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The trade relation between China and USSR had experienced great changes since the establishment of the People’s Republic of China. From the moment in 1949 to the disintegration of the USSR in 1991, there are several stages in the development of the Sino-USSR trade relation: the “golden times” in the 50s, the decline in the 60s, the stagnation in the 60s and the rapid growth in the 80s. §1. The “golden times” in the 1950s The1950s is the period that Sino-USSR trade grew quickly. In the second day after the People’s Republic of China announced her establishment (October 2,1949) , the Soviet government officially admitted the Chinese government and established an ambassadorial diplomatic relations with china. In April 19,1950, the two governments signed the first trade agreement —The Trade Agreement Between The People’s Republic Of China Government and The Union Of Soviet Socialist Republics Government. It was the first trade agreement that China signed with a foreign country. It established a solid foundation for the development of the trade between the two countries. In 1957 and 1958, another two agreement was signed. They included items about transportation and most-favored-treatment clause in economics. They had great meanings in promoting the economic and trade relations between China and USSR The large-scale economic cooperation between China and USSR brought the quick growth of the trade amount between the two countries. In 1950, the total Sino-R.S.S.R trade amount was 3338.4 million dollars and ranked first in the foreign trade partners of the China. In 1955, the total trade amount was 1789.9 million dollars, which was two-third of the amount of the Chinese foreign trade. It was the year that Sino-USSR trade amount took the biggest proportion in the total Chinese foreign trade amount. In 1959, the trade amount reached 2097 million dollars which was the 5.2 times of that in 1950. USSR was the biggest trade partner of China. Her proportion in the foreign trade of China kept at 40%-50percentage except in 1950. Table of sino-USSR trade amount in the 1950s Year Total trade amount Exports Imports Proportion to Chinese foreign trade (%) Original sources: Chinese Foreign Economics and Trade Annual What China mainly exported to USSR were agricultural products and by-products like rice, soy bean, tea, meat and vegetable oil; light industrial products; mineral resources and rare metals. What China imported were mainly equipment and military orders. From 1953 to 1957, the proportion of machines imported from USSR to the total Sino-USSR imports was 34%, 33% were machines in sets. To 1959, the proportions respectively rose to 62.2%and 41.9%. China also imported petrologic products like petrol, lubricant and kerosene; raw materials like steal and cotton. The Chinese Communist Party and the Soviet Communist Party had diverged in ideology since 1956. Their divergence became bigger and bigger which deteriorated the relation between the two countries, produced direct and serious effects on the development of economic, and trade relations between the two countries. Bilateral trade sharply decreased and economic cooperation entirely stopped. In 1960, USSR tore up 12 agreements, recalled all the experts in China, stopped 257 technological cooperation items, and refused to supply mineral resources like cobalt and nickel that China needed urgently and greatly decreased the export of machines and important accessories. All these brought great destruction to the economy of China. The trade amount sharply decreased to 827.9 million dollars in 1961,which was just half of the amount in 1960 and one third of the amount in 1959. In 1970, sino-USSR trade amount dropped to the lowest point in the history—only 4.723 million dollars which was 2.25% of the amount of 1959. This number was only 1% of the total Chinese foreign trade and 0.2% of the USSR foreign trade. USSR’s rank in foreign trade partners of China fell from the first one in the 50s to the fourteenth. To pay back the loans borrowed from USSR, China decreased import as well as increased export. From 1961 to 1965, the trade surplus of China to USSR added up to 950 million dollars. Table of Sino-USSR trade amount in the 60s Original resources: Chinese Foreign Economics and Trade Annual There were also some changes in goods structure in the 1960s. Since China had petrolic products form USSR since 1966. Machines were still the body of Chinese import from USSR, but the quantities greatly reduced. For example, in 1960 USSR exported machines worth of 450 million rubles, which was only four percent of the total machine export when it came to 1965. China stopped to export rice and soybean to USSR because the reduction in agricultural production in the early 60s. However, the main exports were still agricultural production and mineral resources. §3. The stagnation period in the 70s The 70s were the period that China and USSR kept opposing each other, so the trade between the two countries remained in a low level. However, their trade relation revealed a tendency of slow increasement because of the necessity compared with that of the late 60s. The Sino-USSR trade amount of 1971 was 149 million dollars which was the 3.17 times of that of 1970.It increased another 50% in 1972 .The amount kept rising at a low speed after that. Still the Sino-USSR trade remained low and didn’t recover to the level of the late 50s .The proportion of Sino-USSR trade to Chinese foreign trade was only 1.3%. The proportion of Sino-USSR trade to USSR’s foreign trade was even less, only 0.2%, which was the thirty-third in USSR’s trade partners. The Sino-USSR Trade Amount in the 70s Original resources: Chinese Foreign Economics and Trade Annual The Sino-USSR goods structure in the 70s was this: USSR exported machines, transportation and steel. USSR also exported wood to China since 1972. China exported industrial consumer good, food and its ingredients, mineral resources and metals, etc to China. The Sino-USSR relation has moderated since 1980. In May 1989, the USSR president Gorbachev visited China, which normalized the relationship between the two countries. The both governments took an active attitude towards trade, which cause a rapid development. In the 80s, Sino-USSR trade developed at a rather high speed except one or two years. The average growth rate from 1981 to 1986 was 68%. The trade amount in 1990 was 4380 million 4380 million dollars which was the 18.5 times of that of 1981. The rank of USSR in the foreign partners of China rose to the fifth after HongKong and Macao, Japan, US and Germany. The rank of China in the foreign trade partners of USSR rose to the fifteenth in the 80s from the thirty-third in the 70s. However, the trade amount was quite low considering the potentiality of the two countries. Table of the Sino-USSR Trade Amount in the 80s Original resources: Chinese Foreign Economic and Trade Annual Take a wide view of the Sino-USSR trade history, the following specialties can be seen: First, Sino-USSR political relation directly restricted the Sino-USSR economic and trades relations. The trade relation experiences dramatic changes during the forty years. It became the tool and victim of the political struggles, which was especially clearly revealed in the 60s and the 70s. It brought great losses both to China and Russia. Second, the Sino-USSR trade was carried out yearly by the official plans. Government administrated and regulated the trade between the two countries and market did not work here. It was opposed the economic regulations. This environment restrained the enthusiasm of the manufacturers and limited the development of Sino-USSR trade. Third, China and USSR could have complementaried each other very well in economics. However, the export structures of the two countries were single. This kind of structure was a disadvantage in bringing the potentiality of the Sino-USSR trade into full play. It became an outstanding problem in the late 80s and the following years. Fourth, having experienced a stagnation of twenty years, the development of Sino-USSR (Sino-Russia) trade many problems. The hardware including bank system, transportation, communication system and the software like opinions, political policy are two old or even not existed, which can hardly be suitable to the development of the Sino-Russia trade under the open policy. These problems must be solved from the beginning. It will surely lay a negative effect on the development of the Sino-Russia trade relation. Chapter2. Present Situation of Sino-Russia International Trade §1. MAIN CHANNELS AND FORMS OF SINO-RUSSIA INTERNATIONAL TRADE Nowadays some of the channels and forms of Sino-Russia International Trade are traditional, yet some are new-born with the development of economic situation. Certainly, some new changes also took place in some traditional channels and forms during the period of practice. Since Sino-Russia International Trade is the continuation of Sino-Soviet Union International Trade, it is inevitable to begin this part from the Sino-Soviet Union International Trade/ ＊Conventional Trade Between Governments Conventional Trade between governments is usually called" Trade of States" or "Big Trade", which is the main channel adopted by governments of China and Soviet Union to develop the economic relations. Conventional Trade between governments is a traditional way and it adopted the way of keeping accounts according to the trade between governments by means of one-year goods exchange and payments agreements. That means that after every specialized company concludes a transaction according to the regulations of agreement between two governments, the head office of foreign trade will assign the detailed account of exported goods as a mandatory planning to local imports and exports corporations. Because of the reform in respective trade system, the proportion of this kind of trade gradually comes down. At the same time, the frontier trade and the local trade play a more and more important role. For example, from 1987 to 1989,the volume of trade between the Chinese government and the government of Soviet Union dropped 300,000,000 francs, however, the frontier trade between the Chinese coastal provinces and Siberia of Russia has risen to 900,000,000 francs. In1991, conventional trade between two governments has been replaced by the Xianhui Trade ,at that time , the conventional trade makes up 43％of the total volume of trade. In 1993, 80％of Sino-Russia international trade depends on frontier trade and direct trade between enterprises of two countries . ＊ Frontier Trade Frontier trade as a channel of trade has lasted for a long time. Frontier trade always regards barter trade as the main form of trade. Till the early 90's, barter trade makes up about 80％of Sino-Soviet Union trade and Sino-Russia frontier trade. Later the relations of economic trade in frontier region have been developing from the primitive simple exchange of goods to the establishment of jointly owned enterprises. A detailed description about the frontier trade will be discussed later. ＊Local Trade At the end of 80's , with the rapid development of trade especially local trade between China and Soviet Union, the necessity of establishing economic relations directly between localities and the departments of two countries is steadily on the increase. Under that situation, after heated discussion, China and Soviet Union reached an agreement about the direct establishment of economic trade relations between respective localities. Sino-Russia international trade has inherited this channel of trade. The local trade means that each province, autonomous region, municipality directly under the central government and other authorized enterprises in China develop the relations of foreign trade directly with Russian departments concerned. It is not restricted in the barter trade and it includes all kinds of forms of economic collaborations such as export of labor services, contracts for projects and so on. The direct economic trade relations between departments of China and Russia also belong to local trade. No doubt, sometimes it is difficult to draw a clear line between frontier trade and local trade. Frontier provinces can make use of the advantages of in geography to develop frontier trade extensively. Those inland provinces also can develop various economic relations with Russia by way of frontier trade. It is initiative in the history of Sino-Russia international trade to establish the relations of economic trade directly between two countries ' localities (frontier provinces are excluded). Because of the appearance of local trade, Sino-Russia trade has formed a new aspect which includes conventional trade, local trade and frontier trade. After Soviet Union disintegrated, the contact between two countries' localities has been further developed. In order to legalize such a contact, China and Russia signed an agreement about this point, which gave definite regulations on a series of legal problems concerning the relations of frontier trade between two countries. Barter trade is a traditional way in Sino-Soviet Union and Sino-Russia trade, which occupies a special position in Sino-Russia economic collaboration. No matter it is keeping-account conventional trade or local trade, both is underway by means of barter trade. Every year two sides will sign a protocol about exchange of goods and payment agreement between two countries . Such a protocol makes a detailed regulation on assortment of goods, quality, amount of money and so on. According to the manifest regulated by two countries, barter trade requires that import and export corporations belonged to two countries' ministries of foreign trade concretely. Barter trade belongs to visible trade, in which both sides don't need to put to use foreign exchange. Instead of defraying cash and cashing the payment for goods, two sides settle accounts on the delivery check by means of banks. By respectively adding up the total of exchanged goods, both sides can keep the balance between import and export. If one side decays delivery, after being confirmed by two sides, this delivery will be carried out in the next year. Barter trade is a primitive and traditional form of trade, which is inevitable in the poor developed system of foreign exchange. As we all know, both China and Russia are countries without capacity to earn foreign exchange through export and insufficient foreign exchange reserve. What's more, China and Russia can't use hard currency to import urgent goods required by domestic market. The form of barter trade is in keeping with the necessity and interests of two sides. For example, China can export advantageous products such as textile, products of light industry and food so as to get those short-supplied means of productions such as steels, wood, etc and some durable goods like piano and refrigerator. It's the same with Russia. It is a modern and standard form of trade and consequently the most promising one. According to the agreement signed in October2nd, 1990, the conventional trade between China and Soviet Union was replace by Xianhui Trade from the year of 1991. Unlike the traditional barter trade, the Xianhui Trade needs to draw on hard currencey, which is difficult to China and Russia, two countries without sufficient foreign exchange reserve. Thus the volume of trade between China and Russia in 1991 came down obviously to only $390,000.000. In the early 90's,it was still very difficult for China and Russia to develop Xianhui Trade since both countries had not sufficient foreign exchange and necessary financial setup. However, with the adjustment of the relations in trade between two countries, such a modernized and normal Xianhui Trade will play a more and more important role in Sino-Russia trade. Usually it means that those inhabitants living in the frontier regions go to the designated place to make a deal in the means of barter trade . According to the agreement, infrastructures and places of trade are built in designated place. Inhabitants of the border area and travelling traders can display and sell goods in the business district without using passports and visas. Trade of tourism means doing business by the means of tourism. Merchants of China and Russia can carry their own countries' commodities to sell in the places of tourism. The character of this form of trade is :〖a〗The quick circulation of fund 〖b〗Simple way of doing business 〖c〗Sensitive reactions to the ever-changing market After the disintegration of Soviet Union, China and Russia started this new form of trade. When merchants in China and Russia have paid some expense to the Russian airline companies, airline companies will not only guarantee to transport the products to the designated place, but also pay for the customs duty for merchants. Thus, Tianjing, Jinan, Shengyang in China and many cities in Russia have formed this special Air-business corridor. §2. NEW DEVELOPMENTS IN SINO-RUSSIA INTERNATIONAL TRADE After the cold war, people emphasized the economic factor all over the world. In Sino-Russia relationship, the relation in trade has been paid much attention to by both governments. Δ The course of development in Sino-Russia trade Generally speaking, in the period of six years (from 1992 to 1997), rapid progress has been made in Sino-Russia trade relationship although the Sino-Russia trade relationship was not so steady. .Volume of Sino-Russia Trade From 1991 To 1997 (unit :$10,000) Year Total volume of import and export trade Decrease compared with last year(%) According to the diagram, the Sino-Russia trade relationship had gone through three periods: rapid development, great decline and adjustment for improvement ＃1992～1993 The Period of Rapid Development At the end of 1991, after the negotiation, China and Russia reached a series of agreements, which successfully realized the transition from the relationship of the Sino-Soviet Union to that of the Sino-Russia. The government of Russia showed that Russia would acknowledge and inherit all the agreements and contracts signed between China and Soviet Union, hoping that Russia could extend mutual economic and technological cooperation with China. After President Yeltsin and Premier Li Peng met in New York in January31, 1992, all the departments of external economy in Russia were required to enter the practical work at once in order to fulfil those contracts. What's more, all the enterprises were called on to take an active participation in the economic cooperation with China. The president of Russia also extended a warm welcome to any suggestion proposed by China to develop the economic relations. After Deng Xiaoping made important statements in the south of China in the spring of 1992, China opened the trading port to Russia and provided all kinds of preferential policies to enterprises and companies in frontier region as well. At that time, Russia experienced economic crisis, which caused the great shortage of commodities especially food and daily necessities. Russia was in great need of Chinese commodities through import. In order to promote trade, Russia also decided to rescind the rigid rules about that both countries must use foreign exchange in trade. Under the encouragement from both sides, Sino-Russia trade took on a new look. The disintegration of Soviet Union produced the turbulent Russian political situation. The economy of Russia fell into the crisis with the year after year of decrease in the production and foreign trade. However, during that period, Sino-Russia trade increased by a big margin instead of decreasing and the turnover reached 58.62 hundred million dollars which was 52.2% higher than that of Sino-Soviet Union trade in 1991.And the volume of Chinese export was 23.3 hundred million dollars, the volume of import was35.3 hundred million dollars. China ranked third among the trade partners of Russia, only after Germany and Italy. Russia ranked fifth among the trade partners of China after Hongkong, Japan, U.S.A and Germany. Sino-Russia trade from 1992 to 1993 had broken through the former pattern in which the focus was conventional trade between the governments. Furthermore, frontier trade occupied a more and more important proportion. A considerable part of Sino-Russia trade (1992～1993)was barter trade. In 1993,China mainly imported steel products, chemical fertilizer, wood etc. While food, products of light industry, daily necessities are exported to Russia .In the Chinese export ,products for civil use occupied 45%of total export .During that period ,China and Russia also had a new development on the cooperation in other aspects . If people make a general survey of Sino-Russia trade from1992 to 193, they may draw following conclusions: ☆Most of the factors which promoted the increase of Sino-Russia trade are accidental and temporary such as the severe shortage in Russia market ,the lack of foreign exchange in Russia trade partners and so on. ☆The principal part of trade was intermingled with the good and the bad. Many units and individuals that participated in the trade were not qualified for dealing with international trade ☆The improper regulations from the countries caused the disorder in the market. ☆ The forms of trade were primitive for most of them were barter trade. After two years of development in Sino-Russia trade from 1992 to 1993, there was a big decrease in the volume of the trade in 1994. In 1994, China ranked seventh among Russia trade partners. Actually, the tendency of decline had shown the sign at the end of 1993. The occurrence of this decline is not accidental. In the past, Sino-Russia trade was carried out mainly between the governments. The disintegration of the Soviet Union indirectly influenced the reforms of both sides’ systems of trade. 80% of Sino-Russia trade were realized by the means of frontier trade and local trade. Profiteers and enterprises were main force. What’s more, most of the trade were barter trade. Without the general guidance and efficient preparation, it was impossible for such a popularity of frontier trade and local trade to last for a long time. Thus, the negative influence from the spontaneous market was soon exposed. During that period, many Chinese products of inferior quality entered Russian market, as well as a few poorly qualified people. They not only destroyed the prestige of Chinese products but also erected barriers for the Chinese products’ entrance into Russian Market .All that raised doubts held by some Russians toward China, which is sure to be harmful to China. The following are the reasons of that decline: From the late 1993, the government of Russia began to restrict barter trade. China and Russia began to carry out the system of transit visa from the January, 28,1994.Surely it is necessary to carry out that system to improve the system of entry (exit) visa, however, it also brings a lot of inconvenience to those enterprises that want to do business directly in spite of the lack of modern means of communication. The decline of Russian economy and shortage of export sources had a great influence on Russian ability to export. Russian reform in price and customs duty caused the rise of products’ rise.  The open policy of Russia and various channels of import produced the abundance of products in the market. Chinese traditional structure of export products had been used to the change in the consumer market in Russia.  In order to prevent the economy from being too “hot”, China adopted the policy of retrench, which influenced the Chinese demands for raw materials and machine equipment from Russia.  The instability of Russian domestic economic and political situation affected Russian ability to carry out the resolutions, at the same time, it also affected the interest and confidence held by big enterprises and companies in China to invest in Russia in large scale. Besides those economic factors, some political factors are included, especially those so-called the problem of “commercial immigrants” in China. The considerable influence was exerted by that problem on Sino-Russia trade, especially frontier trade and local trade. The governments and foreign ministries of both sides took a calm and realistic attitude toward it. Both sides have reached a series of agreements on the construction of systems and laws in frontier region so as to develop ties of peace , friendship and prosperity between China and Russia. ＃The Adjustment and Improvement Period since 1996 Since 1996, China and Russia have taken some measures to try to solve the problems in the both sides’ cooperation in economy and trade. Propose the objective of a struggle to increase the volume of Sino-Russia trade From April ,24 to 26 in 1996, President Yeltsin paid an official visit to China . Both sides determined to take the advantages of neighboring regions and mutually complementary economy and take some strong measures to further enlarge and develop bilateral trade. President Yeltsin pointed out that present’s volume of bilateral trade 55 hundred million dollars should be raised to 220 hundred million dollars .China and Russia signed over ten documents about cooperation. During Li Peng’s official visit to Russia from December26to 28 ,1996,both sides further discussed measures to strengthen cooperation. They agreed that China and Russia should try best to raise the volume of Sino-Russia trade to 80 hundred million dollars in 1997. What's more, both sides thought it possible to realize the objective of the struggle in the year of 2000---200 hundred million dollars. When premiers of two countries met, they signed an agreement about the construction of Li Yungang Nuclear Power Plant and an agreement about the cooperation between Chinese People’s Bank and Russian Central Bank. Jiang Zemin paid an official visit to Russia from April 22 to 26 in 1997 and he stressed that in order to realize the objective of 200 hundred million dollars at the end of that century, both sides should try to raise the volume of bilateral trade to 80 or 100 hundred million dollars in 1997 first. Recognition of the Importance of Bilateral Relations in Economy and Trade The governments of China and Russia have paid attention to the development of cooperative relationship in economy and trade. They all regarded it as an important part in two countries’ strategic cooperative partnership. On the November 9, 1997, China and Russia emphasized the cooperation in the following fields: The production of natural gases, petroleum, nuclear, energy equipment and cooperation in civil aviation, chemistry, food industry, electrical household appliances etc. Cooperation in banks, insurance and arbitration, the improvement in the quality of products mutually provided, measures are to be taken to adjust the export of labor services. The encouragement of turning the high technology into production. Chapter3. Problems existing in the Sino-Russia trade relations: 1.1 Chinese commodities continue to be synonymous with the cheap and low quality goods, despite the efforts of trade officials to improve quality. This is due to many reasons. Firstly, the border trade communication lacks the effective supervision, so this communication is just in disorder. Many small trade companies of both sides are eager for quick success and instant benefits, so China’s many counterfeit goods pour into Russia market. It is reported that Some Russian cities has even held some “China’s counterfeit goods” shows, which shows the “paper jacket”, “chicken leather outwear”, and so on. More seriously, now more and more Russian consumers also begin to distrust many Chinese companies with good reputation. However, now Korean and Japanese competitors also try their best to enter the vast Russia market with their high-quality goods. Russian shuttle traders have shifted their attention to these developing countries like Indonesian as the market in Chinese goods has reached its limit. In 1997 and 1998 the devaluation in Southeast Asian economies as a result of the financial crisis will make their exports much more competitive. Thus Chinese goods are just losing a lot of the Russian market share. Secondly, the illegal “traveling trade” is still rampant. Sino-Russian border and local trade now constituted one-third of the total bilateral trade volume, it was revealed at a symposium of Sino-Russian border and local trade held here recently. Many pedlars make use of the traveling trade to transport counterfeit goods into Russian market and thus destroy the overall image of Chinese goods. These pedlars have many advantages over big trade companies with good credit, for example, they have fewer management links and more flexible trade tricks, and they could provide much cheaper goods. More important, they cannot be easily supervised, so sometimes they dare to sell seconds at best quality prices and mix the spurious with the genuine. Thirdly, the border trade authorities have not paid enough attention to the commodity quality. Some Chinese trade units regard Russia market as the so-called “parallel market”, which can absorb low-grade commodities even like some African countries. Therefore, the production, trade and commodity inspection units, to some degree, acquiesce in the overflow of counterfeit goods. Fourthly, after so many years of foreign goods pouring into the Russian market, Russians are accustomed to high-quality commodities. More important, the renaissance of Russia’s economics, the rapid growth of China’s economy, and the allied strategic interests really remind us of the complementary need between each other. The guarantee of the retirement pay and the increase of the salary could help improve the purchasing power and arise higher claims of Chinese commodities. 1.2 Many Chinese tourists almost send all their profits back to China and cause the discontent of Russians. The Russia migration service reported “on any given day, about 30,000 Chinese tourists are in Russia's Far East. In Ussuriysk, just north of Vladivostok, they've congregated in a small Chinatown, with its own hotels, casinos and restaurants.” Russian officials complain that while the Chinese are engaged in successful trade in Russia, none of their profits find their way into the local economy. Instead, they say, the money ends up back in China. “Such economic expansion is observed throughout the entire Russian Far East,” said Sergei Pushkaryov, chief of the region's migration service branch. “All the profit is theirs.” More important, as Pavel Gladkikh, a migration service official said, “besides selling cheap clothing, toys and other consumer goods, Chinese tourists are increasingly involved in illegal timber and scrap metal exports through elaborate trading networks. Chinese businessmen hire unemployed countrymen and send them to Russia as tourists. Afterward, they ship containers of goods for the tourists to sell. Receipts from the sales go to firms that the same businessmen establish in Russia. The money is then used to buy timber and scrap metal. They then create Russian shell companies to send the shipments across the border to China. 1.3 The bilateral trade volume is small and the cooperation level is low. Firstly, according to the China Trade, in 1998 the trade volume covers only 5% of the total importing and exporting volume of Russia. On the other hand, the trade volume only covers 2.4% of the total importing and exporting volume of China, or 20.1% of Sino-Japan trade volume. Secondly, the low level of trade cooperation is also showed on the trade form. In 1995, the barter trade covers 61.2% of the whole Sino-Russia trade. Later bilateral governments reach an agreement that bilateral trade should be transformed from the barter trade to spot transaction, and thus the proportion of the barter trade falls down. However, at the same time the bilateral volume also decreases with the falling of small “barters”. In fact, Sino-Russia trade relations lack the form of big global standard trade cooperation; therefore, this cooperation still remains at a very small level. Thirdly, the bilateral direct investment has remained at a low standard until now. Until 1998 Russia has only invested 0.2 billion US dollars in China, while from 1993 to 1997 the direct foreign investment amount in China is almost 185.8 billion US dollars. On the other hand, until 1997 China has only invest 0.18 billion US dollars in Russia, while from 1993 to 1997 Russia has absorbed 9.7 billion US dollars. Therefore, the trade cooperation is not in line with the large potential of both countries, and also not in line with the rapid increasing Sino-Russia political and military relationship. 1.4 The bilateral trade volume is not stable and in line with the good bilateral political relationship. Firstly, Big rise and fall of the turnover often strike the normal bilateral trade relationship. For example, according to China’s trade yearbook, in 1993 the total import and export trade volume between China and Russia is almost 7.5 billion US dollars, while in 1994 the volume is only 4.9 billion US dollars. In 1998, the total trade amount between China and Russia was 5.48 billion USD, 10.5% lower than that of 1997. Secondly, China’s trade deficit becomes larger and larger during the past years. This disequilibrium of bilateral trade seriously influences the normal development of Sino-Russia trade relationship. From 1992 to 1998 China’s total trade deficit adds up to over 12 billion US dollars. More important, the trade structure is not fit for the stable growth of Sino-Russia trade relations. According to China’s 1999 economic report, until now what Russia exports to China are still mainly so-called “four main commodities”, which are machines, ferrous metal, chemical fertilizer and timber. What Russia import from China are mainly foodstuff and some household electrical appliances. The present Sino-Russia trade structure cannot spur the further and steady trade development, and cannot make the full use of the present trade complementary potentials. 1.5 The high risks existing in bilateral trade relations. Many Chinese and Russian companies have to run high risks to go on the bilateral transactions because of three reasons: (1) Two countries have never established trade relation mechanism system conformed to the world standard until now. Their trade system reforms have not been accomplished. In China’s respect, the SOEs have not transformed the past planned system. In the trade relations with Russian companies, many big trade companies lack the trade flexibility, and cannot adapt themselves to the moving market. On the other hand, most of private companies have no adequate capitals to run big bargains with Russian companies. In Russia’s respect, the trade policies are not stable and effective; as a result, Chinese companies that are accustomed to trading with Western corporations are full of worries when they trade with Russian companies. What affects the Sino-Russia trade relationship is that these two countries have never established trade relation mechanism system conformed to the world standard until now. (2) Problems of the bank setting accounts system. According to the statistics of China trade, spot transaction is becoming more and more important. However, after Russia’s radical economic reform, few Russian banks have the adequate strength and credit. More important, the agency system between Chinese and Russian banks is not mature, so there are few spot transaction accounts between Chinese and Russian companies. Until now almost 420 banks in 33 countries have established representative units in China, however, Russia has only established the Russian International Business Bank and the Russian Credit Bank have established branch banks in China. On the other hand, only the Bank of China established branches in Russia. Therefore, the cash settlements through L/C (letter of credit) have not been widely used by corporations of both sides. Therefore, the bilateral trade relationship is seriously influenced by the trade settlement. (3) The arbitration system is not mature. There is no denying that many trade disputes often emerge in the Sino-Russia trade relations, but they cannot be easily settled, because no just, reasonable and effective arbitration systems have been built up until now. In this situation, the irregular trade actions such as illegal speculations, defaulting and the low rate of discharging contracts emerge and prevail between Chinese and Russian traders. Therefore, Chinese and Russian corporations’ legitimate rights and interests cannot be effectively guaranteed. Therefore, the intentional swindles and some other unlawful activities begin to run rampant. (4) Exporting insurance problems. Now Russia is still distinguished by WTO as the “high-risk country”. When Chinese companies export commodities to Russian, Chinese companies are often required to get payment until Russian companies get receipts of goods. However, when Chinese companies want to import commodities from Russia, Russian companies send goods upon receipt of payment. In this situation, Chinese companies always have to bear all risks no matter whether they are exporters or importers. More important, because China and Russia have not established an efficient good exporting insurance system, many big Chinese trade companies have no end of misgivings when they want to enter the Russian market. (5) Because of the mentioned risks, Chinese leading trade corporations are still cautious of Russian investment conditions, though Chinese government has tried best to encourage them to invest in Russia. Recently Russia's Yukos oil company agreed to a symbolic deal with China. Yukos oil company head Mikhail Khodorkovsky recently signed an agreement on increasing next year's oil supply to China by 1.5 million tons. Not a big contract by world standards, but it is expected to become a milestone in Russian-Chinese relations. The contract has symbolic value - 1.5 million tons of oil is exactly the amount the limited capacity railway link to China can handle. Building a pipeline from the Irkutsk region through Mongolia and into China would be the only way to further increase supplies. The pipeline would have a capacity of 25 million tons to 30 million tons a year and would cost $1.7 billion. However, neither Yukos nor the Russian government has the money to finance such an ambitious project. The project will be realized only if the Chinese themselves can come up with funds. Indeed, if the ever-cautious Chinese do agree to invest in the project, it would signal the end of all the talk about a Russian-Chinese strategic partnership and the beginning of action. 1.6 Transportation and other basic infrastructures fall behind the great development of Sino-Russia trade relations. According to the statistics of China Trade, the Chinese ports’ transporting capacity is very limited in the present trade situation. Our important international trade port Manzhouli can only transport 3,000,000 tons per year; the port Suifeng River port can only transport 900,000 tons per year; the port Ernianhaote can only allow freight of 300,000 tons to pass. Because the poor port transporting capacity, it is estimated by China Trade that almost 2000 railway freight carriages were detained on the railway in 1999. In 1999, the transportation units only finish 84% of the volume of rail freights. Because of the limited transporting capacity, almost 25% of the contract assignments have not been fulfilled. On the other hand, Rail lines continue to be the main means of freight transport between China and Russia, however, the Russian railways in Siberia of Russia are all single-track railways, and the air transporting is still too expensive and inconvenient, therefore, the Russian transporting capacity also hinders the normal development of the Sino-Russia trade relations. The Far East Railway Network, in a statement via Grodekovo (near Ussurysk), isn't able to handle the increased turnover of goods between the countries. The line, near the small Russian cities of Khasan and Posyet, is the second Chinese-Russian railway line crossing the countries' Far Eastern border. The other line is about 100 km north on the border with the Chinese province of Heilongjiang. Another rail link, part of the original Trans-Siberian railroad completed in the 1890s, connects Russia to China near Mongolia. Therefore, China and Russia have to spend a lot in forming a comprehensive transporting system of railway, highway, water and air transporting forms. Andrei Ostrovsky of the Far East Institute said Russia itself still has issues to take care of before trade can be expanded. “We shouldn't forget that we still have to improve our border passages, services, capacity and customs processing,” he said. “The bad conditions on our side of the border impede all efforts to increase cross-border trade.” 1.7 The nationalism in Russia and other political trends may seriously affect the Sino-Russia relationship. Firstly, the pouring of Chinese traders and immigrants make many Russians feel disturbed and even panicked. It is estimated by the Russian government that the Russian Far East comprises a territory of 36.4 percent of the entire Russian Federation. However, its population is only 7.6million and 5.4% of the total population of the Russian Federation. The Far East is a large area, endowed with rich natural resources, and a very small population. More important, it is remote from Moscow. Therefore, the so-called “Chinese Expansionism” also affects the bilateral understanding and trade relationship. Secondly, many Chinese media still denounce Russia because it had taken away almost 1.5 million square-kilometers fertile land from China and bullied on Chinese there. In the Russian Far East Programme composed by Russian government, it is said, “The decline of Russian geopolitical positions has spurred Japan and China to directly arise their territorial claims to Russia.” Therefore, Russian government has taken some precaution measures to control the so-called “China’s economic infiltration”. Thirdly, the good Sino-Russia political relationship is based on the common suspicion against the Western countries. If Russia has improved its relationship with the Western countries, the Sino-Russia political and trade relationship will be inevitably affected. These are favorable conditions for expanding trade. However, the total amount of two-way trade is quite small, and by the year 2000, it is expected to reach no more than $20 billion. Facing the mentioned problems, China and Russia must try their best to overcome the difficulties existing in the developing Sino-Russia trade relationship. 1.China and Russia must sternly strike the illegal tourist trade, more important, they should support big trade companies as the main Sino-Russia traders. For example, they may levy heavy penalty against those tourist traders and counterfeit commodity producers. Fortunately, two Chinese state-run business centers selling Chinese-made goods opened in Moscow this spring. Assembly of Chinese TCL televisions in Russia is also planned. China could also provide funding for the manufacture of the Be-200 100-seat passenger aircraft that can land on water, and for a new generation fighter plane. China is also studying possible participation in development of the Russian Far East port of Zarubino. 2.Chinese and Russian traders must transform their original views of mutual markets. Chinese traders should notice the great changes of Russian market. Now many western competitors have made use of their technique and quality advantages to push Chinese traders out of the Russian market. China should not take Russian market as the so-called “parallel market”, which can absorb low-grade commodities even like some African countries. 3.China and Russia must help the mutual media form the correct and comprehensive views of each other. On Boundary Question, in April 1994, both sides completed the protocol on the description of the national boundary and its appendices on the eastern and western sections of the Sino-Russian Boundary, which marked the successful conclusion of the demarcation of the boundary line in the sections unanimously agreed upon through consultations. In this way, the Sino-Russian boundary for the first time in the relations between two countries has been accurately indicated on the spot. Chinese and Russian media thus should comprehensively reconsider and try their best to preserve the Sino-Russia relationship. 4.China and Russia should diversify the importing and exporting commodities. Now Main products exported through border and local trade are cereals, oils and food, vegetables and fruits, garments, shoes, general merchandise, construction materials, electronics and computer equipment, medicines, oil tar, asphalt, refractory materials, ceramics, cigarettes and tobacco, and cotton. China-made electrical household appliances and electrical products are also entering Russian market. Chinese and Russian traders should analyze mutual markets thoroughly and then pursue a great variety of commodities. 5.China and Russia must continue to provide good policies for the Sino-Russia trade relationship. Fortunately, the Russian government has announced on September 4th, 2000 that Russia is going to have a better control the custom duty. From 2001 Russia will decrease the kinds of custom duties from 7 to 4, and the highest duty decrease from 30% to 29%. On the other hand, the undersecretary of China’s Foreign-trade Department, Long Yongtu announced that any enterprises could directly take part in foreign trade after the registration in business branches, in no need of the government’s permission. These all show the determination of mutual governments, however, they still need go on the preferential policies, more important, they should struggle against corruption and malfeasance in order that mutual traders can really enjoy these policies. 6.Chinese and Russian governments should strengthen the cooperation in the scientific resources, energy and capital field. Now China still tries its best to finish a program “Russia-China Energy Bridge”. United Energy Systems of Russia has signed a co-operation agreement with China and is proposing the development of this project that provides for volume electricity exports from Russia to China. Existing power plants in Siberia have sufficient capacity to export up to 15 billion to 18 billion kW/h of electricity to China. UES is presently able to supply electricity to China from the Amur region using existing cables. The Chinese side has agreed to consider the question of Chinese participation in the efforts to complete the construction of Bureya hydroelectric plant in Russia’s Far East. This is a good example, however, such big cooperation projects by mutual governments still fall behind the rapid developing Sino-Russia political relationship, therefore, the high officials of both governments still need spur the relative units to carry these important projects. Overall, effective economic cooperation will help cement the foundations for a Sino-Russia strategic partnership. The people in both countries should seriously value the hard-earned Sino-Russia relationship, and spend all their intelligence, wisdom and courage to overcome all odds on the way to a prosperous Sino-Russia trade relationship. Everybody who does business in Russia knows that problematic laws and weak legal enforcement, corruption, high taxes, and Mafia (organized criminal) activity make it an ordeal. Improving the financial and legal environment must be high on Putin’s agenda, because Russia’s economic behavior of regional leaders. If this plan works, Russia may substantially improve tax collection and management of public property. However, Putin’s success is not certain, because the governors tacitly but stubbornly resist the plan. Putin’s historical duty is to build Russia into a strong nation, make it an influential part of the world, but Putin’s present target is to stabilize the Russian economy. Putin says, although Russia is a resource abundant country, it would still be subject to other countries that are without an advanced economy and powerful arm forces. He emphasizes that the stabilization of economy is the nation’s most important target; the economic growth must reach 7% to 10%. Now the Strategic Research Center, Which Putin has constructed, is setting up the development plan in medium and long run. Although this plan has not been revealed, we can still acknowledge the primary ideas of Russia’s economic construction from Putin’s recent words and actions. First, perfect the role of the market and strengthen the government’s macroscopic control over the economy at the same time, Putin asserts that the government should not give up its necessary control over the economy, while the market’s adjusting function should be respected. Russia should strictly control the war industries and those enterprises of strategic resources, and posses the dominant part in main industries so that a radical economic development plan could be carried out under administration. Russia must support competition. Russia is not yet a truly open and competitive economy because of high barriers to entry for investors. The government must establish simple and uniform terns for establishing new companies and put an end to the arbitrary rule of regional officials as well as to criminal pressures on businesses. Second, the role of markets must be substantially enhanced. Introducing private ownership of land will benefit the agrarian sector and also bolster financial markets, because land could serve as collateral for mortgages. No less important is enacting more flexible policies for wages and working conditions in the private sector. Third, a reform of the judicial system like that mentioned by German Gref os badly needed to ensure that independent courts can enforce contracts (replacing criminal groups as enforcers) and resist pressure from high-ranking officials. Second, develop high-tech industries—especially information industries—and complete the industrial construction adjustment systematically. Having established and strengthened basic market and democratic institutions during the 1990s, Russia became an emerging market country that badly needs a modernization breakthrough. How can the government of President Vladimir Putin attain this goal? The urge for modernization in Russia is stronger than in any other emerging market country. This former superpower lags further and further behind world leaders: Russia’s GDP now ranks only fourteenth in the world, and its social indicators are close to those of medium-income developing countries. Putin begins his rule during a strong economic recovery that follows a fourfold devaluation of the ruble in 1998 and a sharp rise in world oil prices. Throughout 2000, macroeconomic and industrial indicators are likely to remain favorable, with GDP expected to rise by 4-5 percent if oil prices stay close to $30 a barrel. In view of this good economic mews, is achieving a modernization breakthrough really that important for Russia? The answer is definitely yes, because, during 2003-05, Russia may experience shortages of natural resources, and its efforts to boost economic growth may be hampered by the continued decay of its industries. The more an economic takeoff is delayed, the more difficult it will be for Russia to catch up with the advanced nations. Leading experts estimate that $2 trillion will be required in the next 20 years to modernize Russia’s production facilities, infrastructure, and labor force. If modernization efforts begin today, it will take from 15 to 30 years for Russia t catch up with the West—and that is if the Russian economy grows at 6-8 percent annually. Putin thinks the backwardness in information industry will lead to the lag in all other industries, so Russia should push up the development of information technology. Presently, resource and war industries are still the leading parts of national economy, so the government should show adequate emphasis upon these industries and increase the export of these products so as to accumulate enough capital for the industrial constriction adjustment. Third, administrate financial orders, reform tax system and improve the investment environment. What hamper business in Russia most of all are taxes. If entrepreneurs paid all the taxes they owed, they would pay more than they earned. Therefore the “shadow economy” amounts to about 25 percent of GDP. Tax evasion is one of the main reasons—along with control of mediators over resource and output flows, schemes designed for managers’ personal benefit, and the high price of money—behind the wide use of money surrogates (for example, promissory notes—veksel) and barter. Over the years, there has been much talk in Russia about reducing the tax burden, but only Putin’s government has tackled the issue. It intends to improve the general rules of the game for taxation and lower taxes on producers and ordinary citizens. Tax officials plan to eliminate all preferences and seek to establish equal conditions for all. This approach signals a radical shift in the government’s economic philosophy. The government seems to understand the significance of improving the economic environment. Legal experts are working on protecting minority stockholders’ interests, introducing transparent accounting techniques, and implementing other reform measures. But carrying out some important reforms requires consistent policy rather than isolated initiatives. Putin requires that the banking system strictly control the exclusive use of national loans in order to stop the abuse of the budget and preferment loans. In order to relieve the burden of enterprises, Putin continues the policies of cutting tax types, lowering tax rates while widening tax sources. He is going to cut the tax sorts from 35 to 5 only, and lower the income tax rate from 45% to 30%. Fourth, decrease the gap between the rich and the poor; improve citizens’ living standard. Nowadays, the rate of the income of richest 10% citizens and that of the poorest 10% citizens is 1:15, far beyond the warring line of social stability, which is 1:10. More than 1/3 citizen live under the poverty line. In order to conquer the impoverishment of citizens, the government has decided to impose luxury consumption tax upon the rich and constantly enhance the lowest wage and welfare standard according to the price index. The government set up a system to redistribute money through Moscow to support poorer regions. Although net redistribution accounts for only 1 percent of GDP, it arouses considerable conflict. There are only 10 “donor” regions— that is, regions that contribute more to the federal budget than they receive from it –and they are unhappy that their payments make up more than half the federal budget. Some regions pursue policies of “glocalization” by establishing direct links with foreign partners, which often makes them more dependent on international markets than on decrees signed in Moscow. But one should also bear in mind that Russia’s real economic course is strongly influenced by businesspeople who are accustomed to lobbying, corruption, and paternalism. Influential industrial groups want the government to protect them from rival foreign investments by allowing only selected “friendly” companies to operate in Russia (the stance labeled “hammerization” after U.S. oil tycoon Armand Hmmer’s strategy of relying on his friendships with Kremlin leaders to make business deals in the former Soviet Union). So Putin’s policy must be pragmatic in responding to various challenges and vested interests. Nonetheless, it is likely, though not inevitable, that his economic policy will have a liberal bias, because the government currently controls a very small share of the national economy. Federal budget revenues in 1999 were only about 14 percent of GDP, and those of all levels of government combined were only 36 percent of GDP. Existing government financial and economic institutions lack the power and the resources to intervene effectively in the Russian economy, so it will be difficult for the government to be an active player in Russian markets in the years to come. The first few months of Putin’s rule show that he is quite serious about the comprehensive modernization of Russia. If her continues to pursue this objective, his economic achievements will depend on progress being made in four areas: bringing down foreign debt, creating a market-friendly environment, restructuring the real sector, and bringing order to economic federalism. After several months’ reform, Russia’s economy has abundant natural resources, apparent technical advantages and fine economical foundations, it will have a brilliant future with an effective macroscopic policy and social stabilization. §3. The Future of Putin’s modernizing Policy Putin has already shown himself to be a resolute and efficient leader. The economic problems he faces are very serious, However. It will be difficult to deliver Russia quickly from foreign indebtedness. Debts will press on the economy throughout Putin’s rule, although the government can ease this burden somewhat if it comes to an agreement with creditors. In any case, paying Russia’s debts may entail austerity measures, and living standards are not going to improve. The money flowing into the country now, following political and financial stabilization will be spent on technological modernization. But prospects in other economic fields are less gloomy. Putin has sufficient power to carry out badly needed reforms. Muddy depends on whether he will persist in seeking profound changes in economic institutions despite the reluctance of Russian businesspeople to adjust to a liberal economy and competitive markets. Still, if a pro-market policy is pursued, Russia can enjoy sustained growth. The most plausible economic growth projections based on this assumption, calculated by the CSR, are in the range of improvement in Russia’s international positions, because the world economy is expected to grow at almost the same rate. Even if a pro-market strategy is pursued, Russia will not be able to meet the modernization breakthrough. Ⅳ.Problems in the Real Sector Putin will need to force companies to undertake “adjustment with restructuring.” Companies should be pressed to separate into viable and nonviable divisions and to sell off the latter, thereby reducing overemployment. By now, companies have stopped providing social safety nets for their equipment has been used for an average of 16 years and has depreciated to only 30 percent of its original value. The government has been unable to finance modernization (companies have enjoyed tacit subsidies, however, because the government did not press them to pay their taxes), so companies must rely primarily on their own resources and private loans. The government must help companies get rid of arrears that arose from a discrepancy between a restrictive macroeconomic policy and a soft microeconomic policy that has tolerated tax arrears and interenterprise debts, and from the government’s failure to meet its commitments. The first step should be arranging mutual settlements between companies. But this must be followed by development and implementation of a consistent policy of gradually strengthening budget constraints in various types of settlements, including payments for energy supplies, interenterprise payments, and tax payments. Chapter5 Prospects and Suggestions for Sino-Russian Economic and Trade Relationship People may care about the prospect of Sino-Russian economic and trade relationship very much after reading the previous chapters. Here, first, let us have a look at the tendency of Russian economic and trade policy, then discuss the prospect of the Sino-Russian Trade. §1.Changes in Russian Foreign Economic and Trade Policy In the recent several years, Russia has adjusted its foreign economic and trade policy continuously. On one hand, the government manages to make its foreign trade adjusting system step closer to the international standard; on the other hand, the government made its foreign trade policy fit the demand of national security more. Especially in Putin’s reform, many new policies and strategies have been made. 1.1 The Open Policy and the struggle for a Favorable International Environment The Open Policy is the basic national policy after Russia’s Independence. Here are some observations on the policy. First, after the disintegration of USSR, Russia got its international position as its legal successor. Second, Russia set up a flourish trade relationship with the countries around. Based on geo-economics, Russia strengthened its international position. Third, in Russian foreign policies, Russia reconsidered its relationship with the eastern and western. 1.2 Improvements in the Investment Environment and Encouragement of Foreign Investment Russian government pays great attention to encourage foreign investment. Now the scale of Russian foreign investment is in a rather low position. The distribution of Russian foreign investment is like this: 1996-1997 Foreign Investment Structure in Russia USD(billion) Ruble(billion) USD(billion) Ruble(billion) Direct Investment 2.09 1793.5 3.897 8310.2 Bond Investment 0.045 425.6 0.342 1952.8 Other Investment 4.37 161.6 6.257 134.4 Source: Economic Status of Russian Society, National Statistics Committee of Russian Federation, Jan 1998, P112 Sector Structure of Foreign Investment in Russia (%) Total Direct Others Total Direct Others Total Direct Others All Foreign Investment 100.0 52.1 47.8 100.0 67.1 31.8 100.0 32.1 67.2 Non-Production Sector 5.7 9.7 1.3 19.6 15.9 27.9 31.4 15.4 39.4 Production Sector 94.3 90.3 98.7 80.4 84.1 72.1 68.6 84.6 60.6 Industry 70.7 52.8 90.4 43.0 37.6 52.9 33.3 59.3 20.5 Agriculture 1.2 1.8 0.5 0.1 0.1 0.1 0.1 0.3 0.0 Building Industry 9.8 16.6 2.4 7.1 10.0 1.2 0.8 1.5 0.5 Transportation 4.1 7.7 0.1 3.7 3.8 3.6 4.0 7.1 2.4 Source: Russian government Economic Information Center, June 1997 The Distribution of Investing Countries The foreign investments in Russia mainly come from USA and European Union countries. According to the investment amount, the first three countries are USA, Britain and Germany. It is estimated that, before the year 2000, Russia intends to attract 20 billion dollars foreign investment per year, including 10 billion direct investment. From 1960’s, USSR began to set up some joint-owned enterprises outside its boundaries. Till the end of 1980’s, joint-owned enterprises came our within the Russian boundaries. Till 1996, 24168 joint-owned enterprises registered within the Russian boundaries. Till Jan1, 1997, all the registered capital of the joint-owned companies in Russia was 239,ooo billion(old) rubles, and 75% is foreign capital. The proportion of Industry Production Made by Joint-Owned Companies in All the Industry Production in Russia (%) Machine Manufacturing and Metal Processing Source: Russian Economy & Life, July 1997, Issue 29 The Sector structure of the Output Value of Joint-Owned & Foreign-Owned Enterprises Department The Number of Joint-Owned and Foreign-Owned Enterprises Value of Output Source: Russian Economy & Life, July 1997, Issue 29 1.4 The Abolition of the Foreign Trade Monopoly and Market Adjustment in Place of administrative Methods Adjusting foreign economic policy and reforming foreign trade system is a most important part in the economic system reforming in Russia. Following the agreement of IMF and the demand of Russia’s WTO bid, from 1996, Russia has gradually decreased its tariff. According to the Standardized Principle of Importing and Exporting Tariff designed in 1995, the highest importing tariff is 30%, and the lowest is 5%. It makes the liberalization of economy come true. 1.5 Measures for Stimulating Exports of State Industrial and High-tech Products After 1991, compared with the period of then USSR, Russia’s proportion in the world trade decreases, and it is less than 1.5% now. However, the foreign trade is still the only department that continues to increase. From 1993-1997, Russian foreign trade increased continuously. It increased 10.8% in 1994, 20% in 1995,15.8% in 1996. Now, the proportion of export in GNP is about 20%. (with foreign countries which are not the members of the CIS in billion US dollars ($)) 1992 1993 1994 1995 1996 1997 1998 1999 Russian Export (F.O.B) 42.4 44.3 49.2 63.7 69.2 68.4 57.3 61.1 Russian Import (C.I.F) 37.0 26.8 28.3 33.2 31.5 38.8 32.3 21.8 Trade Turnover 79.4 71.1 77.5 96.9 100.7 107.2 89.6 82.9 Balance ＋5.4 ＋17.5 ＋20.9 ＋30.5 ＋37.7 ＋29.6 ＋25.0 ＋39.3 Sources: Official Russian State Customs Committee Statistics,1999-2000; “Foreign Trade: Change of Time”, Moscow, 1996 CIS-12 Former USSR Republics: Russia, Ukraine, Belarus, Kazakhstan, Armenia, Georgia, Azerbaijan, Moldova, Uzbekistan, Kirgizstan, Turkmenistan, Tadjikistan In order to exploit the exporting potentiality and improve the export structure, Russian government made some adjustment. In the Outline of Russian Federation’s Export Strategy 1996-2005, it contains the following content: (1). The Structure of Export: From the reality, Russia Government admits that the main export still comes from energy, but emphasize the principle of saving energy. It is believed that, the increase of Russian export mainly lies in the export of machine manufacturing product. (2). The Development Strategy of Export: It particularly emphasize the cooperation with the eastern European countries and the third world countries. (3). The Taxing Policy: The Russian Federation resumes the returning tax system of export (5). Government Advocate the Network Construction: (8). Perfect the Legal Basis of Export On a whole, the changes of Russian foreign trade policy bring about a brand-new prospect of Sino-Russian trade. 2.1 The Goal of Increasing Trade to US$ 20 Billion From the independence of Russia, China keeps a good relationship with Russian government. The good relationship exists in many aspects, such as politics, trade, technology, culture and military. Meanwhile, there are also some problems existing in the development of the good relationship, it mainly dues to the unbalance between the development of political relationship and economic relationship. In order encourage the tow countries’ trade development, the leaders form two countries discussed this problem seriously and raised the goal that the trade sum per year should reach 20 US$. In April, 1996, Russian President Boris Yelsin visited China and said in the journalist conference, “ The two countries unanimously agree that great efforts should be made to encourage the development of bilateral trade, including to increase the present trade sum 5.5 billion US$ to 20 Billion US$.” The Goal of increasing Trade to US$ 20 billion indicates the hope of China and Russia is to let economic relationship keep up with the political relationship. From the present situation, in order to reach the goal of increasing Trade to US$ 20 billion, the two countries still face many difficulties. Although the difficulties still exist, in a long run, the potential development is large and the prospect is broad, and here are some observations: Firstly, tow countries both have the desire to strengthen the trade relationship, and this kind of desire increases through the years. Now, the unbalance between political relationship and trade relationship attracts the great attention of leaders, and to construct a new economic and trade relationship has become the main task in the near future. Secondly, the problems and contradicts exists indicates that, to a reforming countries like China and Russia, the interference of governments is very essential to develop the national economy and foreign trade. As a result, the bilateral trade is under the macro-control of the two governments, and cooperation is mainly between large corporations or administrations of two countries. Thirdly, from the whole, the basis of Sino-Russia trade still lies in the mutual aid and coordinate, especially in the fields like energy, nuclear-electricity, and aeronautics. Meanwhile, the two governments also realize that there are still many new fields for Sino-Russia trade, so some new styles, such as mutual benefit, should be applied to practice. Fourthly, In Feb 1998, the Sino-Russian Regional Cooperation Committee was founded, which set up a solid base to develop Sino-Russian local and border trade. The situations above indicates that, through the efforts made by the two governments, and based on the experience of the past ten years, China and Russia are constructing a new type of trade relationship. The importance of the Sino-Russian trade relationship should be fully realized and understood as a strategic problem. The past bilateral trade relationship should be appropriately estimated and the problem that the unbalance of the political and trade relationship leads to should be paid great attention to. In the nowadays world, the tendency of the world to become a whole is obvious. In such a big tendency, the relationship between countries is even closer, especially the economic and trade relationship. China and Russia are large countries and neighbors, so their bilateral trade has great potentiality. The bilateral trade relationship is very important to China. In the following long period, Chinese national economy will develop very quickly, and it needs large foreign markets. Namely, a quarter of the goods in China should be exported. Russia is a large market with great potentiality, so it is very important to China. The bilateral trade relationship is the same important to Russia. First, China is a large market. Till 2000, Chinese import and export total will reach 400 billion US dollars per year, and the neighbor cannot neglect this large market. Second, if Russia wants to enter the Asian-Pacific region, it should cooperate with the countries in this region, and first it should keep a good relationship with China. 3.2 Some Concrete Problems to Be Solved Though the Sino-Russian trade relationship is more and more prosperous, there still exist many serious problems. These have already been mentioned in the previous chapter, so no more will be discussed here. 3.3 The Correction of Wrong Understanding and the Coordination of Policy Adjustment In the past eight years, the Sino-Russian trade relationship is not that stable, so the correction of wrong understanding and the coordination of the policy adjustment is very important. First, reconsider the Russian market. Now the Russian market changes much compared with the previous years. 1) The violent competition. Many western countries enter the Russian market with their advanced technology, which is a great challenge to China. 2) Russian demand to improve the commodity quality is severe. Now the Russian residents are accustomed to using the foreign products, and they generally require good quality and services. 3) The appearing of two consuming markets. As a result, China should take Russian changes into consideration, and try to do well in the Russian market. Third, the main parts of Sino-Russian trade relationship. In 1988-1993, the bilateral local and border trade is very prosperous, and the border trade is very important to the whole bilateral trade relationship. Many people may think that the trade between local people will play the most important part in the future, however, the main parts of the bilateral trade still exists between the large corporations between China and Russia. As a result, only when the changes above have been fully realized and understood, the bilateral trade relationship between China and Russia can be improved. 3.4 Full Development of Potentials in Bilateral Science and Technical Cooperation Though Russian science and technology decreases greatly since the disruption of the former USSR, there are still vast fields for China and Russia to cooperate and trade. Here are some observations and suggestions. First, have a positive view on the Sino-Russian trade relationship and make its development under the control of the governments. Second, set up some Sino-Russian technology cooperation institution and let them play an important role in the bilateral trade. In a word, as we develop the commodity trade with the Russia, we should still develop the bilateral trade in the fields of technology, services, and international investments, which can help to improve the Sino-Russian Trade level. 3.5 Strengthen the Government’s Role of Participation and Adjustment of Cooperation Because the Sino-Russian Trade is generally in a rather low level compared with the bilateral political relationship, the government’s role is extremely important. A large part of Sino-Russian trade cooperation is between the large corporations or the state-owned corporations, so the government’s control and coordination is extremely important. What’s more, in the military field, there are also good cooperation perspectives, and it also greatly needs government’s participation. Finally, it should be pointed out that though the suggestions of the Sino-Russian Forum may be of great help to improve the bilateral trade between China and Russia, whether they can work or not depends on the governments’ policy. Based on the principle of mutual aid and mutual benefit, the prospect of the Sino-Russian Trade will be much brighter in the future. Bibliography: Source: «中俄贸易关系» 薛君度、陆南泉 主编 中国社会科学出版社出版 www.imf.org www.sino-russia .com www.russiajournal.com www.ru Word Count: 12166
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