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Neighborhood Affair

The topic of Chinese investments in the Far East is actively discussed by experts

Declared in early April, the news of China's intention - with the support of the Ministry of Economic Development of Russia - to invest in the creation of its industrial production in the Russian Far East (in the spheres of construction industry, metallurgy, power engineering, mechanical engineering, shipbuilding, chemical, textile and cement industries, telecommunications, agriculture ) Sharply divided the Russian expert community into those who are for and against those who oppose this initiative. Discussion, and if you like - polemical (that is, excluding any search for points of contact with the opinion of the enemy), the fuss also poured out onto the EastRussia site.

Neighborhood Affair

Each side puts forward - and very convincing - arguments in support of or against the possible presence of Chinese industrial production on Russian territory. As might be expected, the opponents of this deployment, mainly appeal to the inevitability of dangerous environmental consequences for our country.

Speech - solely about investing in the creation of new modern enterprises

Alexander Galushka, Minister of the Russian Federation for the Development of the Far East: "The conversation does not in any way refer to the transfer of old manufactures from Chinese territory. Speech is solely about investing in the creation of new modern enterprises.

Let's figure this out. For the sake of objectivity, I want to note that China offered nothing. This is the initiative of this country - to build enterprises abroad - and China will build them where it will receive adequate conditions - in Asia, in America or in Europe. This is a global investment, and there is a serious competition of whole countries for getting them.

We strive to win in the competition for investment. At the same time, we do not offer anything to Chinese investors that would be different from a similar offer to Korean, Japanese, Australian, Singaporean, the minister said. “Competitive investment conditions have been formed in the Russian Far East, and we are seeing demand for these conditions on the part of Russian and foreign business. Including - Chinese. Our country is interested in the arrival of high-quality investors who are ready to build new modern enterprises, create jobs for Russians, pay taxes, comply with Russian legislation, including the environmental one ”(quoted in the Rossiyskaya Gazeta newspaper).

Domestic safety standards are stricter than Chinese ones

Alexey Gordeychik, lawyer, managing director of Gordeychik & Partners Group of companies: "Today, due to incomparable volumes of economic potential (not in favor of Russia), trade with the Russian Federation is a matter of concern not for the central authorities of the PRC, or even for provincial governors, but for large cities in China. What can interest our eastern neighbor, in addition to land and its fossils? After all, the price of electric energy is higher for us than for its neighbors exporting it. The potential cost of production for us is higher even with the application of benefits and preferences established in the TOP, even taking into account the reduction in the cost of labor due to the devaluation of the ruble ... In addition, there are questions to the qualification of our workforce.

Agriculture? I think that even from distant Beijing, where, as we know, "gloomy weather", our Far Eastern, mainly marshlands, have long ceased imagining the endless Russian black soil to the Chinese.

Infrastructure is very important for the development of any industrial production. But in this aspect, the Chinese have long been ahead of us.

Now the idea that export of its manufactures to Russia is needed by the Celestial Empire is being actively promoted to carry over to our sparsely populated territory especially dangerous ones, including chemical manufactures, in which there are often accidents in the PRC. But there are also questions. After all, domestic security standards in this issue are more strict than Chinese ones. Or the calculation that the traditional severity of Russian laws will be compensated by the usual unavailability of their execution? .. ".

Residents of the Amur Region, Primorsky and Khabarovsk Territories will be able to work in modern high-tech enterprises.

Margarita Fedotova, First Vice President of the Russian-Asian Union of Industrialists and Entrepreneurs (RASPP), member of the Youth Public Chamber of the Russian Federation: “The Russian Federation has been building relations with China for quite a long time. Including more than once raised the issue of stimulating the flow of Chinese investment in the economy of our country. Today, in each subject of the Russian Federation an institute for work with investors has been created - a development corporation, an investment development agency of a particular region. All of them tacitly compete with each other and fight for the investor. One of the most important tasks of these organizations is attracting investments and working with the investor through the “one-stop shop” system. The initiative of the Ministry of the East Development can get practical implementation and, thus, the plan for the development of the region will be implemented. The capabilities and potential of the Russian Far East were demonstrated in the framework of the Eastern Economic Forum in September 2015, and this apparently led to the beginning of a productive dialogue.

I believe that when developing transparent rules of cooperation and proper control by the regional authorities of observing environmental norms, quoting Chinese labor in the Far East, the export of industrial enterprises from China will undoubtedly have a positive impact on the development of the regional economy and the living standards of the local population. Residents of the Amur Region, Primorsky, Khabarovsk Territory will be able to work in modern high-tech enterprises, move up the career ladder in large companies, which is certainly more promising than working in small Chinese shops opened on the territory of the Russian Far East today. For example, in the 70-xx years 20 century with the participation of the Italian concern Fiat was built car factory in Togliatti, which today works and delivers cars to the Russian car market. "

And how much does this benefit the Chinese business?

Elena Berezhnova, Candidate of Science (Economics), Associate Professor, Primorsky Branch, Russian Academy of Sciences In general, advocates the activation of economic cooperation with China, but with a thorough assessment of the social component and a miscalculation of all possible risks. In particular, the risk of abolishing regional industry and the risk of notorious demographic expansion: "Due to the fact that the PRC invites Russia to export production facilities in 12 priority activities, a number of issues arise, the solution of which may endanger the existence of the remnants of the above activities on the Russian Far East.

In addition, these activities require significant investments in infrastructure facilities - the provision of water and electricity. How willing are Chinese partners to incur costs in related industries? Despite the statements of the Chinese partners about the transfer to the territory of the Far East of enterprises "subject to mandatory compliance" with Russian environmental requirements, the question arises - how much does it benefit Chinese business?

At the same time, the competitiveness of Chinese goods in poorly developed market markets (to which, unfortunately, at the moment, Russia belongs) is caused by a rather low price and, accordingly, not very high quality. If all the requirements of the Russian legislation in the field of ecology are observed, (after all, in pursuit of rapid economic growth, China has significantly harmed its environment) labor and administrative law, cost reduction is possible in large part due to cheap labor.

If the Chinese partners hire their workers from the Far East for their production (which is unlikely, since certain specialists may be absent, and if one learns Russian workers - this will lead to an increase in costs), one can speak about the socioeconomic effect of the development of the territories of the Far East, Otherwise, it is indirectly the expansion of the PRC people, as workers will have to transport their families, due to the fact that these investment projects are quite long-term Tion.

In turn, given the low density of the Russian population in the Far East, this may lead to a national imbalance ... ”. 

Exotic fears and conspiracy theories I would suggest discarding

Ashot Marian, Senior Managing Director for Investment, RUSNANO: "Already there is a rich experience of localization of production with Chinese partners in the Far East, a priority for the development of industry, one of which is the leading contractor in the energy market, Amur Sirius.

Together with it, as well as the Chinese Zhong Rong Trust (under the management of almost 200 billion US dollars), we are creating a joint private equity fund to create new productions in the region.

Only the first closure of the fund is planned at the amount of USD 500 million. I would suggest dropping exotic fears and conspiracy theories. The world's economies are doing their best to attract foreign investors. And for control there is a mechanism of state regulation ”.

Seven years will spend, spit and go ...

Representative of the regional logistics business, General Director of DV Invest, Chairman of the Public Expert Council (ECO) on economic policy of the Primorsky Territory Denis Sarana In principle, not against imports to the Far East of Chinese production. But the businessman doubts that the domestic bureaucratic machine will allow any effective development of this undertaking: "I think that further talks will not work. Let first the Chinese comrades try to get land, make a project, carry out its expertise and get a building permit. Seven years will be spent, spit and go away ... ". 

China has been practicing successfully for a couple of decades in setting up joint ventures around the world

Vladimir Rozhankovsky, LIFA, director of the analytical department of IC Okay Broker: "I think that government representatives made a correct and timely comment on this issue: Chinese companies must comply with our environmental standards on the territory of the Russian Federation. Most likely, this particular nuance can cause the greatest divergence of views between the Russian and Chinese sides, since it is unlikely that distribution issues profits and taxation will cause any difficulties. In the end, China has been practicing joint ventures around the world for a couple of decades. The initiative is positive: let something better be in this region than nothing. "

Today, China has many problems ...

Nikolai Matvienko, Adviser to the Vice-President of the Russian Builders Alliance in the Far Eastern Federal District: “China has a lot of problems these days. Slowdown in production, drop in domestic demand, increased competition in foreign markets are only the most noticeable of them. And in a number of cases, the solution to these problems directly depends on whether the Chinese economy is able to get rid of the ballast of old enterprises, burdened with heavy, slowly turning and steadily decaying assets, laden with debts and limited in development by the natural limits of their markets, in time and with little blood.

After all, if not - then they will just have to explode, as has already happened with numerous cement plants. They immediately became unnecessary after the collapse of the notorious Chinese "bubble" in the real estate market in 2013-th year. Then only in the province of Hebei in just one day closed immediately 17 cement plants. In Shijiazhuang, 35 cement plants have been shut down over the past few months.

But after a series of meetings with representatives of Russian Minvostokrazvitiya, the Chinese people began to get a hope that there are still benevolent people in the world to whom they can export their scrap, saving on dynamite and gaining some financial profit. 

That is, we are not talking about "investing" in the Russian economy, "transferring technologies", but "exporting" - selling for the money of an importer an industrial second-hand that nobody needs. Where does Russia get the money - it's not even decent to ask. But the list of “priority sectors” speaks for itself: these are exactly the sectors in which China is now experiencing an oversupply of capacity.

Let's assume - we will buy them. We'll get deeper into debt, lower the ruble rate even lower, save on schools, hospitals and pensions ... But what's next? Where do we sell the products of these plants? Came to yourself? So in fact, we do not have any large-scale construction projects that would need the same cement, because the country now has no money. Export to third countries? But it could be done by the Chinese themselves, from their factories, if there was an international demand for their products.

Export to China? As an option - you can. Although in order to pay "in kind" of the same loans that had previously been in China to take in order to buy from them these plants. With the whole comic of this scheme, in the practice of international trade it is quite popular, provided, of course, that the payback period of such projects does not exceed the period of wear of the factories themselves. And all would be well, but here's the catch: the duty to pay debts will remain with Russia, and the right to regulate the price of finished products, obviously - in China. In this scenario, the payback period for the Russian side goes to plus infinity ... ". 

"Will new enterprises comply with environmental safety standards, depends on us"

Sergey Chernin, Chairman of the Commission of the Public Chamber of the Russian Federation on Ecology and Environmental Protection: “We must understand very well that the current level of development of treatment facilities, production processes and equipment allows us to forget about such a concept as“ dirty ”production. There are dozens of different catalysts and innovative technologies that make it possible not only to purify industrial emissions, bringing them to an environmentally acceptable state, but also to use substances obtained from industrial wastewaters and exhaust emissions in new technological cycles. By-products of some enterprises are raw materials, the basis for the production of useful products in others. And it is necessary now, in parallel with the design of new production facilities, to think about where and how this raw material will be used.

Whether the new enterprises will comply with environmental safety standards depends on us: on the fulfillment of the requirements of the current legislation, the work of regulatory bodies and public attention. This moment must be under the strictest control!

The construction of new enterprises in itself means the strengthening of the industrial potential of Russia, the localization of production, the creation of new jobs and the development of territories. This process can become the basis for the economic prosperity of the Far East, but it should not undermine the ecology of the region. Public control is necessary at each stage of these projects' implementation.

ER Help

Public discussion on the issue of Chinese enterprises in the Far East began after the publication of the news of the Russian Ministry of Eastern Development 5 on April about negotiations between Rustam Makarov, Director of the Department of Ministry of Eastern Europe and Zhou Jianpin, director of the Industry Development Department of the Northeastern Provinces of China.

The agreement on cooperation between agencies was reached earlier during the visit of the Minister of the Russian Federation for the Development of the Far East Alexander Galushka to Beijing and is fixed in the Memorandum of Understanding on strengthening Russian-Chinese regional, industrial and investment cooperation in the Far East. It is connected with the initiative of the People's Republic of China to export production capacities in 12 priority sectors of the economy: construction industry, metallurgy, power engineering, mechanical engineering, shipbuilding, chemical industry, textile industry, cement industry, telecommunications and agriculture. We are talking about the possible transfer of Chinese enterprises to the territory of the Far East, taking into account the mandatory compliance with the environmental requirements established in Russia.

As noted by Zhou Jianping, the Chinese side is ready to actively involve private and state companies in the implementation of such projects. For his part, Rustam Makarov, the representative of the Ministry of Regional Development, confirmed the readiness of the Russian side for cooperation, stressing that the new enterprises created within the territories of advanced development and the Free Port of Vladivostok receive substantial tax benefits and administrative preferences.

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