China-Russia Bilateral Trade To Expand With Alibaba – Russia E-Commerce JV

Sino-Russian bilateral trade to significantly increase with new joint venture

Op/Ed by Chris Devonshire-Ellis 

The creation of a new joint venture between Russia’s State Owned Direct Investment Fund (RDIF), the Russian search engine and email account company Mail.ru Group, China’s Alibaba and Russia’s mobile phone network operator Megafon will help achieve the level of US$200 billion in bilateral trade between the two countries set by the Presidents of Russia and China, Head of RDIF Kirill Dmitriev has said in an interview.

“This is a company that will also allow many Russian entrepreneurs to gain access to a billion customers in Asian markets, will help achieve the level of US$200 billion in goods turnover set by our leaders. It is very important that this company will also create many jobs in Russia.” he said.

On October 9, RDIF, Mail.ru Group, Alibaba, and Megafon completed a deal to set up a joint venture (JV) in the social e-commerce in Russia and the CIS countries. It was noted that AliExpress Russia JV (AER JV) is majority owned by Russian shareholders with a Board of Directors comprised of representation from RDIF, Alibaba Group, MegaFon and Mail.ru Group. Boris Dobrodeev will be the Chairman of AliExpress Russia JV Board of Directors. The parties have appointed two Co-CEOs — AliExpress Russia Head Liu Wei and First Deputy Chief Executive Officer of Mail.ru Group Dmitry Sergeev.

As part of the shareholder collaboration, the AliExpress Russia JV and Mail.ru Group entered into a strategic cooperation agreement relating to, among other things, user traffic and product initiatives. The AliExpress Russia JV will be featured on Mail.ru Group’s platforms through exclusive product integration and marketing solutions.

According to RDIF CEO Kirill Dmitriev, the partnership already provides access to e-commerce services for more than 50% of Russian population, and Russian suppliers have the opportunity to reach 1.5 billion customers in China and globally.

In June, RDIF, Alibaba, Megafon and Mail.ru Group have signed a final agreement on creating a joint venture AliExpress Russia to integrate key Russian consumer Internet and e-commerce platforms.

The share of Megafon in AliExpress Russia will be 24.3%, RDIF — 12.9%, Mail.ru — 15%. Alibaba Group will invest $100 mln and will become part of AliExpress joint venture business in Russia, which includes the current local and cross-border activities of the international e-commerce platform AliExpress.

Russian consumers have pent up demand following sanctions imposed by the United States and European Union. Accessing Chinese products online will help service this demand. Meanwhile, Russia has become an in-demand destination for Chinese tourists, with such visitors now contributing about US$1 billion per annum on visits to Russia. Russia has put into place a “China friendly” tourism programme, that is luring Chinese visitors away from popular EU destinations such as Milan by offering lower prices for tours and lower duties on luxury goods than the EU provides.

While many China commentators based in Beijing and Shanghai have been concentrating on the US Trade war, the tangible development opportunities are taking place between China and Russia, not China and Washington. It is arguable that one impacts upon the other. China-US bilateral trade is continuing to fall – bilateral trade between China and the United States fell by 15% in the first six months of this year, while China-Russia bilateral trade rose by 20% over the same period. Businesses involved in the China economic space need to be looking at alternative growth markets, and supplying the Russian consumer base is one of them.

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