The Ministry of Eastern Development reported on China's desire to move some of its enterprises to the Far East. Russian authorities say they are ready to locate Chinese production facilities subject to mandatory compliance with environmental requirements adopted in Russia. Does this mean that, against the backdrop of falling labor costs, an “investment boom” is beginning in our country? What will the transfer of production bring to China and Russia? Will the economy of the Far East receive an impetus for development, and what benefit will its population receive from this?

Which enterprises and under what conditions can be transferred from China to the Russian Far East?

The PRC has expressed a desire to move to the territory of our country part of the enterprises of 12 sectors of the economy - mechanical engineering, agriculture, cement industry, metallurgy, energy, textile industry, shipbuilding, telecommunications industry enterprises and others.

Enterprises will be created within the priority development territories (ASEZ) and the Free Port of Vladivostok, they will receive administrative preferences and tax benefits. Among the requirements for the Chinese that the Russian side puts forward, in addition to environmental ones, is a restriction on the use of foreign labor. According to the assurances of the head of the Ministry of Eastern Development, Alexander Galushka, among the workers at the newly created enterprises there will be at least 80% Russian citizens. The exact list of enterprises is unknown, as are the details of the agreements. To date, only a memorandum has been signed.

Why did the Chinese need to transfer part of their production to Russia? .

One of the main reasons is the catastrophic environmental situation in China itself.

This problem appeared in the country quite a long time ago, and by the time the PRC was formed in 1949 it was already very noticeable. Rapid population growth created a large demographic burden on the land, and during the “Cultural Revolution” and the “Great Leap Forward”, uncontrolled deforestation and plowing of new lands began. At the end of the last century, when the country began an investment boom, the environment suffered catastrophic damage. China, with its dense river network and the fourth largest fresh water reserves in the world, second only to Russia, Canada and Brazil, is the only major country experiencing a water crisis. Of the 600 cities in China, 400 experience a shortage of drinking water, and more than 360 million rural residents of China consume water that does not meet sanitary standards. Pollution of water bodies in China occurs due to the discharge of industrial waste into them and due to the excessive use of chemicals in agriculture.

Chinese industry discharges an order of magnitude more waste into the environment per unit of output produced than industry in developed countries. Protest sentiments related to the difficult environmental situation are growing in the country - every year up to half a million people die from air pollution in China. The state spends more than $100 billion a year on environmental protection, but this measure does not have much effect.

The problem in the country's agriculture is no less serious - the number of arable lands is decreasing, soil erosion and desertification of pastures are increasing.

All these reasons are forcing the Chinese leadership to look for ways to relieve the industrial complex and transfer part of production to other countries, as well as search for new agricultural land.

How demanding are Russian environmental standards, and are the Chinese ready to follow them?

Russian environmental standards are among the strictest in the world, although this circumstance is compensated by the fact that Russian officials are among the most “accommodating”, and Chinese “investors” know this very well. In modern China, its own “green legislation” is quite strict, but it is completely ineffective, since economic growth is considered the highest good in Chinese society, and environmental laws can only be implemented formally. The state and business, in the name of economic growth, willingly violate environmental requirements; no more than 1% of all claims related to environmental pollution reach the court, and overzealous environmental service employees may even be fired.

It would be unreasonable to expect that the Chinese will demonstrate a reverent attitude towards the ecology of other countries. There have been quite a few reports in the press about the destruction of forests in Africa and Latin America by Chinese “investors.” Residents of our Far East already know how agricultural lands become unusable after two or three years of Chinese work on them. Attempts by our supervisory authorities to somehow moderate the agility of Chinese entrepreneurs turn out to be ineffective - they are often blocked at the level of local administrations.

In addition, according to experts, the Chinese often use chemicals in industry that are not subject to regulation in our country, and for this reason it will simply be impossible to control their use.

Will the transfer of Chinese enterprises to Russia mean the creation of jobs for our citizens?

The idea of ​​moving Chinese enterprises to the Far East appeared several years ago. At the St. Petersburg Economic Forum in 2014, Deputy Chairman of the People's Republic of China Li Yuanchao, speaking about investments in Russia, directly stated that in addition to financial resources, China also has the largest workforce in the world and considers its projects with the Russian side precisely taking this factor into account. This position is confirmed by many years of experience of Chinese business in Russia. For example, the well-known history of the Amazar pulp mill in Transbaikalia. Contrary to the initial agreement on 50% participation of local residents in the work of the plant, in reality their share turned out to be tiny, salaries are lower than those of the Chinese, disrespectful attitude from employers and a complete lack of prospects. By the way, the implementation of the plant construction project for more than 10 years was reduced to basic logging and export of unprocessed wood to China.

The Chinese use a similar approach in their investment activities in other countries. Together with production, millions of Chinese citizens are imported to the countries of Africa and Latin America. This creates social tensions in host countries in addition to the environmental and economic problems that arise as a result of Chinese investments. The Chinese are fighting this phenomenon by creating cultural centers, buying up media and inviting the best local journalists to create the image of a “white and fluffy” Chinese.

Does the decline in labor costs in Russia affect the attractiveness of our country for foreign investors?

To a minimal extent and in isolated cases. Today, the cost of labor in Russia (the average salary is less than $500, according to Rosstat) has become lower than in China (the national average is more than $700). This is not the first time this situation has arisen - in the early 90s, the cost of Russian labor was also lower than Chinese and amounted to less than $10, but this did not lead to any investment boom.

Rather, on the contrary, production facilities that could compete with Western industry were actively destroyed, equipment, including quite modern imported equipment, was scrapped, but in enterprises of strategic importance, on the contrary, foreigners were happy to buy out shares, and it was difficult to “smoke” them out of there It was possible even in the 2000s, when the salaries of Russians increased many times over. That is, the cost of labor is not such a determining factor in the attractiveness of a country for foreign investment. In any case, this is not the only factor.

But the head of Sberbank, Gref, is very happy that Russian labor costs less than Chinese labor. The former head of the Ministry of Economic Development admires the “courage” of the head of the Central Bank Nabiullina, who, by collapsing the ruble, thereby saved the real sector of the economy.

So far, this “salvation” has resulted in the fact that there are no buyers at the Chinese clothing markets in Blagoveshchensk. And this is happening not because cheaper Russian-made goods have been discovered (there are also such, flour, for example, but there are few of them, and the Chinese have already arranged their supplies from Russia to China), but because our customers lack money. Experts say that an increasing number of our citizens go to retail chains like Auchan for clothes, where they purchase Chinese consumer goods of the lowest quality, even by Chinese standards.

Is the government using cheaper Russian labor for the country’s economic growth?

He uses the only method known to the government - he continues to tirelessly try to attract a foreign investor. The Ministry of Industry and Trade invites Western retailers Zara, H&M and IKEA to place orders at Russian enterprises. Retailers said they were ready to consider the proposal. Pierre Cardin declares its readiness to sew clothes in Russia.

Experts say that the difference in labor costs in China and Russia does not yet provide grounds for transferring production from one country to another. We are talking only about small batches of up to 1000 units. Large batch production is still more profitable to do in China. This is due to the fact that tailoring in Russia is of a “screwdriver” nature, that is, the country does not have a sufficient quantity and the required range of fabrics and accessories. A similar situation is observed in any other area of ​​industrial production in the country.

What plans does our government have for the development of the Far East other than Chinese proposals?

Since the 90s, quite a lot of plans for the development of the Far Eastern Branch have been adopted. As Prime Minister Medvedev admitted back in 2013, all the plans and models that the government used to develop the region “have not yet brought the result that we expected, they have not produced an economic effect.” Among the latest development programs for the Far Eastern District, adopted last summer, are the development of coal deposits and the construction of a coal transshipment point in the port of Vanino, gold mining in the Amur region, and the construction of mining and processing complexes. That is, activities that are in one way or another connected with the sale of minerals, at most in an enriched form. The products of enterprises that the Chinese would like to transfer to Russia should also be exported to Southeast Asian countries. That is, for a small amount of production money, these will simply smoke the sky of the Far East and nothing more.

To be fair, it should be noted that in addition to the sale of raw materials, our government officials have another “weakness” - gambling zones. Apparently, the government pins all its hopes for economic growth in the Far East on one of them in the suburbs of Vladivostok. Where would we be without such a “driver”?

Of the total volume of foreign investment attracted to the Far Eastern Federal District over the past 2.5 years, the lion's share - 85% - comes from China. In 2017, the volume of investments by partners from the Middle Kingdom in the Far Eastern economy increased by a third.

Meeting of the heads of government of the Russian Federation and the People's Republic of China in Beijing. At a press conference following this event, Li Keqiang noted that “this time we have reached new agreements on cooperation in the Far East. We are going to increase Chinese investment in the development of the Far East, we are ready to import even more Russian energy products from there.” Photo: Sergey Kuksin / RG

New conditions

According to the General Director of the Far East Development Fund (FEDF), Alexey Chekunkov, the potential for Chinese investment in the Far Eastern District is enormous - tens of billions of dollars. The fact that it can and should be implemented was stated during the official two-day visit to China by Russian Prime Minister Dmitry Medvedev.

“We are going to increase Chinese investment in the development of the Far East,” Premier of the State Council of the People’s Republic of China Li Keqiang promised at a meeting with the head of the Russian government.

Close ties between the northeastern provinces of China and the Far Eastern Federal District have been established for a long time, but if previously they were almost exclusively of a trade nature, today they have received a completely new impetus thanks to the economic instruments that have begun to operate in the Russian Far East - ASEZ and FPV.

In particular, in priority development territories we have waived the income tax, which is credited to the federal budget. There the zero rate is valid for five years. And we have significantly reduced the portion of the tax that goes to regional budgets. Therefore, naturally, we invite you to invest in these territories,” explained Dmitry Medvedev.

Chinese business is now discovering the Far East in a new way. Entrepreneurs saw that the conditions created by the Russian state work and are favorable for business development, says Alexander Galushka, Minister of the Russian Federation for the Development of the Far East.

To help residents, the Russian government established the Far East Agency to attract investment and support exports. This department works with partners from around the world, but the first foreign representative office was opened in China. That is, now a potential Chinese investor can get advice directly in Beijing, Harbin and Shanghai, for this he does not need to come to Russia.

The results of the efforts undertaken at a high level are already there, and considerable ones. Chinese partners are willing to enter the oil and gas sector, cooperation is developing in agro-industrial cooperation, high technology, and housing construction.

About factories and farms

One of the largest Russian-Chinese projects is the construction of an oil refinery in the Amur region on the territory of the Priamurskaya ASEZ. It is initiated by the Amur Energy Company (AEC). The first stage of the complex is planned to be commissioned in 2018. The second will start operating in 2020, when an oil products pipeline is built from the village of Berezovka (RF) to Heihe (PRC).

Plenipotentiary Representative of the President of the Russian Federation in the Far Eastern Federal District Yuri Trutnev: The development project of the Primorye-1 and Primorye-2 international transport complexes can become strategic for the interaction between Russia and China in the Far East. Photo: minvr.ru

The main investor of the project (with a 90% share) is private Chinese capital represented by the Menglan Xinghe company,” AEC General Director Alexander Gordeev told Breath of China. - In total, about 120 billion rubles of investment will be attracted to the Amur region.

Starting from 2019, the plant will be able to process 4 million tons of oil and 2 million tons of oil and gas condensate per year. Four-fifths of all production will go to China via pipelines laid along the bottom of the Amur River.

Many new projects with the participation of Chinese capital are being implemented in the Primorsky Territory. Thus, the investor of the free port of Vladivostok, the Yubo-Sumotori Production Company, is organizing the production and distribution of FAW brand trucks. The planned production volume at the start of the project is up to 2 thousand vehicles per year. The ERZO enterprise is creating facilities in Ussuriysk for processing used tires. "Primorsk Gold Mining Company" is developing the Zolotoy deposit in the Partizansky district. The Zhongding Corporation has launched active activities with an investment project for a Russian-Chinese dairy farm for 1,800 cows. The plans of the company "Industrial Park for the Development of Science and Technology in Agriculture and Livestock" are also promising. Tanyuan", which involve the construction of a cattle breeding complex in the Shkotovsky district. The investor is a consortium of individuals from Jilin Province.

In the Jewish Autonomous Region, the resident of the Amuro-Khingan ASEZ, the company Amurprom, has begun construction of a plant for the deep processing of soybeans in the Leninsky district. The high-tech enterprise will produce oil, lecithin, isoflavins and protein complexes. The plant's capacity is up to 300 thousand tons of soybeans per year. Another project of the same company is deep processing of wood with a productivity of more than 20 thousand cubic meters of wood per year. The plant will produce lumber, veneer, furniture panels and fuel briquettes.

With the attraction of investments from China, a business-class hotel complex is being created in the Jewish Autonomy on the site of the Nizhneleninsky industrial park. The hotel will have 280 rooms. In addition, the Logistics enterprise plans to build a complex for receiving, processing and storing cargo traveling from Russia to China and back.

In 2017, it was decided to launch a pulp and paper mill project in the city of Amursk, Khabarovsk Territory. The Chinese side plans to invest more than $1.5 billion in the construction of a facility with a capacity of 500 thousand tons of softwood pulp per year. At least 500 jobs will be created. The investor will be a subsidiary of China Paper Corporation. The corresponding memorandum of understanding was signed by the Far East Investment Promotion Agency and China Paper. According to the document, the plant’s construction area will be included in the Komsomolsk priority development territory, which will allow the investor to receive significant tax benefits. As the governor of the Khabarovsk Territory Vyacheslav Shport noted, “the new production will be the next step towards the development of cooperation between Russia and China. Regional authorities will provide maximum assistance to investors.”

Businesses from the Middle Kingdom are opening up completely new territories in the East of Russia. In the Yakut ASEZ "Kangalassy", residents with the participation of Chinese capital invested in the production of ceramic bricks. Kamchatka is ready to invest more than four billion rubles in a port-industrial park. It is expected to include several functional zones: a transit cargo terminal, enterprises for the processing and smelting of renewable resources, a fishing cluster, ship repair and shipbuilding complexes, as well as a number of other industries.

Roads

Both Russia and China are making very serious investments in transport infrastructure today.

Since the beginning of 2017, the volume of transit cargo coming from China through the south of the Far East has increased fourfold. And the volume of mutual trade increased by 33%. The creation of “bridges of friendship” is intended to stimulate trade turnover and cargo flow. One of them is the railway (Nizhneleninskoe (Jewish Autonomous Region, Russian Federation) - Tongjiang (PRC), it will be launched in the first half of the coming year. Construction of the road bridge Blagoveshchensk (Amur Region, Russian Federation) - Heihe (PRC) is also underway).

Recently it became known that a high-speed railway could appear between Harbin and Vladivostok. Its construction, the initiative of which followed from the Chinese partners, was discussed by the head of the Ministry of Eastern Development of the Russian Federation, Alexander Galushka, with the General Director of the China Railway Dongfang Group, Tsai Zemin.

The Harbin - Vladivostok highway has more than 380 km of tracks and 12 stations. The construction of the line from Mudanjiang to Harbin is already underway. It is planned that the speed of movement along it will be 250 km per hour. The project cost is up to 19 billion US dollars.

Chinese business is now discovering the Far East in a new way, says Alexander Galushka, Minister of the Russian Federation for the Development of the Far East. Photo: minvr.ru

Initially, a passenger line was conceived. But after assessing the economics of the project, it was decided to focus on a mixed flow, taking into account the transportation of goods, noted Tsai Zemin.

Another important topic is the international transport corridors (ITC) “Primorye-1” and “Primorye-2”.

I consider it relevant to cooperate with Chinese business on the construction of the Razdolnoye - Khasan - Zarubino road, which is part of the Primorye-2 ITC and connects the northeastern provinces of China with the ports of the region. In addition, we need a ring road in Vladivostok with bridges to the Russky and Elena islands, which requires serious financial investments,” listed Acting Governor of the Primorsky Territory Andrei Tarasenko.

China Communications Construction Company is going to participate in these projects. This Chinese national corporation has repeatedly emphasized its interest in working in the region, including in the construction of roads along the Primorye-1 and Primorye-2 transport corridors.

The development project of the Primorye-1 and Primorye-2 international transport corridors may become strategic for the interaction between Russia and China in the Far East. The leaders of our countries support him. The project will benefit our states. This can be a striking example of connecting the Eurasian Economic Union with the Silk Road Economic Belt. For our part, we are interested in the project taking place and its implementation beginning in the near future,” emphasized Deputy Prime Minister and Plenipotentiary Envoy of the President of the Russian Federation in the Far Eastern Federal District Yuri Trutnev.

Plans to move part of the production abroad appeared in China in November 2014. In this way, the authorities are going to solve the problem of environmental pollution - rapid industrialization has led to a catastrophic deterioration of the environmental situation in the country.
At one time, the West built light industrial enterprises in China, “exporting” environmental problems there, noted Tom Miller from the research company Gavekal Dragonomics. “Now China has reached a stage in its development where it itself wants to export non-environmentally friendly production, creating metallurgical plants and other enterprises in poor countries,” Miller said.
China's production facilities will be moved primarily as part of the fight against environmental pollution, Bloomberg emphasized.
“The logic is partly the same as that of Japan and many other countries that endured dirty production in the 70s and 80s - this is not a search for cheaper labor, it is rather an environmental story,” agrees the head of the Russia in Asia program -Pacific Region" of the Carnegie Moscow Center Alexander Gabuev.
The country's authorities and official media report that this initiative will help eliminate another problem - overproduction. Chinese steel, cement and glass producers have excess capacity that is not needed now that the economy is no longer growing at 10% a year.
To begin with, China intends to “unload” the largest steel producer - Hebei province, and with it the entire north of the country, where air pollution is much worse than in the south.
Hebei province is home to seven of China's most polluted cities, and the region is the country's largest source of sulfur dioxide. It produces 200 million tons of steel each year—twice what the United States produces and a quarter of China's output.
The Chinese authorities intend to provide preferences to local companies, stimulating the relocation of production abroad. The plans for 2014 focused primarily on Africa, Western Asia and Southeast Asia. At that time, Russia was not on this list.
Northern neighbor
The PRC agreed with Russia on the “export” of production capacity in December last year. The exact details of the agreements are unknown - so far only a memorandum has been signed. The list of Chinese enterprises that may end up in Russia is still unknown, Leonid Agafonov, adviser to the head of the Ministry of Eastern Development, told the BBC Russian Service.
It is only known that these will be enterprises in 12 industries, including: metallurgy, energy, mechanical engineering, shipbuilding, construction, telecommunications, agriculture, as well as textile, chemical and cement industries.
Chinese business will receive tax benefits and administrative preferences in the Far East, said ministry spokesman Rustam Makarov.
The interest of Russian officials is clear - it is necessary to develop the Far East (a separate ministry was created for this purpose). China in the current conditions is the most obvious partner, given the transport proximity and the “turn to the east” proclaimed by the Kremlin.
The PRC is especially interested in such mechanisms as priority development territories (ASED) and the Free Port of Vladivostok, says Agafonov. The minister's adviser cited the construction of an oil refinery in the Amur region as an example of successful investment attraction.
In April 2015, the Amur Refinery project received priority status. The initiator of the project is the Amur Energy Company, which is 90% controlled by an enterprise from Heihe, a city in the border province of Heilongjiang. Under the terms of agreements with local authorities, the refinery will supply 90% of petroleum products to China, raw materials will be purchased in Russia.
Alexander Gabuev from the Carnegie Center believes that the success of Chinese enterprises that will be transferred to Russia is questionable, since one of the reasons for this initiative is the elimination of excess capacity in China.
“Here, it seems to me, we come to the most interesting thing. How will these businesses that will be relocated perform in a competitive market? Even if these factories are built, how will they make money, how will they integrate into the world market? And what is the competitive advantage of the Far East?” - the expert lists his questions for the project.
Among the competitive advantages of the Far East, he points out cheap electricity and less stringent environmental supervision (in China they have now become much stricter in monitoring harmful emissions in production).
“What exactly we will gain in terms of making money in the future is not yet very clear. Although it seems to me that jobs and industrial potential are always good. Another question is that in the Far East you are always up against a small market, a not very developed infrastructure, monstrous Russian legislation, its implementation in terms of exports and, roughly speaking, Russian customs, where everything usually gets stuck,” complains Gabuev.
It is also unknown under what conditions factories will be created in Russia, he continues. In particular, it is unclear who will build the enterprises and then work for them: the Russians or the Chinese.
Among the many unknowns, the Russian authorities have clarified only one point: all projects will necessarily comply with Russian environmental standards. This condition is more important than mutual interest, noted the head of the department, Alexander Galushka. He believes that there is no need to fear the arrival of “dirty” industries. Environmentalists have a different opinion on this matter.
"Clean work?
“China has never been known for its environmentally friendly and safe production,” says Greenpeace Russia toxics program coordinator Nina Lesikhina.
As an example, she cites the recent tragedy in Tianjin (a city in China bordering Hebei province), where explosions occurred at chemical warehouses last August. As a result, more than 170 people died, more than a thousand cars were destroyed, and highly toxic substances were released.
Greenpeace believes that the transfer of part of Chinese production to the Far East could lead to an increase in environmental risks not only for the region, but for the entire country.
“Unfortunately, the environmental requirements established in Russia, taking into account which it is planned to transfer Chinese enterprises, are extremely weak and, as a rule, not observed in practice. Recently, there has been an active process of degradation of environmental legislation in the interests of business,” notes Lesikhina.
Environmentalists note that many hazardous chemicals used in Chinese factories are not subject to regulation and, therefore, control in Russia. “This means that in the event of the transfer of Chinese production, these substances, along with wastewater and emissions from enterprises, will continue to flow, but into our air and our rivers,” adds a representative of Greenpeace Russia.
On forums and on social networks, residents of the Far East not only express fears that an increase in the number of plants and factories will harm the environment, but are also afraid of increasing Chinese influence in the region. Suffice it to recall the reaction caused by the news that the Trans-Baikal Territory offered to lease 115 thousand hectares of land to the Chinese.
Journalists, deputies and public figures suggested that the lease would be followed by the colonization of Siberia and the subsequent annexation of the region. They even started collecting signatures on the Internet asking them to refuse to lease land to China.
Attitudes towards Chinese activities among residents of Moscow and the Far East are different, says Gabuev. “On the ground there, judging by my travels, there are no real threats and no real level of local discontent about China,” he notes.

The Far East is waiting for Chinese investment in industry and transport. The official website of the Ministry of the Russian Federation for the Development of the Far East reported on April 5 that the Chinese side came up with an initiative to transfer a number of its enterprises in such industries as metallurgy, construction and cement production, energy, mechanical engineering, shipbuilding, chemical and textile to the territory of the Far Eastern regions industry, telecommunications and agriculture.

At a meeting of the directors of the departments of the Ministry of Eastern Development and the State Development Committee of the Russian Federation, Rustam Makarov and Zhou Jianping, a document was signed on the creation of a mechanism for regular consultations and exchange of information in the field of investment cooperation. Issues of attracting public and private Chinese investment into the regions of the Far East were discussed.

“We are ready to accept Chinese enterprises and create joint export-oriented production facilities in the Far Eastern territory”- said Rustam Makarov following the meeting.

“I am confident that through joint efforts we will be able to achieve results in the shortest possible time”- said his Chinese colleague.

At the meeting, plans for the creation of international transport corridors in the south of Primorsky Krai were also widely discussed. For this purpose, it was decided to hold a meeting in the near future with the participation of leading companies from China and Russia engaged in the transport sector.

An agreement on interaction between the departments was reached during the visit of the Minister of the Russian Federation for the Development of the Far East, Alexander Galushka, to Beijing and was recorded in the Memorandum of Understanding on strengthening Russian-Chinese regional, production and investment cooperation in the Far East.

Is this beneficial for us? Attracting investment, creating new industries and, as a consequence, jobs is, of course, beneficial. And then the question is how this will be implemented.

Immediately after the news was published on the website, there were reports in various media and blogs that China was seizing the Far East, moving hazardous industries to us and Chinese workers would work there. I will quote clarifications for the media from the Ministry of Eastern Development:

The interaction of the Russian Ministry of Eastern Development with the State Development Committee of China is based on mutual understanding on the following issues: 100% compliance with Russian legislation, at least 80% Russian labor force, unconditional priority of Russian suppliers and contractors.

“Russian environmental legislation is one of the strictest in the world,” Rustam Makarov emphasized. - No project that does not comply with environmental standards can be implemented by definition. There is no and cannot be a place for dirty industries in the Far East.”

Until recently, we were going to Europe and adopting all the very high European standards in the field of ecology, which is of course good. In China, environmental legislation is much more lenient.

Why does China need this? I will refer to the article by the expert of the “Experimental Creative Center” Yuri Byaly “China’s Economic War” published in the newspaper “Essence of Time” on December 9, 2015.

“Another big problem in China is the huge unused or incompletely used capacity for infrastructure, industrial, office and housing construction created in recent, “fat” years for the economy. Which, again, were created in anticipation of increased demand in the domestic and global markets and the previous high rates of economic growth.

The country's domestic market has developed very rapidly in recent years, in parallel with the growth in household incomes, and has indeed largely replaced, from an economic point of view, income from exports. That is, China's economy has become much less export-oriented. However, the domestic segment of the economy is unable to use the excess industrial capacity created for future use in a crisis.

China has recently been very actively developing the service sector as a “support” for economic development. And it is already receiving very serious results in this direction. However, again, the service sector cannot use a significant part of the country’s excess industrial capacity.

As a result, domestic investment in productive assets is steadily falling.

Previously, before the start of the current wave of the global crisis, the annual growth rate of capital investment reached 50%, and the growth of infrastructure investment exceeded 64% per year! And then the growth rate of capital investment began to decline, and in the last three years it has been declining steadily and quite quickly.

But once capital investment decreases, then at the same time and inevitably the demand for all industrial raw materials decreases. And, accordingly, on the products of the primary sectors of the economy, which are also experiencing an increasingly deeper impact of the crisis.

As a result, the only way to fully utilize the accumulated “excess” Chinese financial resources, as well as production and raw material capacities, is external expansion with foreign direct investment, as well as industrial and infrastructure projects.”

So we see the implementation in practice of what the expert is talking about. They are already planning to move unused production facilities, as well as implement large-scale transport projects. And Chinese business is very interested in this. Although the official ideology in the PRC is communist, they live economically according to Western standards, which means that a plant built and not operating is money invested and not generating profit. Investments are made in most cases using borrowed funds:

“The next economic problem in China is the huge volume of domestic and foreign loans acquired by Chinese corporations. These loans were taken out in anticipation of the world economy emerging from the crisis and further growth in exports and domestic consumption. Unfortunately, there was no way out of the crisis, but credit debts remained. Moreover, most of the loans (and, accordingly, debts) were actually hidden from control, since they went through “shadow” banking.

As a result, China has a very large combined external and internal debt, mostly accumulated by corporations. According to various estimates, which differ in “estimates” of the share of “shadow banking” in loans, this debt ranges from 3 to 5 trillion dollars, some analysts say almost $12 trillion. But even this is relatively small by global standards: most European countries have a debt-to-GDP ratio significantly higher than China. However, such a debt, taking into account its reliably unknown “shadow” component, calls into question the economic stability of many, including large, corporations and banks ».

In addition to ecology, the next topic for criticism can be boiled down to the assertion that we are selling the Far East to the Chinese. They will bring their workers there, since ours are much more expensive. Again, I quote the article:

“As a result of recent decades of rapid growth, the Chinese economy has delivered incredibly rapid growth in the prosperity of very large sections of the population.

As we can see, average salaries in China have grown 3 times over the decade, and taking into account the appreciation of the yuan - 4 times. And in terms of dollars, we exceeded $800 per month - a very respectable level for any developing country.”

Solid is not the right word, it turns out that the average salary in China at the dollar exchange rate of 68 rubles is equal to 54,400 rubles. Let's compare it with Russian salaries. The Business Life website reports that the average salary in the regions of Russia in 2015 was (thousand rubles):

Primorsky Krai 30.9
Khabarovsk Territory 32.0
Amur region 31.4

For example from our Southern Federal District:

Krasnodar region 23.5
Astrakhan region 24.9
Volgograd region 21.5
Rostov region 21.2

There can no longer be talk of any “high cost” of the domestic labor force. At least until oil costs more than $100, and no gypsy will tell you that.

Reading the comments of Russian legislators and the media on the message of the Ministry for the Development of the Far East about the possible transfer of Chinese enterprises to Russia, one might think that there really is no passage from Chinese investors in the Trans-Urals. A short piece of news that appeared in early April on the Ministry of Eastern Europe’s website that the department had discussed the potential for exporting production facilities from China to the Far East caused no less heated discussion than last year’s news about the lease of 115 thousand hectares of wild steppes in Transbaikalia to the Chinese.

Many deputies spoke out categorically against the construction of Chinese factories, believing that this would cause irreparable harm to the ecology of the region.

The media also did not remain aloof from the discussion. Rare attempts to give the floor to supporters and opponents of the initiative were predictably drowned in a barrage of negativity about dirty production, Chinese colonization and the inevitable annexation in the end. As often happens in discussions about Chinese expansion in the Trans-Urals, most participants did not bother to find out what and with whom the Minvost agreed in China.

It is clear that such fears do not arise out of nowhere. There are so many dirty plants and factories in Russia, and how many forests are being cut down. If it were not for active people, there would be much more of them.

In particular, only recently did residents of one of the districts of the Tula region contact the leader of the Spravoros faction, Sergei Mironov, through his Internet reception about a harmful asphalt plant that was poisoning everything around them. Mironov helped and the harmful plant was closed during the construction stage. But Mironov alone cannot close all harmful industries. But the state does not have a clear policy in this area, otherwise the asphalt plant in the Tula region simply would not have been built...

But with Chinese enterprises it’s not so clear

Disagreements at the highest level

According to senior officials of the Ministry of Eastern Affairs, the idea to discuss with Beijing the transfer of Chinese enterprises to the Far East was born in September 2015. Then Deputy Prime Minister Yuri Trutnev, who oversees the development of the Far Eastern Federal District, visited Dalian as part of the Meeting of New Champions, which is annually organized by the World Economic Forum (this site is often called the “summer Davos”). Trutnev spoke there together with the head of the State Committee for Reform and Development of China (formerly the State Planning Committee, which has become the main center for macro-regulation of the Chinese economy) Xu Shaoshi (徐绍史). Xu spoke about the circular of the State Council of the People's Republic of China, adopted the day before, “On promoting international cooperation in the field of production capacity and equipment manufacturing.”

It was in this speech that the Russian Deputy Prime Minister first heard about China’s plans to stimulate the transfer of production capacity abroad in twelve industries. At the same time, Trutnev instructed employees of the Ministry of Eastern Europe to quickly work out the issue with their Chinese colleagues. In November, the head of the department, Alexander Galushka, visited Beijing and met with the leaders of the State Committee for Reforms, proposing to record the interest of both parties in the potential attraction of Chinese production to the Far East. And on December 17, during Dmitry Medvedev’s visit to China, the two departments signed a memorandum of cooperation in the Far East, in which the transfer of industry became one of four topics for possible cooperation (along with the development of the Northern Sea Route, transportation of goods from the North-East of China through the ports of Primorye and attracting Chinese investors to priority development areas and the Free Port of Vladivostok). The April conversation between Rustam Makarov, director of the Ministry of Eastern Affairs’ department for attracting investment and supporting exports, and Zhou Jianping (周建平), director of the State Development Committee for the Development of Industrial Development in Northeast China, was, in fact, the first working consultations, and they cannot be called particularly substantive. According to officials familiar with the progress of the negotiations, at this meeting the Chinese agreed to discuss specific proposals when Moscow has them, but in the meantime they will seek the opinion of their regional authorities.

In the absence of big projects to brag about, officials often boast about declarations of intent (both Russian and Chinese bureaucrats are no exception, here the two “strategic partners” are among the world leaders). The Ministry of Eastern Europe also did the same, obviously not counting on such a strong reaction from the public. On April 7, Rustam Makarov appeared on the RBC TV channel to discuss the initiative with experts and repel criticism. He said that 80% of the workers will be citizens of the Russian Federation, the authorities will not reduce environmental requirements, and the products are expected to be sold on the “giant market” of the Asia-Pacific region. Later, the Ministry of Eastern Europe issued additional clarifications: the department will negotiate with other countries, and China does not intend to transfer industry exclusively to Russia. A study of data on why, where and how China intends to move industry shows that the Far East is not yet threatened by the industrial expansion of its giant neighbor.

Transfer rules

Historically, production is transferred to other countries mainly for three reasons: the cheapness of resources (usually labor), the development of new large markets and concern for the environment. Japan's industrial expansion into Asian countries illustrates this mechanism well. At first, production (for example, factories of Japanese auto industry giants like Toyota) moved to countries with cheap labor and low environmental standards, strengthening the competitiveness of Japanese cars in world markets, as well as the health of Japanese citizens. Then, in the countries where production was transferred, their own middle class arose: former cheap labor and their descendants turned into consumers. Accordingly, it makes sense to transfer production to countries with cheaper labor, a potential capacious market and low environmental standards (or declared high ones, but with the ability to resolve the issue for a moderate amount).

China has another important reason to think about relocating enterprises - the problem of excess capacity in industry, which Premier Li Keqiang (李克强) has recently been increasingly talking about. The most comprehensive study of this issue, prepared by the European Chamber of Commerce in China at the beginning of the year, clearly shows that in a number of industries, output is in no way related to market demand for the product. China produces far more cement, steel, paper, chemicals and more than it actually needs. Thus, in two years, 2011–2012, China produced more cement than the United States produced in the entire 20th century. But for the Chinese, this is far from a reason for the enthusiastic optimism and mischievous mood with which this fact is described in the Russian blogosphere. Uncompetitive enterprises are kept afloat through non-market loans to maintain social stability or for corruption reasons. Eliminating excess capacity has long been one of Beijing's strategic priorities.

In the circular of the State Council, which so inspired the Ministry of Eastern Europe, both logics can be traced: economic (entering new markets where there will be lower costs and new consumers) and socio-political (elimination of excess capacity and concern for the environment). The document does not directly talk about mechanical “transfer” anywhere. There, only in general terms, the priorities of “international cooperation” are described for twelve industries (steel industry, non-ferrous metallurgy, building materials, railway equipment, electric power, chemical industry, textiles, automobile industry, communications, construction equipment, aviation industry, shipbuilding), but in the case of each industry The recommendations of the State Council are different. For example, for light industry (13th paragraph of the circular) it is recommended to transfer production to “countries with suitable conditions,” the main ones of which are “significant labor resources, low cost, proximity to the target market.” And, for example, the State Council advises manufacturers of energy equipment (point 11) to concentrate on increasing the export of products made in China.

In general, Beijing advocates the construction of production facilities in new countries for industries with low margins and the level of necessary technologies (building materials, textiles) or with an eye to conquering large markets for mass products (automotive industry), and recommends that companies in more technological sectors limit themselves to the supply of Chinese equipment and placement there, if necessary, service centers and individual elements of the component base (R&D centers are recommended to be located only in countries that have the potential for this).

A similar approach is manifested, for example, in the only launched program for the transfer of Chinese production in the post-Soviet space - in Kazakhstan. In December 2014, during the visit of Premier Li Keqiang to Astana, an agreement in principle was reached to launch the program; the parties announced fifty-two projects totaling $24 billion. In March 2015, before the forum in Boao, Kazakh Prime Minister Karim Masimov (a professional sinologist, an excellent speaker in Chinese) signed several agreements worth $14 billion with Li Keqiang, and already in December, when welcoming Masimov in Beijing, Li spoke about the first results. Enterprises for the production of building materials (cement, glass, metal structures), agricultural processing, non-ferrous metallurgy, textile production, as well as in the energy sector (nuclear fuel production, renewable energy sources, electrical networks) will be transferred to Kazakhstan. “Car assembly, polypropylene production have already been launched, the light metro in Astana should be launched before the end of the year,” said Li Keqiang (these statements, judging by the recent start of construction, are still not entirely true).

Even more material for understanding how the “transfer of enterprises the Chinese way” functions comes from Africa, where entrepreneurs from the PRC began building factories long before the State Council became concerned with regulating this area and issuing relevant circulars. According to Chinese statistics, at the end of 2014, over three thousand enterprises with Chinese capital operated in Africa, and twenty special trade and investment zones attracted over 360 industrial enterprises. In addition to hydrocarbon production and mineral development, the Chinese are building factories in Africa for the production of building materials, household appliances, mechanical engineering and light industry enterprises.

As the most authoritative expert on the Chinese presence in Africa, a professor at the University named after A. Johns Hopkins Deborah Brautigam, in the 2000s, businessmen from China, when choosing places to create industrial enterprises, were guided by the same principles - cheap labor, the growth potential of the local market, and the ability not to pay too much attention to environmental standards. By the way, as field research by Brautigam and her team shows, at most Chinese enterprises in Africa the majority of workers are local, so she calls rumors about the “yellow colonization” of Africa a myth.

Is the Far East in danger?

Armed with knowledge of China's experience setting up factories abroad, as well as statistics, it is possible to assess whether the Far East is suitable for good-neighbourly industrial expansion.

First of all, it is necessary to evaluate the experience already accumulated - after all, the Chinese began building factories in Africa before any orders from Beijing. Due to the transfer of statistics on foreign direct investment from Rosstat to the Central Bank, there is now confusion in the accounting of regional data. However, the statistics available for previous years convincingly show that the Chinese are not eager to invest in the Far East. According to Rosstat data for 2013, the seven largest investors in the Far Eastern Federal District look like this: Japan ($2.34 billion, mainly investments in gas projects in Sakhalin), the Bahamas ($714.8 million), the Netherlands ($525 million), Austria ( $500 million), Cyprus ($495.7 million), India ($462 million), Germany ($440 million). The report on foreign investment in the Far East, released by CEFIR in 2013, commissioned by the Canadian Kinross and the Foreign Investment Advisory Council of the Russian Federation, indicates that in 2011, up to 44% of foreign enterprises in the Far East were Chinese, but these were mainly small farms, trading companies or catering outlets. Judging by the available data, the Chinese have not made any attempts to establish industrial enterprises larger than a sawmill in the Far East.

What are the reasons? The first and main thing is a small domestic market in the Far East. Less than 6.2 million people live in the Far Eastern Federal District, which occupies a third of the territory of the largest country in the world, and the population continues to decline due to migration outflow. The distance from the European part of Russia makes the transportation of goods produced in the Far East extremely expensive, and the production itself is economically unjustified. That is why AvtoVAZ transported its cars to the region at a special subsidized rate. In the same way, taxpayers subsidize the return delivery of goods collected near Vladivostok at the Sollers plant. And that is why the Ministry of Eastern Europe itself, luring investors into priority development areas, relies on exports.

From the point of view of cheap and abundant labor, the Far East is also clearly not Africa. The economically active population is just under 3.4 million people, and the unemployment rate is only 5.4%. Salaries in the most populated subject of the Far Eastern Federal District, the Primorsky Territory, in 2014, even after devaluation, were only equal to the level of salaries in the province of Heilongjiang (黑龙江), bordering the Russian Federation: 28,277 rubles per month ($426) versus 2,278 yuan per month ($429). But already in 2015, the average salary in Primorye was 33,811 rubles (about $509), data for China has not yet been published, but due to the summer devaluation in dollar terms, salaries in the Northeast of China will most likely again be more competitive.

Social aspects are also important. In Northeast China, unemployment is relatively low. According to 2014 data, in Heilongjiang (黑龙江) it was 4.5%, in Jilin (吉林) 3.4%, in Liaoning (辽宁) - 3.4%, and in the Inner Mongolia Autonomous Region (IAR) – 3.6%. At the same time, as data from the China Labor Bulletin show, all four provinces have recently been an important part of the growing strike movement in China. Local authorities know firsthand the dangers of strikes: in March, Heilongjiang Governor Lu Hao (陆昊) came under fire for unrest at local coal mines. It is unlikely that in this situation the authorities of Northeast China will be happy with the initiative of their Russian colleagues, which could deprive them of at least some jobs.

If we assume that the Chinese enterprises that the Ministry of Eastern Europe plans to locate in the Far Eastern Federal District will export to the Asia-Pacific region, then products, logically, will have to be aimed at all countries in the region, except Russia and China (from where the factories, in fact, are supposed to be transferred) . The trouble is that the Northeast of China is one of the least export-oriented Chinese regions. Only Liaoning ranks among China's top 10 exporting provinces, while Heilongjiang ranks no higher than 21st, Inner Mongolia ranks no higher than 24th, and Jilin ranks 25th.

Probably, not so long ago, Beijing could have turned a blind eye if one of the local bosses had dared to conquer Russian neighbors with factories using borrowed money from state institutions like the China Development Bank or the Export-Import Bank. It was these two institutions, according to Brautigam's research, that played an important role in the process of industrial development in Africa. The significant role that “political banks” have to play is also mentioned in last year’s SCRR circular (paragraph 32). The problem is that both banks are now at the center of an anti-corruption campaign, as well as Beijing's efforts to make state-owned banks more efficient and prevent bad debts from mounting. That is why in Russia these banks can finance projects of President Vladimir Putin’s friends like Yamal LNG, but one can hardly expect massive loans from them for projects in the Far Eastern Federal District without regard to economic logic.

Thus, defenders of the industrial virginity of the Far East should not be afraid of the initiative announced by the Ministry of Eastern Europe. In terms of implementation, it will most likely go no further than the cooperation program between the Far Eastern Federal District and the North-East of China signed in 2009 by Dmitry Medvedev and Hu Jintao, which Moscow and Beijing now prefer not to remember. If at least a few Chinese enterprises appear in the Far East in a couple of years, this can already be considered a great success. Anti-Chinese phobias themselves are much more dangerous for the development of the region, when people are ready to panic at the appearance of any chimera born in bureaucratic offices. The alarm bells are scaring off real investors and drowning out calls for a radical improvement in the investment climate through structural reforms.