China and the World

Shopping money

Border town pioneers use of Russian currency

Shopping w

Stocking up in Suifenhe

“The United States is not a parasite on the world economy”, Russian president Vladimir Putin told Chinese media two years ago. “But the US dollar’s monopoly is a parasite,” he insisted, according to reports in Xinhua.

Graciously Putin then explained that he was making the point in hope of finding solutions to problems in the world economy. So he might have been pleased to hear about the launch of a pilot project in the city of Suifenhe in Heilongjiang province last month which now permits the locals to buy and sell products using the Russian rouble.

Suifenhe has launched a trade zone that Russian citizens can visit without visas. But now they will be able to pay for goods and services there with their own currency too. Chinese residents also have permission to use roubles at local banks.

The media coverage of the programme has been muted despite being reported as the first time since the founding of modern China that foreign currency has been allowed to circulate freely on Chinese soil.

Because Suifenhe is visited daily by hundreds of Russian nationals, there is already a thriving grey market in foreign exchange. But bigger picture, the speculation is that the experiment could be repeated elsewhere in the border region. The local boss of the People’s Bank of China has said that the authorities want to standardise the currency market in cross-border towns like Suifenhe but expect Russian cities to promote the renminbi too.

Of course, governments in both countries would like to see less of a role for the US dollar as a global trade and investment currency. Both share an instinctive antipathy to American pre-eminence in the post-Cold War order, showing solidarity in their BRICS status and often taking a common stance in opposing votes at the United Nations on intervention in the affairs of sovereign states.

Russia was one of the first to forge ties with the Chinese, opening what Henry Kissinger describes as the first “de facto” foreign embassy in China in 1715. But interests are not irretrievably aligned. China is now a huge rival in Moscow’s former spheres of influence in the Central Asian republics, for instance, while Beijing looks coldly at Russian deals with Vietnam to develop oil and gas resources in disputed areas of the South China Sea. Moscow has been selling submarines to Vietnam’s navy too.

At least cross-border trade in places like Suifenhe offers mutual benefit. But the situation on the two sides of the 2,600-mile frontier is rather different. While more than 110 million people live in the three Chinese provinces adjoining Russia, fewer than five million Russians look back from across the border. It’s the kind of population mismatch that has prompted thousands of Chinese migrants to try their luck farming in Russia (see WiC176).

Other imbalances also shape Sino-Russian economic ties. China replaced Germany as Russia’s leading trade partner two years ago and the two countries are targeting $100 billion of trade this year. But Russia is a much less significant commercial counterpart for the Chinese than the European Union, the United States or Japan. Moscow hopes to close some of the gap exporting the raw materials that China needs. Mineral resources, timber, chemical products and metals make up the major share of sales, while imports consist mainly of machinery and transport equipment, textiles, footwear and food.

The key sphere for investment cooperation between the two nations is the energy sector, although progress on some deals has been desperately slow after disputes about how to shoulder pipeline costs. At the end of last year Russian giant Gazprom missed another deadline for signing a massive gas deal that WiC first mentioned in issue 35, for instance.

Despite this, shares at PetroChina were rising this week on hopes that agreement on pricing is imminent. That might have been prompted by warnings from the Chinese that they don’t need the gas as much as they did when negotiations began 10 years ago, having established alternative arrangements with central Asia and Myanmar.


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.