Forbes: comment by Liang Xinjun, CEO at Fosun Group
Sunday, 12 October
Li told the Xinhua news agency today that China and Russia had a new and “comprehensive strategic partnership of coordination”.
“I’m looking forward to deepening the traditional friendship between China and Russia, and expanding our pragmatic cooperation, so as to achieve greater advancement in the development of bilateral ties,” Li said, doing his best impersonation of a press release.
Regardless of the political niceties and talking points, China and Russia really have been moving closer. Russian president Vladimir Putin said that as Europe diversifies away from Russian oil and gas, Russia too must diversify away from Europe and the natural pick is China. Some 50 agreements and memorandums of understanding are reported to be signed during the trip, including in areas related to high-speed transit and finance.
For Russia, finance agreements is at least as important as energy deals.
Russia could use the help of Chinese lending institutions. The Russian economy was banned from tapping U.S. and European loans of over 90 days. The Russian economy has been sanctioned since March, following the annexation of the Crimean peninsula in the Black Sea, a former piece of strategic Ukrainian real estate. Russia and Ukraine have been locking horns since late last year, but violence between the Ukrainian military and ethnic Russians erupted in Crimea in March and later spread to the oblasts of Donetsk and Luhansk in Eastern Ukraine. The West blames Russia for failing to quell the civil war there.
For its own part, China is seeking to diversify its sources of energy and Russia is the cheapest play around. However, billions are needed in pipeline and other logistics to deliver Russian hydrocarbons to mainland China. The two countries are likely to be in the early innings of energy integration. The relationship is important to Russia. In the not-so-distant future, Europe will likely have the infrastructure to handle imports of American liquefied natural gas. China likes things cheaper and would prefer to have its supply come from Russia. Both markets will diversify, with Russia continuing to be a key player in Europe and a growing supplier for China.
In May, China and Russia signed a 30-year, $400 billion deal to jointly produce and deliver around 38 billion cubic meters of natural gas per year to China.
Trade between China and Russia was $89.2 billion last year and plans are in place to raise that to $100 billion by 2015 and $200 billion by 2020, all thanks to oil and gas.
“There are a lot of opportunities for the Chinese in Russia, but also for Russian investors in China,” says Liang Xinjun, CEO of the Fosun Group, a Shanghai based investment firm. “Capital markets are going to open in China and change the nature of investing. Russians should come to China, too,” he said at VTB Capital’s Russia Calling investment conference in Moscow on Oct. 2.
Before Russia, Li visited Germany, the first leg on a three-nation tour which will also take him to Italy before flying back to Beijing.