Page 13 - bne magazine March 2017 issue

bne March 2017 Companies & Markets I 13
“pivot to the East”. Trade turnover between the two nations grew 34% on year in January to $6.5bn, China’s Customs Administration said on February 10. Exports from China to Russia rose 29.5% to $3.4bn, while China’s imports from Rus- sia surged 39.3% to $3.1bn.
However, there have been hiccups. Construction of the first Russia-China bridge across the Amur river has hit financing problems. The major trade link, announced in 2014 by the RDIF, was recently allocated another $110mn in financing, but may need three times that amount. Construction of the bridge started three years ago, but funding problems and construc- tion delays by the Russian side have halted construction work.
Russia is also throwing money at its ambition to achieve food self-sufficiency by 2020 as it keeps the prohibitions on EU produce for several more years. Putin has allocated an extra €3.3bn to Russia’s agricultural sector in the 2017 budget, but there is a tacit acknowledgement amongst the political estab- lishment that Russia has to partner with foreign countries to stimulate moribund production. However, Russia’s distrust of China runs deep, with both geography and history inhibiting them from becoming closer allies.
I think I’m turning Chinese, I really think so
Many Russians in the east – which has a dwindling population – fear that in the future they will have to speak Chinese. The Russian regions neighbouring China – Amur, Primorye and Khabarovsk – are home to only around 4mn Russians, slightly more than two people per square kilometre, while there is up to 5mn Chinese illegal immigrants living in Russia’s Far East, and the number is increasing by a million or so every year, according to some estimates.
On the other side of the border, stretching for 3,650km, there are 109mn Chinese living in the neighbouring regions of Hei- longjiang, Jilin and Liaoning, who are part of a much bigger country with a rapidly growing, hungry population.
Victor Ishaev, former governor of Khabarovsk region, warned back in 1999 that, “all the land in Russia’s Far East” will be bought up by Chinese. “The peaceful capture of the Far East is underway.”
An actual deal to lease Russian land in the Trans-Baikal region to the Chinese in 2015 caused an uproar. The agree- ment allows the Chinese firm Huae Sinban to rent up to 300,000 acres of land over 49 years to grow crops and rear livestock.
After the deal was signed, the firebrand leader of the ultranationalist Liberal Democratic Party, Vladimir Zhiri- novsky, warned that a future governor of Trans-Baikal Ter- ritory will be Chinese and demanded the mass eviction of Chinese migrant workers.
Putin is well aware of the sensitivities and spoke about the demographic problems in the Far East at an economic forum
in Vladivostok as recently as September. To tackle this under- population, the Russian government created a new law last year, entitling every Russian citizen to a hectare of land in the Far East for free.
However, the scheme has reportedly had limited success
so far. For instance, hundreds of people have been applying for the same prime plots in Khankaiski District with only a dozen or so being successful. The Financial Times reported in September how one Russian trader, Anton Nekhoroshkov,
“All the land in Russia’s Far East will be bought up by Chinese – the peaceful capture of the Far East is underway”
had bought land in Khankaisky with the hope of building a roadside location to service passing truck drivers and tourists from China. However, Nekhoroshov’s hopes faded after he arrived and found that his land was located in a swamp and the road was a gravel track with no passing traffic.
In the meantime, Chinese are fanning out across Russia’s Far East. In Primorye, parcels of land that used to lie uncultivated are now soyabean fields, many rented and tilled by Chinese farmers. Chinese investors have also renewed former collective rice planting areas near Lake Khanka that were neglected after the Soviet Union collapsed.
Chinese farmers are also making inroads in Western Russia in a project in Ryazan, a region just 200km southeast of Moscow. In May last year, the RDIF said it is partnering with China’s Banner Infant Dairy Products and Thailand’s Charoen Pok- phand Group to build a $1bn dairy complex in Ryazan. Once completed in three to five years, the complex is supposed to produce about 300,000 tonnes of milk and 400,000 tonnes
of cheese and dairy products.
In a separate deal, Vietnam’s TH Group started building dairy farms outside Moscow as part of a ten-year $2.7bn project. The Ryazan enterprise, which will be run by Charoen Pok- phand, will include dairy farms catering for 80,000 milking cows and a feed factory with 60,000 hectares of grain, accord- ing to the RDIF. Industry insiders have speculated whether this project will simply replace the more controversial mega- project in China’s Heilongjiang province.
“The RDIF may be trying to quietly scrap the Chinese farm in Heilongjiang,” a senior agricultural player with links to the government projects, tells bne IntelliNews. “Having Chinese farmers working inside Russian borders might be more palat- able than having them milk our cows in China.”
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