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China sees no cause for concern over East Siberian land lease to Chinese businessmen

August 21, 2015, 16:46 UTC+3 BEIJING
The authorities of the Trans-Baikal Territory have signed a letter of intent with China’s Huae Sinban, under which the Chinese company plans to invest $350 million in local agribusiness development
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© ITAR-TASS/Vladimir Sayapin

BEIJING, August 21. /TASS/. China’s Ministry of Commerce sees no cause for concern over the intention of the Trans-Baikal authorities in Eastern Siberian to transfer land to Chinese businessmen for lease, Director of the Ministry’s Eastern Europe and Central Asia Department Ling Zhi said on Friday.

"The Russian legislation permits the lease of land. I do not understand the causes of the panic," the Chinese official said. ‘We have very good relations in agricultural cooperation and our companies are working very intensely in the field of growing grain and vegetables and building infrastructure for agricultural produce transportation," he said.

"As for the Trans-Baikal Territory, there are a lot of possibilities there for the lease of land and for growing grain and other agricultural crops. I don’t see any questions in this respect and I even don’t understand why it is bad to lease," the Chinese official said.

The Trans-Baikal authorities intend to transfer the industrial zone in the Mogoitui village, which has been idle since 2010, to China’s Huae Sinban to create an agricultural production and sale center.

The authorities of the Trans-Baikal Territory have signed a letter of intent with China’s Huae Sinban, under which the Chinese company plans to invest about 24 billion rubles ($350 million) in local agribusiness development.

Under the project, the Chinese investor will take 115,000 hectares of uncultivated lands and pastures on lease in the Nerchinsk-Zavodskoi, Uletovsky, Sretensky and Shilkinsky districts and on the territory of the Aginsk-Buryat Area for a term of up to 49 years. The Chinese company will be required to sign lease agreements with the landowners comprising both private entities and municipalities.

The All-Russian People’s Front (ONF) public movement led by President Vladimir Putin has called for holding hearings on a prospective deal to lease out large chunks of land to the Chinese investor in East Siberia, the Front’s press office reported in June.

"Attracting investment to deeply depressed regions is a noble thing, especially in the light of all the latest statements by ONF leader Vladimir Putin on the need for the quickest implementation of import substitution projects," the public movement’s press office said.

"At the same time, the ONF regional division has the firm position that the territorial authorities must hold public hearings on the issue with the involvement of the expert community and public organizations concerned, with the participation of local residents and the administrations of municipalities on the territories covered by the project," the ONF press office quoted co-chairman of the public movement’s Trans-Baikal headquarters Nikolai Govorin as saying.

"The document that was signed is so far an unbinding legal agreement for any of the parties but has already caused local residents’ fears," he added.

"I don’t see anything terrible if someone cultivates this land but it is important that this should be done in accordance with Russian law and in compliance with all agro-technical requirements that are effective in the Russian Federation and are set to the Russian producer," ONF regional member Andrei Kharin said.

He also said the lease term of almost half a century raised questions, especially considering that this term for Russian leaseholders "is no more than 10 years."

China expects positive effect from Russia’s efforts to develop of Far East region

China expects a positive effect from Russia’s measures aimed at creation of advance development territories in Far East region and developing the free port of Vladivostok, Lin Zhi said.

"The plans are ambitious. Numerous advance development territories have been defined and the port of Vladivostok has become a free trade port. The Russian law has never seen such practices before. Considering the current level of development of the Far East and its small population number these are ambitious tasks," he said.

"The free trade port is an important factor for attracting investments, primarily Chinese ones. Negotiations are underway for the development of the port’s infrastructure and logistics facilities. Obviously all this creates more favorable conditions for doing business. I think in the short terms and in long term there will be an effect (from these measures)," Lin Zhi said.

In July, President Vladimir Putin signed a bill on creation of the free port of Vladivostok into law. The document will come into force on September 12. The free port will comprise all the ports in the south of the Primorye territory of Russia’s Far East, the Knevichi airport and railway areas.

According to the lawmakers, the free port will create almost 500,000 new jobs by 2034 and increase the gross regional product of Primorye to 1.106 trillion rubles ($16.172) by 2021.

In late 2014, the State Duma, the lower house of Russia’s parliament, passed in the third and final reading a law on advanced development territories aimed at boosting the social and economic development of the Russian Far Eastern regions and single-industry towns.

The law stipulates that advanced development territories will be established for a term of 70 years, which may be prolonged, if necessary.

Within three years after the law comes into force, advanced development territories will appear in the Russian Far East and also in single-industry towns with the tensest social and economic situation included in the government’s list.

Subsequently, advanced development territories may be established in other Russian regions.

Advanced development territories will offer privileged terms for entrepreneurial and other activity. Specifically, the law stipulates reduced rent rates, priority connection to infrastructure facilities and free customs zone procedures.

Sanctions influence China-Russia financial cooperation

Western sanctions influence the cooperation between Russian and Chinese banks, head of the Europe and Central Asia Department of the Chinese Ministry of Commerce Lin Zhi said.

Anti-Russia sanctions imposed by western countries due to events in Ukraine cover a number of Russian banks, including top lenders Sberbank and VTB, which cannot raise long-term financing on global capital markets.

"This first of all impacts finances. Many Russian banks, which make settlement payments with China, are facing difficulties. We also use SWIFT system, which has some certain limitations for Russian banks," Lin Zhi said.

Some Russian lenders under sanctions said they witnessed longer payment periods via the international payment system SWIFT.

Formally, there are no limitations for operations of Russian banks via SWIFT though the issue of disconnecting Russian lenders from SWIFT is being occasionally discussed by politicians in the European Union /EU/ and the US.

"We can hardly assess the degree of influence of Russian sanctions against the US and EU on the Russian-Chinese business ties. But this is very sensitive for financial instruments, especially for banks, which settle accounts via SWIFT," Lin Zhi said.

After anti-Russia sanctions were imposed many banks expected to substitute financing in China and other countries of the Asian and Pacific region for western financing though some experts say those hopes failed.

Representative of China’s Commerce Ministry said Russian and Chinese banks are actively cooperating despite sanctions, which is proved by signing of a number of financial and credit agreements during the visit by Chinese President Xi Jinping to Moscow in May 2015.

Also, the plan is to sign an agreement between banks in the financial sector during the visit of Russian President to China in September 2015, Lin Zhi said.

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