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China’s slowing economy no tragedy for economic relations with Russia

January 12, 2016, 18:38 UTC+3 Alexandrova Lyudmila
© AP Photo/Ng Han Guan

MOSCOW, January 12. /TASS/. The slowing economy of China as an important trade partner of Russia, the plunge of China’s stock market and the falling stock prices of Chinese companies do not promise the Russian economy anything good but this should not be perceived as a tragedy for bilateral relations, Russian experts say. Russia needs to adapt to new conditions and diversify its relations, making emphasis on the export of Russian goods rather than on loans from China.

"The serious slowdown of the Chinese economy will continue for at least another six months, with slight rises, but the general trend will mark a downward movement," Head of the School of Eastern Studies at the Higher School of Economics Alexei Maslov told TASS.

"This situation is not linked with a temporary setback on the Chinese market but is related to a whole number of structural crises, first of all, because China’s GDP grew for a long time exclusively due to fixed capital investment rather than to consumer market growth. A considerably long period will be needed to reverse this trend," the expert said.

"The second aspect is the need to close down inefficient enterprises and bankrupt businesses, which cannot repay loans, and liquidate inventory stocks," he added.

All these measures are expected to improve the performance of key Chinese enterprises so that investors, including from foreign countries, can again be confident in the efficiency of the Chinese economy, the expert noted.

"It is hardly possible to expect at least that kind of the growth that was observed five years ago. Most likely, China’s annual GDP growth will be around 6-5.5% in coming years," he said.

Serious measures to improve China’s economy were mapped out already last year, the expert said.

"That is, the Chinese leadership looks sensibly at the situation. The question is not about whether the government understands the need for implementing measures but about the possible resistance of local elites and inertia of Chinese regional society," he noted.

Russia has been viewing China in the past year and a half as its basic economic partner and there have been big hopes that China will act as the largest investor in the Russian economy, Maslov said.

"As the past year has showed, both Russian-Chinese trade has fallen by more than 30% and there have been actually no substantial Chinese investments, despite promises. As a whole, it can be stated that China will hardly act as a major investor in the Russian economy. This may seriously affect Russian projects in the Far East and large infrastructural projects, primarily, the construction of railways," the expert noted.

China wants quick investment recoupment, considering its economic difficulties, the expert said.

"That is why, it is basically focusing on absolutely safe options. And this can explain, for example, why it is laying a whole number of trade routes outside Russia but through Kazakhstan and Turkey where it can wholly control the entire process," the expert said.

Russia should not expect Chinese investments but should create a pool of export products, which China would want to buy, Maslov said.

"This means earning from sales rather than from obtaining loans. This refers to agricultural produce, profound oil refining products and the technologies of Russian medium business. We should not expect noticeable development of economic relations between Russia and China this year but there will be no tragedy in that," he added.

No sharp slowdown in the Chinese economy can be expected further, Associate Professor of the Department of Oriental Studies at the Moscow State Institute of International Relations (MGIMO) Natalia Stapran said.

In her opinion, the 30% contraction in trade between Russia and China does not reflect quite adequately the real situation in bilateral economic relations.

"It is necessary to take into account the fall of oil prices, the change in the US dollar rate and the preservation of oil exports to China in Russia’s overall trade turnover," she told TASS.

"As a whole, this is not such a tragic situation as it seems at first glance. China has a two-digit minus in trade relations with many other countries as well," the expert said.

"The slowdown of the Chinese economy will hardly pull back the entire world economy because Americans prevail on world markets and have control over them," the expert said.

TASS may not share the opinions of its contributors