will be able to achieve results in the shortest possible time”- said his Chinese colleague.

At the meeting, plans for the creation of international transport corridors in the south of Primorsky Krai were also widely discussed. For this purpose, it was decided to hold a meeting in the near future with the participation of leading companies from China and Russia engaged in the transport sector.

An agreement on interaction between the departments was reached during the visit of the Minister of the Russian Federation for the Development of the Far East, Alexander Galushka, to Beijing and was recorded in the Memorandum of Understanding on strengthening Russian-Chinese regional, production and investment cooperation in the Far East.

Is this beneficial for us? Attracting investment, creating new industries and, as a consequence, jobs is, of course, beneficial. And then the question is how this will be implemented.

Immediately after the news was published on the website, there were reports in various media and blogs that China was seizing the Far East, moving hazardous industries to us and Chinese workers would work there. I will quote clarifications for the media from the Ministry of Eastern Development:

The interaction of the Russian Ministry of Eastern Development with the State Development Committee of China is based on mutual understanding on the following issues: 100% compliance with Russian legislation, at least 80% Russian labor force, unconditional priority of Russian suppliers and contractors.

“Russian environmental legislation is one of the strictest in the world,” Rustam Makarov emphasized. - No project that does not comply with environmental standards can be implemented by definition. There is no and cannot be a place for dirty industries in the Far East.”

Until recently, we were going to Europe and adopting all the very high European standards in the field of ecology, which is of course good. In China, environmental legislation is much more lenient.

Why does China need this? I will refer to the article by the expert of the “Experimental Creative Center” Yuri Byaly “China’s Economic War” published in the newspaper “Essence of Time” on December 9, 2015.

“Another big problem in China is the huge unused or incompletely used capacity for infrastructure, industrial, office and housing construction created in recent, “fat” years for the economy. Which, again, were created in anticipation of increased demand in the domestic and global markets and the previous high rates of economic growth.

The country's domestic market has developed very rapidly in recent years, in parallel with the growth in household incomes, and has indeed largely replaced, from an economic point of view, income from exports. That is, China's economy has become much less export-oriented. However, the domestic segment of the economy is unable to use the excess industrial capacity created for future use in a crisis.

China has recently been very actively developing the service sector as a “support” for economic development. And it is already receiving very serious results in this direction. However, again, the service sector cannot use a significant part of the country’s excess industrial capacity.

As a result, domestic investment in productive assets is steadily falling.

Previously, before the start of the current wave of the global crisis, the annual growth rate of capital investment reached 50%, and the growth of infrastructure investment exceeded 64% per year! And then the growth rate of capital investment began to decline, and in the last three years it has been declining steadily and quite quickly.

But once capital investment decreases, then at the same time and inevitably the demand for all industrial raw materials decreases. And, accordingly, on the products of the primary sectors of the economy, which are also experiencing an increasingly deeper impact of the crisis.

As a result, the only way to fully utilize the accumulated “excess” Chinese financial resources, as well as production and raw material capacities, is external expansion with foreign direct investment, as well as industrial and infrastructure projects.”

So we see the implementation in practice of what the expert is talking about. They are already planning to move unused production facilities, as well as implement large-scale transport projects. And Chinese business is very interested in this. Although the official ideology in the PRC is communist, they live economically according to Western standards, which means that a plant built and not operating is money invested and not generating profit. Investments are made in most cases using borrowed funds:

“The next economic problem in China is the huge volume of domestic and foreign loans acquired by Chinese corporations. These loans were taken out in anticipation of the world economy emerging from the crisis and further growth in exports and domestic consumption. Unfortunately, there was no way out of the crisis, but credit debts remained. Moreover, most of the loans (and, accordingly, debts) were actually hidden from control, since they went through “shadow” banking.

As a result, China has a very large combined external and internal debt, mostly accumulated by corporations. According to various estimates, which differ in “estimates” of the share of “shadow banking” in loans, this debt ranges from 3 to 5 trillion dollars, some analysts say almost $12 trillion. But even this is relatively small by global standards: most European countries have a debt-to-GDP ratio significantly higher than China. However, such a debt, taking into account its reliably unknown “shadow” component, calls into question the economic stability of many, including large, corporations and banks ».

In addition to ecology, the next topic for criticism can be boiled down to the assertion that we are selling the Far East to the Chinese. They will bring their workers there, since ours are much more expensive. Again, I quote the article:

“As a result of recent decades of rapid growth, the Chinese economy has delivered incredibly rapid growth in the prosperity of very large sections of the population.

As we can see, average salaries in China have grown 3 times over the decade, and taking into account the appreciation of the yuan - 4 times. And in terms of dollars, we exceeded $800 per month - a very respectable level for any developing country.”

Solid is not the right word, it turns out that the average salary in China at the dollar exchange rate of 68 rubles is equal to 54,400 rubles. Let's compare it with Russian salaries. Website "Business Life"

Plans to move part of the production abroad appeared in China in November 2014. In this way, the authorities are going to solve the problem of environmental pollution - rapid industrialization has led to a catastrophic deterioration of the environmental situation in the country.
At one time, the West built light industrial enterprises in China, “exporting” environmental problems there, noted Tom Miller from the research company Gavekal Dragonomics. “Now China has reached a stage in its development where it itself wants to export non-environmentally friendly production, creating metallurgical plants and other enterprises in poor countries,” Miller said.
China's production facilities will be moved primarily as part of the fight against environmental pollution, Bloomberg emphasized.
“The logic is partly the same as that of Japan and many other countries that endured dirty production in the 70s and 80s - this is not a search for cheaper labor, it is rather an environmental story,” agrees the head of the Russia in Asia program -Pacific Region" of the Carnegie Moscow Center Alexander Gabuev.
The country's authorities and official media report that this initiative will help eliminate another problem - overproduction. Chinese steel, cement and glass producers have excess capacity that is not needed now that the economy is no longer growing at 10% a year.
To begin with, China intends to “unload” the largest steel producer - Hebei province, and with it the entire north of the country, where air pollution is much worse than in the south.
Hebei province is home to seven of China's most polluted cities, and the region is the country's largest source of sulfur dioxide. It produces 200 million tons of steel each year—twice what the United States produces and a quarter of China's output.
The Chinese authorities intend to provide preferences to local companies, stimulating the relocation of production abroad. The plans for 2014 focused primarily on Africa, Western Asia and Southeast Asia. At that time, Russia was not on this list.
Northern neighbor
The PRC agreed with Russia on the “export” of production facilities in December last year. The exact details of the agreements are unknown - so far only a memorandum has been signed. The list of Chinese enterprises that may end up in Russia is still unknown, Leonid Agafonov, adviser to the head of the Ministry of Eastern Development, told the BBC Russian Service.
It is only known that these will be enterprises in 12 industries, including: metallurgy, energy, mechanical engineering, shipbuilding, construction, telecommunications, agriculture, as well as textile, chemical and cement industries.
Chinese business will receive tax breaks and administrative preferences in the Far East, said ministry spokesman Rustam Makarov.
The interest of Russian officials is clear - it is necessary to develop the Far East (a separate ministry was created for this purpose). China in the current conditions is the most obvious partner, given the transport proximity and the “turn to the east” proclaimed by the Kremlin.
The PRC is especially interested in such mechanisms as priority development territories (ASED) and the Free Port of Vladivostok, says Agafonov. The minister's adviser cited the construction of an oil refinery in the Amur region as an example of successful investment attraction.
In April 2015, the Amur Refinery project received priority status. The initiator of the project is the Amur Energy Company, which is 90% controlled by an enterprise from Heihe, a city in the border province of Heilongjiang. Under the terms of agreements with local authorities, the refinery will supply 90% of petroleum products to China, raw materials will be purchased in Russia.
Alexander Gabuev from the Carnegie Center believes that the success of Chinese enterprises that will be transferred to Russia is questionable, since one of the reasons for this initiative is the elimination of excess capacity in China.
“Here, it seems to me, we come to the most interesting thing. How will these businesses that will be relocated perform in a competitive market? Even if these factories are built, how will they make money, how will they integrate into the world market? And what is the competitive advantage of the Far East?” - the expert lists his questions for the project.
Among the competitive advantages of the Far East, he points out cheap electricity and less stringent environmental supervision (in China they have now become much stricter in monitoring harmful emissions in production).
“What exactly we will gain in terms of making money in the future is not yet very clear. Although it seems to me that jobs and industrial potential are always good. Another question is that in the Far East you are always up against a small market, a not very developed infrastructure, monstrous Russian legislation, its implementation in terms of exports and, roughly speaking, Russian customs, where everything usually gets stuck,” complains Gabuev.
It is also unknown under what conditions factories will be created in Russia, he continues. In particular, it is unclear who will build the enterprises and then work for them: the Russians or the Chinese.
Among the many unknowns, the Russian authorities have clarified only one point: all projects will necessarily comply with Russian environmental standards. This condition is more important than mutual interest, noted the head of the department, Alexander Galushka. He believes that there is no need to fear the arrival of “dirty” industries. Environmentalists have a different opinion on this matter.
"Clean work?
“China has never been known for its environmentally friendly and safe production,” says Greenpeace Russia toxics program coordinator Nina Lesikhina.
As an example, she cites the recent tragedy in Tianjin (a city in China bordering Hebei province), where explosions occurred at chemical warehouses last August. As a result, more than 170 people died, more than a thousand cars were destroyed, and highly toxic substances were released.
Greenpeace believes that the transfer of part of Chinese production to the Far East could lead to an increase in environmental risks not only for the region, but for the entire country.
“Unfortunately, the environmental requirements established in Russia, taking into account which it is planned to transfer Chinese enterprises, are extremely weak and, as a rule, not observed in practice. Recently, there has been an active process of degradation of environmental legislation in the interests of business,” notes Lesikhina.
Environmentalists note that many hazardous chemicals used in Chinese factories are not subject to regulation and, therefore, control in Russia. “This means that in the event of the transfer of Chinese production, these substances, along with wastewater and emissions from enterprises, will continue to flow, but into our air and our rivers,” adds a representative of Greenpeace Russia.
On forums and on social networks, residents of the Far East not only express fears that an increase in the number of plants and factories will harm the environment, but are also afraid of increasing Chinese influence in the region. Suffice it to recall the reaction caused by the news that the Trans-Baikal Territory offered to lease 115 thousand hectares of land to the Chinese.
Journalists, deputies and public figures suggested that the lease would be followed by the colonization of Siberia and the subsequent annexation of the region. They even started collecting signatures on the Internet asking them to refuse to lease land to China.
Attitudes towards Chinese activities among residents of Moscow and the Far East are different, says Gabuev. “On the ground there, judging by my travels, there are no real threats and no real level of local discontent about China,” he notes.

Over the past two years, Russia has been actively attracting foreign investment to the Far East. Their total volume amounted to nine billion dollars, of which 80% was the contribution of the Chinese side. Russian President Vladimir Putin announced this on September 7 at a meeting of the leaders of Russia, Japan, South Korea and Mongolia, which took place as part of the Third Eastern Economic Forum. Three years ago, Deputy Prime Minister of the Russian Federation Trutnev said that the Far East in the future would become “Russian Shenzhen.” At the BRICS summit in Xiamen earlier this month, China came up with an innovative proposal to develop maritime resources and maritime transport routes. Russia, in turn, expressed interest in cooperation, and Russian media subsequently wrote that Far Eastern ports and aquaculture could form the basis of this alliance. The vast and sparsely populated Far Eastern region appears to be part of a blossoming of Sino-Russian relations.

According to the Chinese newspaper Cankao Xiaosi, against the backdrop of global economic globalization and regional integration, important aspects in the development of bilateral relations between Russia and China will be: using the comparative advantages of border regions (the Far East and Northeast of China), stimulating the strategic development of cooperation in this area , increasing competitiveness. These regions are in close geographical proximity, and efforts must be made to enhance exchanges between the peoples of both countries, strengthen mutual trust and maintain friendly relations. Common interests will then become the driving force for promoting economic development at the local level. This will benefit the border regions and create a favorable social climate within them. Based on the foregoing, the Russian and Chinese governments should pay great attention to the harmonious development of regional cooperation.

Significant results of Russian-Chinese cross-border cooperation

Over the past decade, the Chinese government has prepared a number of national strategic plans to revive and accelerate the development of the northeastern region of the PRC. In the context of further promoting domestic institutional reform and adjusting the economic structure, it becomes clear that China should continue to work for the benefit of Russian-Chinese cooperation. The key emphasis here is on openness to the outside world, sustainable development, optimization and modernization of the industrial structure, as well as the introduction of institutional innovation.

At the same time, the “stable” backwardness of the Far East has become an obstacle to the development of the entire Russian economy as a whole. Since 2009, the Russian government has also proposed a series of national strategies to accelerate the development of the Far Eastern region. The main directions of development were: creation of priority development areas (ADT), construction of free ports, improvement of infrastructure projects. At the same time, the Russian government considers strengthening cooperation with China as an important driving force for the development of the Far East.

Over the past five years, the following results have been achieved in the field of cooperation, created on the basis of the common interests of the two countries.

First, there is a constant increase in trade volume. Commercial exchanges between the Russian Far East and the Chinese Northeast have already become an important part of Russian-Chinese trade and economic cooperation. Currently, China has long been the largest trading partner in the Far East, the largest source of imports and the third largest exporter. As trade expands, exchanges become more diverse and their structure more optimized. In addition to the continuous growth of the traditional trade range, the share of high-tech and high-value-added products is also increasing.

Secondly, a mechanism was created for various types of consultations. In order to achieve the harmonious development of neighboring regions, the governments of the two countries and relevant departments have gradually established a number of institutions to take further measures: improve the model and modes of conducting economic and trade cooperation, promote the growth of trade and lower trade barriers, strengthen border construction and coordinate the laws of relevant legislation. In addition, the established institutions facilitate the exchange of experience in the field of improving the environmental condition of transboundary rivers and developing transport infrastructure.

Thirdly, cooperation, attracting capital, and joint development of regional resources have become an important part of the development of cross-border cooperation. In recent years, representatives of the border regions of China, taking advantage of geographical advantages, that is, proximity to the Russian Far East, are opening new joint commercial and industrial enterprises, such as farms, timber processing plants and others. The Chinese side is making efforts to develop construction in the region and contribute to further strengthening scientific and technological cooperation between the two countries. Russia and China are working together to increase the level of technology development in the field of crops. These technologies have already brought tangible results.

© RIA Novosti, Evgeny Biyatov | Go to photobank Logo of the Eastern Economic Forum on the territory of the Far Eastern Federal University on Russky Island in Vladivostok

Fourthly, such a concept as international Internet business has appeared on the market. With the rapid development of e-commerce, as well as the geographical proximity in the two border regions of China and Russia, the cost of shipping goods is relatively low. In recent years, it has become fashionable in the Far East to order Chinese products on the Internet. This contributed to the opening of more warehouses, improving logistics in the region and the development of Chinese Internet business in general. Cross-border e-commerce, which has enormous development potential, has become a new area and a new platform for Russian-Chinese cross-border cooperation.

Fifthly, plans for joint Russian-Chinese construction of large infrastructure are being implemented. After some delay on the Russian side, construction of the second half of the Tongjiang-Nizhneleninskoye cross-border railway bridge began. Also, after 20 years of negotiations, construction of the Blagoveshchensk-Heihe road bridge began. China and Russia are discussing cooperation in the construction of the Primorye-1 and Primorye-2 highways, as well as in the reconstruction of basic infrastructure in order to achieve synergy between the Belt and Road project and the Far East development project.

The PRC and the Russian Federation should maintain cooperation to improve business conditions

Of course, in order to implement mutually beneficial business cooperation, it is first necessary to go through the stage of formation, study and expectation, especially considering the fact that the approaches of the parties may sometimes differ. Communication between the two countries may not always go smoothly, but problems that arise must be taken seriously and resolved jointly.

The governments of the two countries must strengthen interaction in the fields of politics, law, and the construction of basic infrastructure. The establishment of the Russian-Chinese market is still in progress, and there are still questions regarding the conditions provided by the market. With the increase in mutual investment between the two countries, a clearer legal regime for investment protection should be established to further reduce risks for investors. This refers to provisions such as: legal protection for the construction of technology parks and investments in key areas.

© RIA Novosti, Vladimir Fedorenko | Go to photobank In the sea trade port of the city of Korsakov. Sakhalin region

The creation of infrastructure today is not only an obstacle to the development of the two border regions of Russia and China, but also a necessary link in their future interaction. An important point in the development of production and investment cooperation is the improvement of a number of infrastructure facilities: bridges, railways and roads, water routes, power grids and ports.

Local governments in the Far East and Northeast China began to establish contacts in agriculture quite a long time ago, but the scale of exchange in this area was small. In the future, it is worth taking cooperation to a new level and working together to strengthen cooperation in agricultural production.

The ports of the border regions of the two countries have rich tourism resources. Russian and Chinese governments and enterprises should coordinate with each other, make full use of the potential of cooperation, improve relevant infrastructure facilities, improve service levels, and jointly develop these resources. Thus, the development of the cross-border tourism economy will become a new direction in Russian-Chinese cooperation.

The ecological resources of the Russian Far East and Northeast China are also rich, but are not sufficiently resistant to harmful factors. Countries should establish and improve local environmental cooperation mechanisms, promote the construction of transboundary nature reserves, and build transboundary ecological corridors.

Business conditions will not soon reach the ideal. However, if the existing business environment does not satisfy the requirements of investors in the near future, this will lead to a decrease in interest in investing in the regions. Investors will be distrustful of the proposed projects, and this in the short term, and even more so in the long term, will negatively affect mutual trust and cooperation between Russia and China.

The countries reached consensus on the initiative to create a link between the Eurasian Union and the One Belt, One Road project. Thanks to the joint efforts of Russia and China, cooperation based on the creation of basic infrastructure and constant interaction in the industrial field will definitely benefit the people of both countries.

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China begins its “conquest” of the Russian Far East

Participation in the development plans of this region is of great importance for Beijing due to its rich reserves of raw materials. We need investments that respect Russian legislation, and not roads or dams in exchange for oil, says Oleg Lipaev, a representative of the Ministry of Industry and Trade of the Russian Federation.

Vladivostok, July 31. The Russian Far East is home to more than 20,000 Chinese factories and about 70,000 Chinese immigrants, making Beijing a key player in this isolated region, which is of great importance for its rich raw material resources.

Crossing the Sino-Russian border through the Suifenghe checkpoint, located in northeast China, the first thing that catches your eye is that Russia has ceased to be the “big brother” in relations with Beijing, which just a quarter of a century ago religiously followed communist ideology imposed by the Soviet regime.

The brand new roads and shopping centers located on the Chinese side, where you can see all kinds of goods and food products, stand in stark contrast to the infrastructure of the last century and the dilapidated roads of the Primorsky Territory. They are not even able to provide connections between the main economic enterprises of this region.

China is a key player in the development of Primorsky Krai. Its share in the regional gross domestic product reaches 20%, said Oleg Lipaev, a representative of the Ministry of Industry and Trade of the Russian Federation in the Primorsky Territory.

“50% of agricultural products, especially fruits and herbs, that are sold on the Russian market are produced in China. If the Chinese stop exporting their greens, the price will probably triple,” the official said during an interview.

In the capital of the Primorsky Territory, Vladivostok, a port city of 750,000 people and strategically important for Russia due to its access to the Pacific Ocean, the Chinese control most of the markets where locals buy everyday goods, from clothing to rice.

Four of the city's main markets are owned by 37-year-old Chinese entrepreneur Liu De Shang, who is also chairman of the China-Russia Entrepreneurs Association. He has been doing business in Russia for 15 years.

The largest of its markets employs about two thousand Chinese, selling in stalls a wide variety of Chinese-made goods. All business is strictly controlled by citizens of the Celestial Empire.

They produce goods, bring them to Russia and sell them at retail here.

Liu's story best reflects the success that enterprising Chinese can achieve in this industrially underdeveloped region of Russia.

“I worked as a cook in China for many years, and in 1995 I decided to quit everything and began selling boots in Russia that were produced in the Chinese province of Heilongjiang,” says Liu de Shang.

“In 58 days I earned my first fortune: 24 thousand rubles, which was equal to 780 dollars,” recalls this man, who has good connections in all levels of society, with a smile.

“Business took off and we opened our first store. Subsequently, we purchased the adjacent premises, removed the wall and expanded the business,” says Liu, who has become a legendary figure in his village.

And the whole point is that more than 120 relatives and acquaintances are involved in the business, which has spread to other regions of Russia (four shopping centers in Vladivostok, two in Khabarovsk, as well as his brother’s retail premises in Moscow).

Migration of Chinese people who work in mining, construction or markets has especially intensified since the 1990s, when industry in the north of the country collapsed due to the privatization of bankrupt state-owned enterprises.

Russian authorities do not have data on the exact number of Chinese in the country, but according to various estimates, there are about 70 thousand of them, who arrived both legally and illegally, in three regions in northeastern Russia. This causes a certain amount of tension and xenophobic sentiment, as Russians see the Chinese enriching themselves on their territory.

Cross-border trade, based on the exchange of Russian raw materials for Chinese goods, is a concern here, as it is in some Latin American countries.

“The problem is that it is impossible to compete with China. Each time they supply more and more high-tech goods, which entails consequences at the local level and determines the existence of our entire industry,” Lipaev noted.

He emphasized that it was for this reason that the Russian government introduced a tax on the export of metals, wood and oil.

“In the Chinese province of Heilongjiang, the average wage is between 60 and 100 dollars. We have 600 in the Primorsky Territory. How can we compete with them?” asks Lipaev, without expressing much optimism about the future.

“In the near future, trade with China will be profitable, especially for people with access to cheap goods. But in 10-15 years, China will certainly pose a threat and create barriers to job creation in the local labor market,” the official warned.

However, some experts are more optimistic because they believe Chinese investment, goods and immigrants offer a chance for development in a region in economic and demographic decline.

“We still have a Soviet mindset that makes us think that foreign investment in mining represents a form of colonialism and dependence on foreign countries,” says Victor Larin, an expert on Russian-Chinese relations.

“I think that the eastern part of Russia may lose this opportunity. China is not a threat, but an opportunity,” he added.

Larin welcomed the intergovernmental agreements signed in 2009 by Russian President Dmitry A. Medvedev and Chinese President Hu Jintao and aimed at further developing economic relations, primarily in the field of extraction and use of natural resources.

However, some have criticized China's actions not only in Siberia, but also in Central Asia, Africa and Latin America, where Chinese mining investments are not accompanied by prior analysis of environmental and social impacts.

“To develop the mineral resources of Siberia, we propose to create joint Russian-Chinese enterprises operating in accordance with Russian legislation,” emphasizes Lipaev, who studied in China.

We need investment that respects Russian law, not roads or dams in exchange for oil. We don't need them," he said.

“We can build them ourselves,” Larin added, highlighting the difference between his country and Central Asia, Southeast Asia and Africa, where China always wins, offering in exchange for natural resources not only financing, but also the construction of the necessary infrastructure .

“We want to remain an independent country and for this we will continue to do everything in our power as long as we can,” he noted.

Reading the comments of Russian legislators and the media on the message of the Ministry for the Development of the Far East about the possible transfer of Chinese enterprises to Russia, one might think that there really is no passage from Chinese investors in the Trans-Urals. A short piece of news that appeared in early April on the Ministry of Eastern Europe’s website that the department had discussed the potential for exporting production facilities from China to the Far East caused no less heated discussion than last year’s news about the lease of 115 thousand hectares of wild steppes in Transbaikalia to the Chinese.

Many deputies spoke out categorically against the construction of Chinese factories, believing that this would cause irreparable harm to the ecology of the region.

The media also did not remain aloof from the discussion. Rare attempts to give the floor to supporters and opponents of the initiative were predictably drowned in a barrage of negativity about dirty production, Chinese colonization and the inevitable annexation in the end. As often happens in discussions about Chinese expansion in the Trans-Urals, most participants did not bother to find out what and with whom the Minvost agreed in China.

It is clear that such fears do not arise out of nowhere. There are so many dirty plants and factories in Russia, and how many forests are being cut down. If it were not for active people, there would be much more of them.

In particular, only recently did residents of one of the districts of the Tula region contact the leader of the Spravoros faction, Sergei Mironov, through his Internet reception about a harmful asphalt plant that was poisoning everything around them. Mironov helped and the harmful plant was closed during the construction stage. But Mironov alone cannot close all harmful industries. But the state does not have a clear policy in this area, otherwise the asphalt plant in the Tula region simply would not have been built...

But with Chinese enterprises it’s not so clear

Disagreements at the highest level

According to senior officials of the Ministry of Eastern Affairs, the idea to discuss with Beijing the transfer of Chinese enterprises to the Far East was born in September 2015. Then Deputy Prime Minister Yuri Trutnev, who oversees the development of the Far Eastern Federal District, visited Dalian as part of the Meeting of New Champions, which is annually organized by the World Economic Forum (this site is often called the “summer Davos”). Trutnev spoke there together with the head of the State Committee for Reform and Development of China (the former State Planning Committee, which has become the main center for macro-regulation of the Chinese economy) Xu Shaoshi (徐绍史). Xu spoke about the circular of the State Council of the People's Republic of China, adopted the day before, “On promoting international cooperation in the field of production capacity and equipment manufacturing.”

It was in this speech that the Russian Deputy Prime Minister first heard about China’s plans to stimulate the transfer of production capacity abroad in twelve industries. At the same time, Trutnev instructed employees of the Ministry of Eastern Europe to quickly work out the issue with their Chinese colleagues. In November, the head of the department, Alexander Galushka, visited Beijing and met with the leaders of the State Committee for Reforms, proposing to record the interest of both parties in the potential attraction of Chinese production to the Far East. And on December 17, during Dmitry Medvedev’s visit to China, the two departments signed a memorandum of cooperation in the Far East, in which the transfer of industry became one of four topics for possible cooperation (along with the development of the Northern Sea Route, transportation of goods from the Northeast of China through the ports of Primorye and attracting Chinese investors to priority development areas and the Free Port of Vladivostok). The April conversation between Rustam Makarov, director of the Ministry of Eastern Affairs’ department for attracting investment and supporting exports, and Zhou Jianping (周建平), director of the State Development Committee for the Development of Industrial Development in Northeast China, was, in fact, the first working consultations, and they cannot be called particularly substantive. According to officials familiar with the progress of the negotiations, at this meeting the Chinese agreed to discuss specific proposals when Moscow has them, but in the meantime they will seek the opinion of their regional authorities.

In the absence of big projects to brag about, officials often boast about declarations of intent (both Russian and Chinese bureaucrats are no exception, here the two “strategic partners” are among the world leaders). The Ministry of Eastern Europe also did the same, obviously not counting on such a strong reaction from the public. On April 7, Rustam Makarov appeared on the RBC TV channel to discuss the initiative with experts and repel criticism. He said that 80% of the workers will be citizens of the Russian Federation, the authorities will not reduce environmental requirements, and the products are expected to be sold on the “giant market” of the Asia-Pacific region. Later, the Ministry of Eastern Europe issued additional clarifications: the department will negotiate with other countries, and China does not intend to transfer industry exclusively to Russia. A study of data on why, where and how China intends to move industry shows that the Far East is not yet threatened by the industrial expansion of its giant neighbor.

Transfer rules

Historically, production is transferred to other countries mainly for three reasons: the cheapness of resources (usually labor), the development of new large markets and concern for the environment. Japan's industrial expansion into Asian countries illustrates this mechanism well. At first, production (for example, factories of Japanese auto industry giants like Toyota) moved to countries with cheap labor and low environmental standards, strengthening the competitiveness of Japanese cars in world markets, as well as the health of Japanese citizens. Then, in the countries where production was transferred, their own middle class arose: former cheap labor and their descendants turned into consumers. Accordingly, it makes sense to transfer production to countries with cheaper labor, a potential capacious market and low environmental standards (or declared high ones, but with the ability to resolve the issue for a moderate amount).

China has another important reason to think about relocating enterprises - the problem of excess capacity in industry, which Premier Li Keqiang (李克强) has recently been increasingly talking about. The most comprehensive study of this issue, prepared by the European Chamber of Commerce in China at the beginning of the year, clearly shows that in a number of industries, output is in no way related to market demand for the product. China produces far more cement, steel, paper, chemicals and more than it actually needs. Thus, in two years, 2011–2012, China produced more cement than the United States produced in the entire 20th century. But for the Chinese, this is far from a reason for the enthusiastic optimism and mischievous mood with which this fact is described in the Russian blogosphere. Uncompetitive enterprises are kept afloat through non-market loans to maintain social stability or for corruption reasons. Eliminating excess capacity has long been one of Beijing's strategic priorities.

In the circular of the State Council, which so inspired the Ministry of Eastern Europe, both logics can be traced: economic (entering new markets where there will be lower costs and new consumers) and socio-political (elimination of excess capacity and concern for the environment). The document does not directly talk about mechanical “transfer” anywhere. There, only in general terms, the priorities of “international cooperation” are described for twelve industries (steel industry, non-ferrous metallurgy, building materials, railway equipment, electric power, chemical industry, textiles, automobile industry, communications, construction equipment, aviation industry, shipbuilding), but in the case of each industry The recommendations of the State Council are different. For example, for light industry (13th paragraph of the circular) it is recommended to transfer production to “countries with suitable conditions,” the main ones of which are “significant labor resources, low cost, proximity to the target market.” And, for example, the State Council advises manufacturers of energy equipment (point 11) to concentrate on increasing the export of products made in China.

In general, Beijing advocates the construction of production facilities in new countries for industries with low margins and the level of necessary technologies (building materials, textiles) or with an eye to conquering large markets for mass products (automotive industry), and recommends that companies in more technological sectors limit themselves to the supply of Chinese equipment and placement there, if necessary, service centers and individual elements of the component base (R&D centers are recommended to be located only in countries that have the potential for this).

A similar approach is manifested, for example, in the only launched program for the transfer of Chinese production in the post-Soviet space - in Kazakhstan. In December 2014, during the visit of Premier Li Keqiang to Astana, an agreement in principle was reached to launch the program; the parties announced fifty-two projects totaling $24 billion. In March 2015, before the forum in Boao, Kazakh Prime Minister Karim Masimov (a professional sinologist, an excellent speaker in Chinese) signed several agreements worth $14 billion with Li Keqiang, and already in December, when welcoming Masimov in Beijing, Li spoke about the first results. Enterprises for the production of building materials (cement, glass, metal structures), agricultural processing, non-ferrous metallurgy, textile production, as well as in the energy sector (nuclear fuel production, renewable energy sources, electrical networks) will be transferred to Kazakhstan. “Car assembly, polypropylene production have already been launched, the light metro in Astana should be launched before the end of the year,” said Li Keqiang (these statements, judging by the recent start of construction, are still not entirely true).

Even more material for understanding how the “transfer of enterprises the Chinese way” functions comes from Africa, where entrepreneurs from the PRC began building factories long before the State Council became concerned with regulating this area and issuing relevant circulars. According to Chinese statistics, at the end of 2014, over three thousand enterprises with Chinese capital operated in Africa, and twenty special trade and investment zones attracted over 360 industrial enterprises. In addition to hydrocarbon production and mineral development, the Chinese are building factories in Africa for the production of building materials, household appliances, mechanical engineering and light industry enterprises.

As the most authoritative expert on the Chinese presence in Africa, a professor at the University named after A. Johns Hopkins Deborah Brautigam, in the 2000s, businessmen from China, when choosing places to create industrial enterprises, were guided by the same principles - cheap labor, the growth potential of the local market, and the ability not to pay too much attention to environmental standards. By the way, as field research by Brautigam and her team shows, at most Chinese enterprises in Africa the majority of workers are local, so she calls rumors about the “yellow colonization” of Africa a myth.

Is the Far East in danger?

Armed with knowledge of China's experience setting up factories abroad, as well as statistics, it is possible to assess whether the Far East is suitable for good-neighbourly industrial expansion.

First of all, it is necessary to evaluate the experience already accumulated - after all, the Chinese began building factories in Africa before any orders from Beijing. Due to the transfer of statistics on foreign direct investment from Rosstat to the Central Bank, there is now confusion in the accounting of regional data. However, the statistics available for previous years convincingly show that the Chinese are not eager to invest in the Far East. According to Rosstat data for 2013, the seven largest investors in the Far Eastern Federal District look like this: Japan ($2.34 billion, mainly investments in gas projects in Sakhalin), the Bahamas ($714.8 million), the Netherlands ($525 million), Austria ( $500 million), Cyprus ($495.7 million), India ($462 million), Germany ($440 million). The report on foreign investment in the Far East, released by CEFIR in 2013, commissioned by the Canadian Kinross and the Foreign Investment Advisory Council of the Russian Federation, indicates that in 2011, up to 44% of foreign enterprises in the Far East were Chinese, but these were mainly small farms, trading companies or catering outlets. Judging by the available data, the Chinese have not made any attempts to establish industrial enterprises larger than a sawmill in the Far East.

What are the reasons? The first and main thing is a small domestic market in the Far East. Less than 6.2 million people live in the Far Eastern Federal District, which occupies a third of the territory of the largest country in the world, and the population continues to decline due to migration outflow. The distance from the European part of Russia makes the transportation of goods produced in the Far East extremely expensive, and the production itself is economically unjustified. That is why AvtoVAZ transported its cars to the region at a special subsidized rate. In the same way, taxpayers subsidize the return delivery of goods collected near Vladivostok at the Sollers plant. And that is why the Ministry of Eastern Europe itself, luring investors into priority development areas, relies on exports.

From the point of view of cheap and abundant labor, the Far East is also clearly not Africa. The economically active population is just under 3.4 million people, and the unemployment rate is only 5.4%. Salaries in the most populated subject of the Far Eastern Federal District, the Primorsky Territory, in 2014, even after devaluation, were only equal to the level of salaries in the province of Heilongjiang (黑龙江), bordering the Russian Federation: 28,277 rubles per month ($426) versus 2,278 yuan per month ($429). But already in 2015, the average salary in Primorye was 33,811 rubles (about $509), data for China has not yet been published, but due to the summer devaluation in dollar terms, salaries in the Northeast of China will most likely again be more competitive.

Social aspects are also important. In Northeast China, unemployment is relatively low. According to 2014 data, in Heilongjiang (黑龙江) it was 4.5%, in Jilin (吉林) 3.4%, in Liaoning (辽宁) - 3.4%, and in the Inner Mongolia Autonomous Region (IAR) – 3.6%. At the same time, as data from the China Labor Bulletin show, all four provinces have recently been an important part of the growing strike movement in China. Local authorities know firsthand the dangers of strikes: in March, Heilongjiang Governor Lu Hao (陆昊) came under fire for unrest at local coal mines. It is unlikely that in this situation the authorities of Northeast China will be happy with the initiative of their Russian colleagues, which could deprive them of at least some jobs.

If we assume that the Chinese enterprises that the Ministry of Eastern Europe plans to locate in the Far Eastern Federal District will export to the Asia-Pacific region, then products, logically, will have to be aimed at all countries in the region, except Russia and China (from where the factories, in fact, are supposed to be transferred) . The trouble is that the Northeast of China is one of the least export-oriented Chinese regions. Only Liaoning ranks among China's top 10 exporting provinces, while Heilongjiang ranks no higher than 21st, Inner Mongolia ranks no higher than 24th, and Jilin ranks 25th.

Probably, not so long ago, Beijing could have turned a blind eye if one of the local bosses had dared to conquer Russian neighbors with factories using borrowed money from state institutions like the China Development Bank or the Export-Import Bank. It was these two institutions, according to Brautigam's research, that played an important role in the process of industrial development in Africa. The significant role that “political banks” have to play is also mentioned in last year’s SCRR circular (paragraph 32). The problem is that both banks are now at the center of an anti-corruption campaign, as well as Beijing's efforts to make state-owned banks more efficient and prevent bad debts from mounting. That is why in Russia these banks can finance projects of President Vladimir Putin’s friends like Yamal LNG, but one can hardly expect massive loans from them for projects in the Far Eastern Federal District without regard to economic logic.

Thus, defenders of the industrial virginity of the Far East should not be afraid of the initiative announced by the Ministry of Eastern Europe. In terms of implementation, it will most likely go no further than the cooperation program between the Far Eastern Federal District and the North-East of China signed in 2009 by Dmitry Medvedev and Hu Jintao, which Moscow and Beijing now prefer not to remember. If at least a few Chinese enterprises appear in the Far East in a couple of years, this can already be considered a great success. Anti-Chinese phobias themselves are much more dangerous for the development of the region, when people are ready to panic at the appearance of any chimera born in bureaucratic offices. The alarm bells are scaring off real investors and drowning out calls for a radical improvement in the investment climate through structural reforms.