China-Russia Trade
Name:Yang Fei Student ID：S07331
Research paper supervisor:Dr.Seku Conde
Minzu University of China
2007-2008 Academic Year
Abstract: Special attention is paid to developments in the transition era. Quantitative data are examined to evaluate bilateral trade and investment activities in a comparative context. Both the level and composition of trade are evaluated. Potential for labor flows from China to Russia are assessed, and economic data on the border regions are examined to describe interaction at the regional level. Future trends in Chinese-Russian economic relations are projected.
Key words: China Russia Trade energy
Introduction
Earliest contacts between Russia and China in the Amur River basin occurred in the 17th century as the Russian empire expanded eastward across northern Asia. A long stretch of the Amur along with two tributaries, the Argun and the Ussuri, mark the contemporary border between China and Russia. Although there is also a short border west of Mongolia, it is commercially insignificant because the regions in both countries here 2 are remote, undeveloped and thinly populated. The main border interactions between the countries occur along the Russian frontier with northeast China.
Despite sharing a long frontier, the volume of trade in the early years between China and Russia was limited by the difficulty of the two long land routes that connected the population centers of the two countries. It could take as long as three years to complete a trip by rivers and overland caravan between Moscow and Beijing (Gilbert1993). In the late 19th century, construction of railways in Manchuria, 4 Siberia and the Russian Far East and the establishment of sea routes between the countries greatly reduced this impediment to commercial relations. A number of developments in the mid 1980s led to re-opening of economic ties between China and Russia, and trade increased substantially in the 1990s. Fundamental to this shift were the economic transitions in each country and resolution of the strategic tension between them. Liberalization of economic activity and privatization of state enterprises radically shifted economic forces underlying foreign trade.
General situation of the trade
A. Bilateral Trade Volume:
In examining trade patterns evolving between China and Russia, it is useful to have perspective on the degree to which each country is integrated with the world economy. One standard measure is international trade volume relative to GDP. In 2002, this measure was 49% for China and 59% for Russia. For both countries, these figures represent recent observations of a clear trend of increasing international economic integration. A similar pattern is evident in the trends of other measures from these countries' balance of payments accounts relative to GDP. Over the past two decades, both have become distinctly more integrated into the world economy. It is not surprising, then, that they are increasingly integrated with each other, but the details of bilateral trends are nonetheless interesting.
We first consider the levels and shares of aggregate exports and imports between China and Russia from 1985 to 2002. Data are contained in Table2 and partially illustrated in Figure 1. For comparative perspective, Tables 3A and 3B contain trade shares and ranks with trading partners in the northwest Pacific (China, Japan, Korea and Russia) as well as the major trading partners for Russia and China respectively.
The basic story of bilateral trade is expansion across the period starting from very low levels in 1985. Trade volume increased by 436%, dominated by the growth of Russian exports to China. This pattern is clearly evident in Figure 1, which presents the Chinese data on trade with Russia. The temporary peak in 1993 is primarily due to a surge in regional trade, which fell off when stricter border regulations and restrictive trade policies were established.
Figure 1 presents the Chinese data alone because there are considerable discrepancies with the Russian data, and intuition suggests the Chinese figures are closer to the truth. The last two rows in Table 2 calculate the relative difference between the two series on bilateral trade. Export data are reported on an f.o.b, basis while imports are reported using c.i.f. Statisticians apply a rule of thumb that insurance and freight run around 10% of value, so we should expect to see bilateral imports reported by China and Russia about 10% above exports reported by Russia and China, respectively. This pattern held closely from 1985 to 1991 (with the exception of 1989), but as the post-Soviet era unfolded, large divergences between the data emerged. The Russian numbers understate trade activity relative to the Chinese data. As there is no apparent reason to overstate trade activity, but evasion of tariffs and other trade restrictions provide incentives to understate it, our working assumption is that the Chinese data are more accurate. Thornton also has noted such discrepancies (1998). Anecdotal evidence indicates that significant Russian export of fish products in particular (especially important for the Russian Far East) are not reported to Russian authorities. Data on trade in apparel and footwear also show under reporting by Russia. More detective work and analysis is needed to resolve the significant discrepancies in the aggregate trade statistics. Some are probably due to smuggling.
Trends in shares of total trade comprised of bilateral trade tell an interesting story. For China, Russia has declined in relative importance, especially as regards Chinese exports. Although overall trade has increased, China's integration with the rest of the world has moved ahead more rapidly than its integration with Russia, as measured by foreign trade. On the other hand, China's place in Russia's trade has become more prominent. This trend is evident in the Soviet period, but it is difficult to judge for later years. From 1992 to 2002, shares of exports to and imports from China decline and rise again, and are at higher levels than in the Soviet period. But the data are not strictly comparable; figures prior to 1992 are for the entire Soviet Union.
If 6% of Russian exports went to China in 2002, how large is this in relation to Russia's major trading partners, and how does it compare to Russia's trade with other countries in the northwest Pacific region? Table 3A presents comparisons. Data since 1992 put China in 3rd or 5th place as a destination for Russian exports. As a source of imports, China is less important in both shares and ranking. Interestingly, between the Soviet and post-Soviet periods, China and Japan have switched relative positions in Russia's foreign trade. Germany has remained the number one trading partner of Russia. The volume of Russian trade with Germany in 2002 was roughly twice the volume of trade with China.
As the Russian share of China's exports declined, Russia's rank fell from 4th to 17th (table 3B). Russia's share and ranking as an import source for China, on the other hand, remained rather constant, at around 3% and 5th place. China's 2002 trade volume with Russia was only around 1/10 of its volume with either the United States or Japan, China's top trading partners. An interesting fact revealed in these share data is that China's trade activity, especially exporting, is more concentrated than is the case for Russia. In 2002, Japan and the United States accounted for 42% of China's exports and 25% of imports, while Germany and Italy received around 15% of Russian exports, and Russia received around 22% of its imports from Germany and Ukraine.
B. Commodity Composition of Trade:
One finds both continuity and change in the commodities that comprise trade between China and Russia. As noted above, the main trade pattern recently has been consumer goods exported from China to Russia (63% of total in 2002) while intermediate industrial goods and natural resource products dominate exports from Russia to China (65% of total in 2002). Commodities prominent in China's export to Russia are: apparel & textiles, finished leather goods, footwear and meat &prepared foods. Key Russian exports to China include: metals, chemicals, fields, forestry products and fish. Details on the commodity structure of trade and its evolution are contained in Table 4 and illustrated in Figure 2. Comprehensive data on commodity composition published by the Chinese customs administration are the basis of Table 4. Chinese statistics follow the Harmonized System of commodity classification established by the World Customs Organization, using 22 broad aggregates, or Sections, which are comprised of 96 divisions. Commodity composition at the division level is excessively detailed for the present article, yet reporting at the Section level obscures some relevant information. To sharpen distinctions, data in Table 4 are classified using a system slightly reconfigured from that used in China's reporting. Data for earlier years are re-aggregated and reported in the same categories to allow direct comparisons across 1995 to 2002.2Product groups that comprise 5% or more of total trade activity in 2002 are broken out here.
In addition to Section I, Sections IV (Prepared Foods) and XVI (Machinery) have certain divisions with a surplus/deficit pattern that diverges significantly from that for the Section as a whole. Such divisions can be found in many other Sections, but only in the three mentioned do divergent divisions comprise a significant share of the trade volume (over 10% of the Section [...]
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