Border Battle: A Prickly Trade Alliance Comes Up Trumps For China
The Age
Monday June 9, 2008
Amid Russian suspicion, China is pulling off one of the great export ambushes of modern history.
WANG Yong, a 33-year-old entrepreneur in the town of Manzhouli, has been waiting all morning on the Chinese side of the Russian border for his Russian truck drivers to arrive."My two drivers are jiu gui," he says, using a Chinese term that roughly translates as "grog monsters". "They said they'd be here in five minutes and it's already been five hours. After eight hours they stop work, wherever they are, and it takes them three days to go 500 kilometres that a Chinese driver would cover in a day."Nevertheless, Wang relies on Russian truck drivers to take his fresh fruit to Chita, in Russia's Wild East, because Chinese drivers face a minefield of extortion. Russia is erecting legal and illicit barriers to Chinese trade in a climate of rising paranoia summed up in the Pravda headline: "Chinese Immigrants to Conquer Russia."Russia's anxiety trades partly on an old fear that Chinese hordes are itching to take back the resource-rich and underpopulated regions of Siberia that Russia annexed from the Qing dynasty."The Russians are spooked by the idea you have 110 million people in just three northern Chinese provinces and 6 to 7 million people in the Russian far east," says Bobo Lo, author of the forthcoming Axis of Convenience: Moscow, Beijing and the New Geopolitics. "They feel no matter how sweet the political relationship, nature abhors a vacuum and therefore as soon as China feels brave or confident enough to move into the far east, it will."Many Chinese traders in Siberia have been forced to return to China because of new visa requirements and a new law that bars non-Russians from making cash transactions in Russian marketplaces.Chinese authorities, for their part, have enforced tough passport requirements on traders who had previously travelled freely across the border. They have also booted out thousands of Russians from northern China as part of an overzealous security campaign that is driving foreigners out of the country before the Olympic Games. Despite legal and illicit barriers on both sides, including huge Russian tariffs, China is pulling off one of the great export ambushes of modern history. China's Ministry of Commerce says the value of Russian exports to China rose 12.1% in 2007 compared with 2006, while Chinese exports to Russia rose 79.9%. The story from Russia's customs office is more extraordinary. It shows Russian exports barely moved from $US15.8 billion ($A16.5 billion)in 2006 to US$15.9 billion last year, despite soaring oil prices, while Chinese exports almost doubled from $US12.9 billion to $US24.9 billion. China has turned a $US3 billion deficit into a $US9 billion surplus in just one year.Nobody really knows how much trade passes over the Sino-Russian border because black-market goods tend to go unreported. The Russian total trade figure is less than two-thirds of the Chinese version, which may suggest that the Siberian mafia groups controlling much of the timber and resources trade are more powerful than their Chinese counterparts. "You might think China is corrupt, and it is, but Russia is even more corrupt," says Lo, who was second-in-charge at the Australian embassy in Moscow in the late 1990s and is now director of the China and Russia programs at London's Centre for European Reform.Trading with Siberia may be frustrating for China's impatient entrepreneurs, but it is making them very rich. Fifteen years ago Manzhouli was a a stopover village for roaming Mongolian herdsman and the odd military border patrol. Now cranes are pulling skyscrapers out of the arid steppe and the city is filling with bright pink and yellow faux Russian buildings. So much money is rolling in that the Communist Party chiefs of Manzhouli have lined the main road to town with Russian theme parks, monuments, a sculpture garden, exhibition centres, factories and other trophies of overnight material success. These tourist-free tourist attractions and empty commercial buildings are partly financed by kilometres of timber mills that are busily stripping the legal and not-so-legal forestry wealth of Siberia. Some of the processed wood is sent back north across the border but most of it is loaded back on a south-bound train to Chinese construction sites and furniture factories. Siberian oil trains also pass through here, though not as often as before. China gets its oil at a discount thanks to a $US6 billion loan that enabled Rosneft, Russia's state-owned oil giant, to buy oil assets from Yukos - the company previously controlled by tax evader-cum-political prisoner Mikhail Khodorkovsky. Russia, it seems, is honouring its deal with China by sending oil elsewhere.Oil volumes fell last year, but defence sales crashed, prompting analysts to speculate that China's People's Liberation Army no longer relies on Russian technology. Russia once supplied the bulk of Chinese industrial machinery, but now the long lines of shiny excavators, trucks and machinery are all heading the other way. China is increasing its dominance over almost every sector of the Siberian consumer goods market. Two years ago the mayor of Vladivostok made the hyperbolic claim that all the port city's retail trade and half its trade in services was controlled by Chinese.For all the fuss about a new Russia-China axis against Islamic separatists and American missile shields, the relationship is constrained by Russian insecurity and Chinese insensitivity. It is just one example of how China's economic ascendancy is provoking global fear and, more so, in its immediate neighbours.
© 2008 The Age