Russian & Chinese Banks Pursuing Eurasian Economic Union / Belt & Road Project Integration

More Joint Financing as China Looks To Russia To Replace US Produced Trade War Affected Products

Op/Ed by Chris Devonshire-Ellis

Russia’s VEB Bank, which acts as the National Development Bank, has been stepping up interaction with its Chinese strategic partner the China Development Bank (CDB) to better align the development strategies of the two countries.

VEB’s First Deputy Chairman Nikolai Tsekhomsky, stating that “Russia has excellent relations with China’s development institutions. We are interested in jointly investing in projects as part of the process of pairing the Eurasian Economic Union with the Belt and Road Initiative.
The task of the development banks is not only to directly participate in the largest projects within the framework of these integration initiatives, but also to create the necessary financial infrastructure for the active involvement of market players, to reduce barriers and simplify procedures.” he said.

VEB and CDB are discussing project financing for railway transport and shipping by the Northern Sea Route, Tsekhomsky said, adding that the most important element is financing the production of Arctic-capable vessels being built at Russia’s Zvezda shipyard.

According to Tsekhomsky, the Russian and Chinese governments are compiling a list of more than 70 investment projects that are of priority importance for both countries and attractive to investors, while the VEB and the CDB have been assigned the role to evaluate them. During meetings in China last week, VEB presented Russian projects involving a timber industry complex, the creation of the Eastern Grain Gate port terminal, and the construction of the Meridian highway.

Tsekhomsky said “We have gathered a large number of participants under the CDB’s umbrella. This round of meetings was the first shot, and we plan to hold joint Russian-Chinese investment proposal meetings in this format on a regular basis. Our task is to find all areas of cooperation attractive to Chinese partners. I am sure that our joint projects will serve the people in our countries. New investment means new jobs and new opportunities for economic development.”

The linking of the Eurasian Economic Union with the Belt & Road Initiative has already effectively taken place, as the members states of the Union – Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia have all signed off Belt & Road MoU with China. The next development stage of the EAEU with China is the detailing of products and services to be part of the Free Trade Agreement that China signed off with the EAEU last year. Thus far no products are included, but when this changes, trade between the two will massively increase. The EAEU sits between Western China and Eastern Europe. Serbia and Vietnam also have Free Trade Agreements with the Union and these do include products.

The two countries also launched two developments funds recently, the Far East Regional RMB Development Fund is a US$1 billion fund that specializes in financing projects in Far East Russia and North-East China. That is attracting immediate interest, which will be enhanced when the Harbin Free Trade Zone, which is being developed to incentivize and service increasing amounts of Russian trade kicks in. The other fund is a joint stock Sino-Russian Research & Technology Innovation Fund, partially aimed to support Russian and Chinese SME’s in the technology sector. Both countries are advanced in this field but want to move away from reliance on US technologies.

Russian-Chinese bilateral trade is expected to double in the next four years to US$200 billion as both countries look to limit their exposure to United States politics, trade and production in coming years. The consumer demand for hi-tech products such as smartphones in China and Russia is far higher than that in the United States, which has about 20% of the global supply chain market. Moving away from the US political use of trade as a weapon is a core feature of both countries national development strategy.

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