The panel was pretty upbeat on the growing links between Russia and China.
James Kynge: Mr Kynge spoke of the complimentary nature of opposites – China is densely populated but lacking resources, while Russia is sparsely populated and rich in resources. Relations between the two countries have often diverged. Are they on the brink of a new era of increased cooperation, or will they be driven apart by historic forces?
Fan Gang: China is not a bubble for a number of reasons, he said. Per capita income, industrialization and urbanization are still low. Demand remains high as people move into the cities, and the labor supply will remain huge for 20-30 years. Does China invest too much? No, because of the high savings rate. Most investment is in infrastructure, so it is not wasted. Moreover, banks are conservative and NPLs are low. There may be mini-bubbles, but the government has the ability to clean them up. China has another 20 years of 7% growth to come. The fact that global growth comes from the East means that Russia will need to shift there.
Fang Xinghai: There are many similarities, as both countries are large and need modernization. China needs a leading financial center, and this will be Shanghai, where the market cap is $3 trln and daily trading is $20 bln, and capital raised over the last year has been $40 bln. Commodities are also a major component, and this is the world’s fourth largest stock market. Shanghai would welcome Russian banks, and investment banks and would welcome Russian companies to list by year end. The potential is huge for Chinese capital to invest in Russia. More contacts will breed more links.
Yasheng Huang: China advertises heavy machinery and Russia advertises consumer goods, and this illustrates a major difference. China will move to a consumption-based model eventually. China is a rising producer of scientific papers, while Russia is declining. If China moves from commodity-intensive investment to consumption-driven demand, it would need fewer raw materials, which would be damaging for Russia. Russia needs to consider its future as a commodity-centric country.
Lanxin Xiang: This is the high point of the relationship between Russia and China. China should not underestimate Russia as the US did. It is unclear if Russia is really moving to the East. China has no plans for any war with Russia. China had a bad experience with the Soviet Union, but not with Russia. Russia has lost global power as the star of China has risen. China will avoid the G2 trap of being tied to the US. The resolution of the border dispute was rapid and impressive. There is no strategic conflict. Russia understands China better than the West does and recognizes its historic successes.
Bobo Lo: The relationship is indeed the best it has ever been. Massive increases in links have been seen. However, this is a relationship of convenience, not a strategic partnership. They have different views and perspectives. Russia envies China’s success and sees it as a strategic threat and a threat to it in Central Asia and the Far East. The Chinese see Russia as a lazy commodity producer unable to reinvent itself as a great power. The latest crisis showed China as pivotal to the global recovery but Russia has not been relevant. Russia’s interests are all aligned to the West, and China is a supplement, not an alternative. For China, the US is the indispensable partner, not Russia. Each country attaches more importance to its relations with the West. Going forward, the relationship is asymmetrical. Looking forward, China will become more contemptuous of Russia as Russia becomes more nervous of China. China worries that Russia is using it only as a stick to beat the West and annoying it by playing geopolitical games with, for example, the ESPO pipeline. To sidestep this issue, China has shifted its focus to Central Asia.
Sergey Tsyplakov: The crisis has driven the two countries together. Even during the crisis, Russia-China trade volumes grew. Cooperation can and will expand between the two. An exit from stimulus will be hard. China is Russia’s largest trade partner, accounting for 12% of exported Russian goods. Development of the Far East is dependent on Chinese goods and capital. The currents of history are driving the two countries together.