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The difficulties of the Chinese transfer

Business of China is almost ready to create production in Russia

Pay staff in the Russian Far East can be by 20% less than in neighboring China, which prompts business from the PRC to postpone production and begin creating joint Russian-Chinese products for third countries. However, there are still many obstacles to the development of the joint business, noted at the eighth Russian-Chinese business forum BUSINESS WITH CHINA: New Time Strategies (BWC), which was held in Moscow 30-31 May.

The difficulties of the Chinese transfer
The trend of the century

A distinctive feature of BWC-2017 was that the forum for the first time in eight years of its existence was held as part of the 2-th national exhibition of quality consumer goods from China - China Commodity Fair-2017. The products of 400 companies from the 12 provinces of the PRC were represented on an area of ​​10 thousand square meters in the Central Exhibition Complex "Expocentre". Children's toys, electrical appliances, household and office equipment, dishes, kitchen utensils, clothing, camping equipment, gardening equipment and much more needed for everyday life, work and leisure, was pleasing to the eyes of numerous Russian visitors. China has once again proved to be the factory of the world. And at the plenary meeting of the forum, which took place a few steps from the exhibition, an interesting thought was voiced: for the Russian Federation and the PRC, it was time to produce joint products intended for third countries, and on the territory of Russia.

“Today, direct trade between our countries is no longer enough. She does not meet the requirements of the time. In addition to the fact that Russia began to supply its products to the Chinese market, today our enterprises are already operating in the PRC. Most of them are employed in the manufacturing industry and are concentrated in the northeast of the country, where the border with the Russian Primorye and Amur regions passes. And now negotiations are underway at the level of the governments of our states so that Russia and China jointly produce goods for third countries. And not only in the PRC, but also in our country. Chinese business is very interested in this. The fact is that today the level of wages in the Russian Far East is 20% lower than in China. In recent years, the cost of labor in China has increased significantly - the average salary in the thirty largest industrial cities of the PRC is at least $ 1500 per month. This seriously increases the costs of business: China in this sense is already catching up with Japan and South Korea. In addition, in Russia there is less income tax and a lower overall fiscal burden on individual entrepreneurs. Therefore, it is profitable for Chinese business, for the sake of reducing costs, to transfer the production base to Russia, ”said Alexey Maslov, professor at the Faculty of World Economy and World Politics, head of the School of Oriental Studies at the Higher School of Economics.

Moreover, according to the scientist's conclusions, there are three factors that impede such cooperation. One of them is China's desire to control those sectors of the economy of different countries in which it is ready to invest in the framework of the implementation of its globalization policy (transcontinental project "One Belt - One Road"), and Russia is not interested in allowing such supervision of its economy. Especially considering the imbalance in trade relations between the two countries: China is the main foreign trade partner of the Russian Federation, and it takes only 14-15th place in the list of its partners in terms of mutual export-import.

Another factor is the difference between the cultural codes of representatives of the Russian and Chinese civilizations. It leads to the fact that potential partners interpret the content of the same concepts in different ways, misinterpret each other's verbal and non-verbal communication. The third factor follows from the second and is related to the issue of trust. Business counterparties on both sides are often inclined to suspect the other side of all kinds of disregard for their interests.

Intentions and Reality
Honorary participant of the BWC-2017 forum on the Chinese side - EPINDUO chairman of the board (the largest Internet trading platform established in China with the participation of the Center for Cooperation with Russia in March of 2016 with the aim of activating the sale of Russian goods in China) Yui Wei - named two more The obstacles hindering, in his opinion, the development of the Russian-Chinese business partnership: "The sluggish promotion of Russian goods by your business and the government to our market, as well as the ignoring by many Russian entrepreneurs, traders, whales Ysky realities. For example, the use of packaging that is not familiar to the Chinese consumer and does not ensure the proper preservation of Russian food in transportation in a humid climate in the south of our country. "

Fortunately, all of the above negative factors are removable - the Forum participants expressed confidence. How - Igor Lebedev, partner of the international auditing company KPMG, told about this in his report: “Russian and Chinese counterparties must follow a number of rules when planning any foreign economic transaction. Somehow: take into account all the risks that exist in the target markets; develop a go-to-market strategy based on this; conduct a detailed analysis at the planning stage of a project; involve experts and consultants who understand the specifics of the regulatory framework and business practices in the partner's country at all stages of the partnership. "

Representatives of both the Chinese and the Russian side are inspired by the fact that the partnership relations between the two countries are developing - although not rapidly, as we would like - but increasingly. So, in 2016, the trade turnover between the RF and the PRC was almost $ 70 billion, or 4% more compared to the 2015 year. According to the results of the first quarter of this year, it grew by 30% relative to the same period of 2016. It is expected that by the end of this year the volume of mutual import-export with China will reach $ 80 billion in the plans of the governments of both countries to increase it to $ 200 billion in 2020.

The volume of accumulated investments from the PRC in the Russian economy today is more than $ 9,5 billion, and by 2020 it promises to grow to $ 12 billion.

“We are pinning great hopes on attracting Chinese investments to our region - in the advanced development area and the free port of Vladivostok (FPV). These preferential regimes in terms of tax and customs incentives stimulate Chinese business to come to us. The number of residents in the ASEZ and FPV is increasing from year to year. And also the number of TOP themselves. This means only one thing - the volume of investments in the Far Eastern economy, including from China, is growing like a snowball, ”said Leonid Petukhov, one of the honorable participants of BWC-2017, Director General of the Far East Agency for Attracting Investments and Export Support, on the sidelines of the forum ...
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