China and Russia
Packing up the suitcase trade
Hard times at the border these days
Aug 15th 2015 | HEIHE | From the print edition
A FERRIS wheel visible from the Russian bank turns alluringly on the low island of Daheihe on the Chinese side of the Amur river. But the main attraction is the Daheihe Island International Trading City, with its bright ferry terminal and multi-level trading hall. Russian traders used to flock across the border to stuff their suitcases with cheap Chinese goods. Yet that trade, which long sustained the nearby Chinese city of Heihe, has hit a rough patch. Inside the vast trading hall stall-keepers spend more time knitting, napping and playing cards than they do making deals.
Shi Ying, a purveyor of medicines, tea, cosmetics and knick-knacks, blames the drop in value of Russia’s currency. Just over a year ago 100 roubles bought more than 18 yuan (about $3), but today they buy fewer than ten. The Russian economy has been hit by slumping prices for oil and gas, and by Western sanctions following Russia’s invasion of Crimea in 2014 and meddling in Ukraine. Russians, Ms Shi says, “have no money, it’s that simple.”
The stalls cover a huge space and offer wigs, watches, wheel rims, studded leather belts, fake Jim Beam bourbon, high-powered outboard motors and low-powered sex toys. Yet despite the astonishing range of goods, the traders all tell the same tale: declining sales. The few surly buyers from the Russian Far East are struggling too. “It is barely worth the trip,” says Irina, from Khabarovsk. “If the rouble falls any further, I’ll stop coming.”
Political leaders on both sides of the border have said they want to boost bilateral trade. They have focused on oil and gas from Russia, and machinery going the other way. Last year bilateral trade topped $95 billion, a 6.8% increase over the previous year. Work has just begun on China’s portion of a 4,000-kilometre (2,500-mile) pipeline that will carry natural gas from Siberia—through Heihe—to Shanghai. But although the project will create a small number of local jobs during construction, residents expect to see few benefits once the gas starts flowing past their town.
The provincial government of Heilongjiang has been looking to boost trade in other ways. It shares a border of nearly 3,000 kilometres with Russia. It accounts for a quarter of China’s bilateral trade, and 30% of China’s total investment in Russia. Yet the sums are hardly spectacular—$1 billion of investment last year. The province intends to improve infrastructure. Plans for the first-ever bridge between the two countries across the Amur are being touted. Yet such plans have been on the drawing board for years.
Even if a bridge gets built, bilateral promise has a habit of falling short. Much is made of the warm political and personal ties between the Chinese and Russian presidents, Xi Jinping and Vladimir Putin. In May, when many national leaders stayed away from Russia’s parade marking the 70th anniversary of the end of the second world war in Europe, Mr Xi cheerfully attended. Mr Putin is expected to return that favour in September, when China holds a parade of its own to commemorate the anniversary of the war’s end in Asia.
By far the biggest commercial deal to come out of the relationship was a 30-year contract for gas supplies that China signed last year with Gazprom, Russia’s state giant. Over $400 billion of gas, the deal’s boosters said, would be delivered over 30 years. The agreement was portrayed as having huge benefits for both countries. Yet even at the time, China was reckoned by analysts to have got Russia, suffering from Western sanctions, over a barrel. Since then energy prices have more than halved, leading many to suspect that under the terms of the deal Gazprom is losing lots of money already.
If so, it will do nothing to dispel Russian suspicions of China that lurk not far below the surface. In the late 1960s the two countries traded fire across the Amur river. Relations are now a world away from that period, yet while Russia sells arms to China, it is not trusting enough to provide its most advanced equipment. And in the Russian Far East, people are often quick to claim, with little evidence, that their empty land is being infiltrated by nefarious Chinese.
Back on Daheihe island, Oleg, a Chinese-speaking Russian, is doing his bit to improve relations—and profit from Russian woes. His Russian Products Direct Sales Centre opened early this month and offers 5-litre jugs of Russian sunflower oil and thick slabs of Russian chocolate to Chinese buyers. On the shop’s first day the top-selling item was milk powder for babies—Chinese trust foreign brands much more than domestic ones following years of contamination scandals. The weak rouble, Oleg says, can only be good for business.
From the print edition: China
