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Alexei Maslov: it is not profitable for China to invest in Russia today
A well-known orientalist believes that today China can be enticed to the Far East only by unique proposals
Questions about East Asia - the region that is now being made in the economic development of Russia, and mainly in the rise of the economy of the Far East, correspondent EastRussia asked Alexei Maslov, head of the School of Oriental Studies at the Faculty of World Economy and World Politics of the National Research University "Higher School of Economics" .
- At present, Russian businessmen have a kind of myth about China as a country whose market will “eat” any product, and with which, as a result, you just need to be able to negotiate supplies. Although in reality everything is not so simple. I will even say more: in my personal conviction, the Chinese market today is far from the most profitable in terms of a number of products. Much more profitable markets are Vietnamese, Indonesian, Malaysian, and, one might say, almost all the ASEAN countries. But if we stop at the Chinese market, then only certain types of products have certain prospects.
- Some experts say that China is ready to purchase any products and attaches value only to the price, while others say that China is picky about quality issues. How do you think?
- It should be noted that China is currently quite strong in protecting its market. Therefore, even if this or that country today possesses a product that is profitable for China to purchase, it does not mean that this country will be able to break into the Chinese market with this product. It is important to understand that by now there are already a lot of Western manufacturers in China. In particular, British, American, German. Competition in existing niches, from the supply of food for the domestic market to the production of a car, is very intense. Therefore, an effective way out for a particular country to break into the Chinese market is to offer it some unique products.
"But there are also supplies of traditional products - true, they are small. Can they be built up?
- If we talk about manufacturers operating in large volumes of export goods, the tactics may be approximately as follows. At the very beginning, you should either do it yourself, or order a full-fledged monitoring of the Chinese market for the prospects for the supply of a particular type of product. Further, if the manufacturer is convinced of the demand for this product of his in the Chinese market, he should tackle the issue of properly presenting his product to the Chinese market. Ask a question whether it makes sense to give your product for sale to any trading platform or to sell it yourself. It seems that for this purpose it makes sense for a manufacturer to hire an appropriate specialist - not just a translator, but someone who has all the skills necessary for future negotiations. Further, the manufacturer should not step aside, but completely control the entire process of communication with potential consumers. But that's not all. At some point in China, they understand that one or another imported product from a particular manufacturer is really in demand and its share is growing in the market. And, as a result, they begin to make attempts to bypass and outplay this manufacturer. That is, either they themselves begin to produce its products, or they try to enter its competitors. In this situation, the manufacturer has no choice but to defend its place in the Chinese market. It should be noted that the scheme I voiced really works, since I know examples when, as a result, manufacturers entered the Chinese market and fully worked on it for 2-3 years. But this requires much more effort and preparation than just transferring your goods to some trading platform.
In addition, it should be said that in order to improve the situation in Russian exports to China, it is necessary that not just separate trading floors function in Russia, but trading houses that would include such sites. I am talking about this kind of trading houses, similar to those at the expense of which back in the XVIII-XIX centuries. Russia went to the East - these are, as we would say today, powerful corporations. Their representatives were more than effective, as they personally knew all the people needed for successful cooperation in the region. Currently, such corporations can provide expert services and act as lobbyists for the products of Russian manufacturers and exporters to Asian countries. This is more than reasonable, since at present this is how they successfully export products to the countries of the East, for example, the UK and the USA.
- And how effective are modern Russian electronic trading platforms in trade with the countries of Northeast Asia?
- We must clearly understand that the results are different for all of them - due to the fact that some of them are promoted better, others - worse. But in my opinion, so far not all of them are very successful, since they have not yet reached the level at which such platforms usually work within China or in Asia in general. It has its own subtleties that you need to know, from attracting visitors to your site to creating special applications for purchases from smartphones. But in general, this is a very promising direction, given that both wholesale and retail Asian trade is becoming more and more "electronic".
- How in general can you today describe the interaction of Russia with the countries of the East?
- The problem is that any economic interaction is somehow measured in absolute numbers - in particular, the volume of investments, supplies, and trade. It is in them, and not, for example, in the number of various kinds of agreements. And if you take the numbers, it turns out that they are actually not great. And even more than that, the level of economic cooperation with Asia is falling in Russia. For example, with the same China, we are now witnessing a drop in the level of trade volumes. At the same time, we see a noticeable increase in political and cultural ties with the countries of the East - mainly with China, and recently even with Japan, but so far this has not led to a serious increase in Russia's economic interaction with them. We are now talking not about the number of negotiations or preliminary agreements, but about projects already being implemented.
Such a situation in Russia - when speaking about the interaction with a particular country, is accounted for by the results of negotiations, and not by the results of the execution of projects - in my opinion, is catastrophic. For example, if we talk about cooperation with China, then of all the proposals sounded in reality, only about 10% is realized! This fact testifies to the real state of affairs in the development of cooperation with China. In general, negotiations with Asian partners take a lot of time, they also pass through the stages of mutual disappointment and cooling or a drastic change in the substance of the agreements - this is a normal situation, so it is hardly worth talking about preliminary agreements or protocols of intentions.
- One of your statements was that China is with no one. He acts as it is profitable for him to act in a particular situation. In your opinion, how is it profitable for him to deal with the Russian Far East today?
- It makes sense to talk here not about China's interest in the Far East, but about Russia's interest in general. China is not interested in reviving our industry, no matter how much we ourselves are interested in it. This is not China's task, it is solving its own problems, including eliminating the imbalances in its economy, and at the current stage our interests coincide on a number of issues. China is primarily interested in imports from Russia - and not so much processed products as directly Russian resources themselves. The main “raw material” interest of China is our oil and gas, since the energy policy is at the forefront of China today. Moreover, oil and gas at a cheap price. At the same time, it is interesting for China to be present not so much in the purchase of resources as in their production and even transportation. And this interest of China is quite natural - thus, it wants to be able to control all processes in which Russian resources are involved in one way or another. In addition, China is also showing interest in agricultural products, food processing, consumer goods - all this is due to the needs of its large population.
Even more than in imports from Russia, China is interested in supplying its own products to the Russian market. And also in the joint operation of the Russian infrastructure for the supply of their goods. Thus, the interests of Russia and China within the framework of cooperation can substantially coincide.
- And what about the investment interest? Is not Chinese capital interested in making money in Russia?
- There is real competition for Chinese investments in the world, so Russia in this case is also in difficult conditions, given the economic decline, the lack of obvious financial returns from many projects, and often an extremely unsuccessful presentation of these projects for Chinese partners. It is unprofitable for China today to invest in a number of Russian projects, and we still have to prove that a number of projects can have obvious profits for the Chinese side. There are many other countries in the world where it is much more profitable for Chinese business to invest. Ordinary Chinese business is more than interested in investing, for example, in Indonesia, Malaysia, Vietnam, USA. To such an extent that it even fights for the possibility of being present in these markets.
- Today - not profitable. And tomorrow"?
- In the future, Russia could well significantly increase its importance for China's foreign relations. China today is in a rather strong disagreement with such large trading partners as Japan or the United States. But it should be clearly understood that China's interest in Russia can only increase if we offer it unique conditions and projects. By the way, Russia has already offered a lot of this to China - this is participation in the exploitation of priority development areas in the Far East, which provide for significant tax benefits and the possibility of registering under a simplified scheme.But it goes without saying that unique proposals from Russia should go along with elimination of infrastructure problems. In many places, there is simply no cross-border infrastructure - for example, today it is completely unacceptable that a bridge is just being built between Blagoveshchensk and Heihe - cities whose residents are actively involved in cross-border trade. In the meantime, in winter, goods are transported to China only with the help of buses on the frozen river, or boats of the Puma type, which are packed to overflowing with people.
- You mentioned the disagreements between China and Japan and the United States. How much can you expect that it is the world political alignment that will lead to success in the field of economic relations?
- What international projects of Russia and China could you mention?
- For example, a project providing for the production of cables by RusAL for China, as well as grain terminals under construction in Zabaikalsk for the purpose of supplying China. The implementation of a number of joint investment projects with China has begun, most of which are large-scale, that is, they are not being implemented in one year. But here you need to make a reservation right away - in order for these investment projects to be properly promoted, to receive financial and image investors, a certain time is needed - usually 5-7 years and sometimes much more. China is quite capable of waiting this time. Does Russia have it? Therefore, in my opinion, if you still focus on China, then small and medium-sized Russian businesses should be encouraged to develop cooperation with it. And not only to stimulate, but also to explain all the subtleties "from and to", how to work with China, what difficulties there are, how to overcome them. Indeed, it is this practice - the maximum stimulation and support of cooperation through contacts of small and medium-sized businesses - that has been introduced in other countries.
- At present, according to experts, politics outstrips the economy in cooperation not only with China, but also with the ASEAN countries. What is the reason for this imbalance?
- Yes, in the case of the ASEAN countries, we have to talk about the same thing. That is, that economic cooperation with them lags far behind political cooperation. And this situation is explained very simply. Russia is very fond of playing politics and often does it quite successfully, and it does not play well in the international economy at the same time. This model of relations has remained with Russia since the times of the Soviet past, when public handshakes and various kinds of manifestations and symbols of friendship were given much more importance than economic benefits.
- But, nevertheless, at least with any of the countries of Asia at present, Russia has, if not an advance, then at least a correspondence of the level of economic cooperation with the level of political?
- Russia does not generally match the level of economic cooperation with the level of political interaction with this macro-region. Of course, every region or country has its own reasons for this. In particular, speaking about interaction with China, this is explained by the fact that Russia, conducting an active dialogue with it and having a very high level of mutual trust, still follows the economic policy that it adhered to back in the 90s, that is, it relies on mainly for the supply of oil, gas and other natural resources. The persistence of such a situation even today is understandable, since in order to pursue a different economic policy in relations with China, and to restructure trade, which is so necessary in the changed conditions, Russia did not manage to train either new relevant specialists or properly restructure its business. Today, much is being done in this direction, and Russia is entering China with new investment projects, technological cooperation, proposals for the supply of agricultural products, but this is being done with some delay. If we talk about Japan, the lag of economic cooperation from the level of interest of the two countries to each other is connected with the well-known territorial issue. As for the ASEAN countries, the need to reach a certain level in cooperation with them, in principle, by private business is not fully understood today.
- Is it possible today to make the Russian Far East as attractive to China as it is for the British and American economies? What "pluses" can attract China to the Far East today?
- With all the desire to achieve such a goal immediately impossible. For the simple reason that the economies of the Far East and the economies of Great Britain and the USA are completely different economic models. In Western countries, China attracts primarily the capacity and stability of the market. Moreover, he has a similar interest in a number of other countries - for example, Argentina, Canada. Judge for yourself - for example, the United Kingdom and Argentina give China an entirely important sector of its economy, like the nuclear industry.
Russia in the Far East, of course, does not have the largest market capacity, but at the same time, our production is possibly cheaper than in countries with more capacious markets. True, we also have competitors due to the low cost of production. This is, for example, Vietnam or Indonesia. That is, if you want to engage in cheap production, China, where the cost of its own production has risen sharply, there is plenty to choose from. Therefore, Russia has no choice but to offer China something more interesting than just cheap production. For example, full exemption from taxation for a certain period of time, guarantees of ensuring conditions for transparent business in Russia and the absence of government pressure within this framework, interesting infrastructure projects. Moreover, the latter may be attractive to Russia not only for China, but also for Korea and other Asian countries. Only in this case - if Russia offers China not only cheap production, but also an expanded package of services, the Far East will take its place under the sun - that is, it will participate in the Asian division of labor.
- Reset taxes? What then will remain?
- It should be clearly understood that any production is the core, the development of which automatically develops the surrounding territory - the effect of multiplication arises. Manufacturing inevitably entails staff training in accordance with new technologies. Thus, local specialized technical schools get an impetus, and regional universities are developing new profile programs. At the same time, it goes without saying that the corresponding infrastructure is developing around the new production facilities - in particular, there are many shops, a certain number of schools. As a result, the service sector also develops on the territory of the production location. But the process does not end there either - the development of the territory, which leads to the appearance of this or that production on it, makes it attractive for migrants. As a result, an influx of population begins here, not only the quantitative composition of the population is gradually changing, but the quality of human resources also increases. Judge for yourself what a powerful impetus to the Far East will be given by the development of its production by attracting investments from East Asian countries.
- And what assessment can you give today to all the policies of the Ministry of the East Development of Russia, which it conducts in order to develop the Far East?
- The significance of the Ministry for the Development of the Russian Far East cannot be belittled today - it does a great job. And in his activities, he sees a lot of business activity, including personal, as well as a real interest in solving the tasks that are assigned to him. But at the same time, one can clearly see some ineptitude in working with East Asia, failure to take into account the peculiarities of the national system of business and entrepreneurship in Asia. Despite the active promotion of the idea of TORs, this system in China is known primarily at the level of government officials directly involved in negotiations and large corporations. That is, to East Asia, information about innovations, and in general about the Far East, is not sufficiently communicated. While it is at the maximum, and with the correct delivery of information, and it is worth emphasizing.
Let me give an example - in China, the most popular social networks in Russia are blocked, just like blocked by such a powerful Internet search engine as Google. And, as a result, there is very little reliable and comprehensive information on business opportunities that are opening in Russia today, which already has a certain effect on Russia's perception in China, for this is the reason why in a number of Chinese blogs there are various allegations that, That it is completely incomprehensible what Russia is today and how to behave with it. Although it is the Chinese social networks that can gradually give impetus to the awakening of mass interest in investment interaction with Russia.
Another point that today may interfere with the development of cooperation between Russia and the countries of East Asia is that we lack not so much knowledge of their languages as understanding of the specifics of everyday communication to fully negotiate with China and other countries of East and Southeast Asia. business culture, traditions in building the negotiation process and creating acceptable business models. Often, information sheets replace full-fledged macroeconomic analysis and everyday business communication skills in processes in Asia, and the place of knowledge about models and forms of business activity in Asia is taken over by ingenious but ineffective political constructs. But it is the deep practical knowledge of the extreme that is needed today - only then will you be able to understand “from the inside” how to work with Asian countries.