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Russian-Chinese Economic Cooperation: Opportunities and Obstacles in the New Conditions

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The large-scale sanctions that have been slapped on Russia by the “collective West” naturally raised the question of its deepening and expanding economic relations with China. According to a number of parameters, Russia has no alternatives to cooperation with the PRC, or at least these are the most optimal. Such cooperation can be supported by the unprecedentedly high level of political relations, their already established economic partnership, Russia’s objective need for Chinese goods and technologies, and China’s reciprocal interest in Russia’s free market. The growing rivalry between China and the United States is also playing a role. At the same time, Russia should be prepared for the fact that the process of economic convergence will be difficult. The risk of secondary US sanctions against Chinese companies should be taken very seriously. China is highly integrated with the global economy. The risk of losing markets in the US, the EU or other countries as a result of restrictive measures is a serious factor, evoking caution among Chinese business in their relations with Russia.

Moscow’s need for deepening Russian-Chinese economic relations after February 24, 2022 is determined by the following tasks:

First, Russia needs to replace Western imports in its market, the supply of which has stopped due to foreign trade sanctions or informal boycotts. This is especially true of hi-tech goods and industrial equipment. They include electronics, equipment for oil refining, various types of machine tools, machines and parts for them. Chinese industry is the most diversified among the countries which remain friendly to Russia and can potentially be a source of such supplies, and in the long term, a base for creating more complex value chains.

Second, Russia needs markets for its exports, which are being consistently squeezed out of the EU, the US and other countries. Among the key items are oil, coal, ferrous metallurgy products, and over the long term—gas and other goods. Although China is unlikely to take over the entire volume of released exports, its market will play a key role.

Third, Russia needs an efficient mechanism for conducting financial transactions with foreign partners. The minimum task is to build reliable financial mechanisms for bilateral trade. A more complex task is the use of the renminbi for transactions with third countries. Both tasks are difficult to accomplish, but vital for partnership with China amid the new conditions.

China may be interested in developing relations with Russia due to the following conditions:

First, the sanctions free up significant market niches in the Russian market. Previously, they were difficult to occupy due to Russia’s well-established ties with Western partners. Today, there is an immediate liberation of the Russian market due to formal sanctions and informal corporate boycotts. Of course, the Russian market is incomparable with the US and EU markets. It will shrink due to the inevitable economic downturn caused by extreme economic pressures. However, even amid such conditions, the domestic market provides new opportunities for Chinese companies.

Second, China has the opportunity to obtain significant volumes of Russian raw materials at a discount. Russia will play an important role in diversifying the sources of raw materials for the Chinese economy.

Third, China can gradually strengthen its role as a major international financial centre. If the renminbi becomes the key currency of international transactions for Russia, this role of China will inevitably grow.

There are several factors that will contribute to the development of Russian-Chinese cooperation.

First of all, the already-accumulated volume of trade and economic relations should be noted. They form a solid base for further growth. The political climate is also important. If in relations with the EU and other Western players, mutually beneficial trade in the past decade and a half has been increasingly under pressure from political factors, then in relations with China, political conditions have been improving all these years. By themselves, they do not guarantee a breakthrough in the trade and economic sphere. However, they are a solid foundation for their development. Ultimately, it was politics that became the main reason for the collapse of relations between Russia and the West in the field of economics and trade. The broader context of Russian-Chinese relations also plays a role. American rhetoric against the PRC was scaled down since Donald Trump left office. However, the political and economic contradictions between China and the United States have not gone away. Beijing and Washington are strategic rivals. The crisis in relations between Russia and the West provides China with an opportunity to strengthen its position through a deeper partnership with Russia. The decline of the Russian economy is not beneficial to China.

There are also a number of difficulties. The first is related to the ongoing COVID-19 pandemic. China has experienced a new wave of the pandemic. The PRC authorities are forced to maintain a high level of restrictions, associated with business contacts. Sooner or later, the epidemic will cease to be a deterrent, but it prevents the immediate development of cooperation, which requires extensive human contact.

The second difficulty is more significant. Chinese businesses are afraid of secondary sanctions, as well as administrative and criminal prosecution by the US authorities if they violate the US sanctions regime, as well as the restrictive measures of other countries. Such a situation may arise, for example, in the case of mutual settlements between Chinese companies and Russian counterparties under sanctions in US dollars or even euros. Another scenario is the supply to Russia of goods that are produced in China under an American license and at the same time fall under US export control (for example, electronics). The resonant criminal and administrative prosecution by the US authorities of the Chinese company ZTE apparently had a serious psychological impact on Chinese business. The United States accused ZTE of supplying equipment with American components to Iran without permission and bypassing the US export control regime. As a result, ZTE pledged to pay more than $1 billion in fines to several US government agencies. The US authorities’ attempt to prosecute HUAWEI CFO Meng Wanzhou had a similar effect.

We can talk about the same effect in connection with the blocking sanctions of the US Treasury against the Chinese company COSCO SHIPPING Tanker for the alleged transportation of Iranian oil (however, the company was able to quickly have the sanctions lifted administratively). The risks of secondary sanctions and coercive measures are forcing Chinese businesses to carefully evaluate options when considering cooperation with Russia. A particularly thorough analysis is being carried out by companies that are actively working in the US and EU markets.

At the same time, secondary sanctions and coercive measures alone are unlikely to stop the growth of trade relations between Russia and China amid the new conditions. The export control of foreign countries does not apply to those goods that China produces using its own technology, and there are more and more products like this. Financial sanctions are unlikely to affect Russian and Chinese businesses in the event of transactions being conducted in renminbi outside the contours of the American financial system. That is, trading in national currencies will mitigate their impact. The Chinese authorities are actively modernising their legislation aimed at protecting Chinese firms from Western sanctions. There is no doubt that the risk of secondary sanctions and enforcement measures will be significant in the medium term. Russian business should be sympathetic to the caution of their Chinese partners. At the same time, operational work on financial mechanisms for mutual settlements and the development of market niches not related to Western technologies will provide more opportunities in the long term.

An important fundamental factor for further cooperation is knowledge of the Chinese language, culture and law. The lack of such competencies will prevent Russian businesses from seeking markets in China, attracting Chinese investments and suppliers, or conducting effective negotiations. Chinese businessmen in Russia, for their part, are quickly mastering the Russian language. The development of cultural competencies, at first glance, is secondary in comparison with financial infrastructure, transport corridors and other conditions. However, without them it will be difficult to count on the full development of our relations for decades to come.

From our partner RIAC

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Economy

World Order Is Old Order: New World Order Is No Order

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The grand hallucinations: When there is any order, it always becomes visible as an orderly progression, when it is supposed to be a secret or an invisible order, then it is grand hallucinations for a cult of illusionists. Observe how the World Order is an old order, and notice how the new world order is no order. The random engagements in illusionary cultish acts of chaos sold as order. Fakery sold and resold as victory, illusions pushed as hallucinations of success. Courage is needed to see the big magical acts of grand hallucinations.

The feel of afternoon-high: Across the world, free economies are already bent, twisted or broken, while procedures, policies and laws, everything on sale for the right price. Mighty-money, delivered crisply stacked, shrink-wrapped as freshly printed solutions, to buy more chaos, spread misery and create the economic hallucinations and stage the smoke and mirrors, all without any totals, balances or columns. Sold to feel a real afternoon-high.

The interchange: When integrity gone, fakery dominates, when real value-creation gone value-manipulation regulates, when vision gone illusions thrives, when national economics gone hallucinations declared as great success and reality interchanges to fakery.  

The elasticity left: Needed across the free economies of the world, no further proof required, a total change, no further verification needed, as political power no longer economical power, no further help needed, as most nations in need of basic diaper change. Visible damage to skills and competency, inability to understand and articulate the real problems with grassroots solutions is now a big tragedy of our times. Nations already stretched via rubber band economy, some with elasticity left before going bust.

The truth: Which nation has the capacity to face the truth? Which nation can fix itself not just top reshuffle, but rather from top to bottom to the real core? Which nation can uplift its citizenry to stand up to global age skills and cope with global speed and competitiveness? Which nation is capable of understanding and has the right to mobilize its hidden national entrepreneurialism and provide a future for the next generation?

No electricity and missing bulbs: Is there any value left in the most cherished Machiavellian style political power without ever creating any economic power? Is there any remaining value in economic power play of today without entrepreneurial growth models? What good are economies when stuck in waste paper baskets still without digitization like a nation being without electricity? What real economic value is created when odd mindsets playing with economic development procedures like creating light but with no bulb?  

Welcome to cold facts and warm realties.

The branded nations: Why each and every single nation of our planet is now branded every single day of the year? Like it or not, agree with what is said, disagree with what gossiped, simple fact of the day,  each nation is branded, between each sunrise and sunset. Here is some advanced level insight for the national leaderships on global corporate communication challenges, as what may be altering their efforts on global affairs, what might mold their global trades as the deep undercurrents of global ‘likes’ and ‘dislikes’ from the global populace shape their national global image and rate of popularly and any level of respect on world stage.

The global opinion: Observe how fast the world changed, how the ocean of “global opinion” is now drowning ponds of “national opinion”. Notice, nations already intoxicated, in joy over the popularity of their own national opinion, while having just an opposite global opinion on the world stage. What does this mean to a nation’s image supremacy, how does this translate into economic impacts? Why is any global opinion of any kind important anyway? Be cautious, if such important topics are not discussed in your boardrooms, check out the restrooms.

The fabric of humankind. Every huge, little, deadly, serious or funny incident of any kind, becomes ‘alive’ in global social media, where despite all controls its is processed with common sense with common emotions, commented and circulated around the world, many times, registered, measured, analyzed, criticized and humanized as good, bad or ugly in the minds of the global populace.  No one can stop it. Facing truth is now a new global challenge of moral strength, something that increasingly demands insight and awareness. Shunning, arguing or defending and fighting has little or no power, as the real power hidden is in critical thinking to solve common good, humankind issues.   

The 200 nations, now under their own global digital spell, responding, and adjusting their own feedback and updating reality checks, influenced by the five billion, connected populace driving the world opinion.  The voices are no longer the big old-media, as they have already lost their credibility and power,  but across the world the new known and unknown big and small clusters of people sharing their thoughts amongst their local and global connectivity and surroundings. The truth rises, because this is how the critical needs for common good and social justice advances. The fabric of humankind stretches, starts to cover all nations.

Weaponization of Ideologicalism:  Why are most nations increasingly unable to control their restless citizenry? How much more will the citizens of these nations, continuously influenced by the global opinion, facing common sense, chasing truth, turning internal tribalism, into cultural wars defining limits of ideologies, as Weaponization of Ideologicalism slowly ripping local social fabric and crushing economies. Where are the repairmen, where are the solutions, which leadership is ready to articulate and bring national mobilization of entrepreneurialism as an untapped national treasure. Which nation is ready to face reality and show their advanced skills?

The aimless directives: When nations appear aimlessly drifting into hallucinations, the lack of vision, absence of social justice, unable to control internal tribalism, cultural wars move to ideological wars. Nations fragmented and splintered, now facing street by street mental wars. The visible lack of skills at the top management, lack of speed of execution at middle level and the absence of any motivation at remaining workforces now seriously limits all new options.

The coming revolution: The next global revolution, driven by economic chaos based on social failures, while the middle classes already disappeared, may not be about the mobs of commoners with broom-sticks but most likely the imploding calm and silent systemic collapse of bureaucratic administrative blockades and fall of economic intellectualism for destroying the fabric of humankind.

The absence of dialogue, only proves lack of real pragmatic solutions, skills and competence. Electioneering, sloganeering and fakery of wars to remain in power with no real economic solution, in global opinion a colossal failure.  Therefore, “Self Mastery” urgently needed to differentiate between a mesmerized mind with an enlightened one will possibly be a way to face the new challenges. Economies will only improve when old methodologies declared broken

The new world order: No other time in the history of civilization, so many globally connected will hold responsible the so few in power for destroying the remains of world order and bringing the world to a nuclear war.  A war, suggested to eliminate five billion people. It is possible, the coming revolutions to be less about anarchy but more about establishing real meritocracy. The need to search, find and strive for real value creation to answers grassroots prosperity affairs and eliminate lingering bureaucracies with fermented layers of incompetency. How soon will the five billion connected reach a critical point to select the right players with right policies and declare common good the new ultimate goals? This may eventually lead to a new world order. Pandemic was just a sneeze, economy, now like a hole in the empty pocket, leadership like a circus show, while billions looking up. Acquire mastery. Get ready for major global shifts of major economic behaviorism. The rest is easy. 

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Mosul’s recovery moves towards a circular economy

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Five years since the end of the ISIL(so-called Islamic State in Iraq and the Levant) conflict in 2017, the International Organization for Migration (IOM) in Iraq and the UN Environment Programme (UNEP), with funding from the Government of Japan, has established a debris recycling centre in Mosul. After its initial use, the centre has now been handed over to Mosul Municipality for its continued, sustainable operation.

“On behalf of the Iraqi Government, the Ministry of Environment expresses its gratitude to the Government of Japan for generously supporting this important project and to UNEP and IOM for enabling the sustainable management of the huge quantities of conflict debris and restabilization of the liberated areas in an environmentally sustainable manner,” said Iraq’s Minister for Environment, Dr. Jasim Abdulazeez Humadi.

The handover of the Mosul debris recycling centre marks a significant step in the sustainable management of the huge volumes of debris — an estimated 55 million tonnes — created by the ISIL conflict. It also opens the way for the recycling of routine construction and demolition waste, contributing to ‘building back better’ and an increased circularity in Iraq’s development.

UNEP West Asia Regional Director, Sami Dimassi, emphasized that “by reducing waste, stimulating innovation and creating employment, debris recycling also creates an important business opportunity.” Indeed, construction companies in Mosul have expressed interest in purchasing the recycled aggregate, thereby underscoring the longer-term sustainability of debris recycling.

“This project supports recovery and livelihoods by drawing on principles of a circular economy, wherein waste and land pollution is limited through production processes that reuse and repurpose materials for as long as possible,” explained IOM Iraq Chief of Mission, Giorgi Gigauri. “Collaboration and sustainability are key priorities in IOM’s work toward durable solutions to displacement, and we are pleased to have partnered with UNEP and the Government of Japan so that this is represented not only in the function of the plant itself, but also in its functioning, by supporting local authorities to be prepared to effectively operate the plant moving forward.”

On 28 July 2022, Mosul Municipality hosted an event to officially hand over the debris recycling centre, attended by senior government officials and academia, as well as representatives from IOM, UNEP and the United Nations Assistance Mission for Iraq (UNAMI).

Masamoto Kenichi, Charge d’Affaires, Embassy of Japan to Iraq stated: “We are glad to know that the project funded by the government and people of Japan has contributed to cleanup of debris and reconstruction of Mosul. We would like to commend UNEP, IOM and the city of Mosul for their tremendous efforts of turning the legacy of ISIL’s devastation into building blocks of reconstruction”.

Through the rubble recycling project, nearly 25,000 tonnes of debris have been recovered and sorted, of which around half was crushed into recycled aggregate. Material testing of the recycled aggregate endorsed by the National Center for Structural Tests of the Ministry of Planning confirms its compliance with the Iraqi State Commission for Roads and Bridges design standards for road foundational layers and its suitability for several low strength end-use applications such as concrete blocks and kerbstones.

The project created 240 much-needed jobs through cash-for-work schemes targeting vulnerable persons, including 40 women.

Building on this experience, IOM has set up two other debris recycling operations in Sinjar and Hamdaniya in Ninewa Governorate, and a third in Hawija in Kirkuk Governorate, where a pilot phase using a mobile crusher was implemented in al-Buwaiter Village in 2021. In addition, two other conflict-affected governorates — namely Salah al-Din and Anbar — have  also shown a high-level of interest in replicating and scaling up debris recycling in their own regions. 

UNEP has been supporting Iraq in cleaning up the huge volumes of debris created by the ISIL conflict since June 2017. Initially, this included carrying out technical assessments and planning workshops with UN-Habitat, and subsequently designing and implementing debris recycling pilot projects to support returns in Mosul, Kirkuk and other conflict-affected areas in cooperation with IOM.

UNEP

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Digital Futures: Driving Systemic Change for Women

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Authors: Erin Watson-Lynn and Tengfei Wang*

As digital technology continues to unlock new financial opportunities for people across Asia and the Pacific, it is critical that women are central to strategies aimed at harnessing the digital financial future. Women are generally poorer than men – their work is less formal, they receive lower pay, and their money is less likely to be banked. Even when controlling for class, rural residency, age, income, and education level, women are overrepresented among the world’s poorest people in developing countries. Successfully harnessing digital technology can play a key role in creating new opportunities for women to utilise formal financial products and services in ways that empower them. 

Accelerating women’s access to the formal economy through digital innovations in finance increases their opportunity to generate an income and builds resilience to economic shocks. The recently issued ESCAP guidebook titled, Harnessing Digital Technology for Financial Inclusion in the Asia Pacific, highlights the fact that mechanisms to bring women into the digital economy are different from those for other groups, and that tailored policy responses are important for women to fully realise their potential in the Asia-Pacific region.

Overwhelmingly, the evidence tells us that how women utilise their finances can have a beneficial impact on the broader community. When women have bank accounts, they are more likely to save money, buy healthier foods for their family, and invest in education. For women who receive Government-to-Person (G2P) payments, there is significant improvement in their lives across a range of social and economic outcomes. Access to safe, secure, and affordable digital financial services thus has the potential to significantly improve the lives of women.

Despite the enormous opportunity, there are numerous constraints which affect women’s access to financial services. This includes the gender gap in mobile phone ownership across Asia and the Pacific, lower levels of education (including lower levels of basic numeracy and literacy), and lower levels of financial literacy. This complex web of constraints means that country and provincial level diagnostics are required and demands agile and flexible policy responses that meet the unique needs of women across the region.

Already, across Asia and the Pacific, governments are implementing innovative policy solutions to capture the opportunities that come with digital finance, while trying to manage the constraints women often face. The policy guidebook provides a framework to examine the role of governments as market facilitators, market participants and market regulators. Through this framework, specific policy innovations drawn from examples across the region are identified which other governments can adapt and implement in their local markets.  

A good example of how strategies can be implemented at either the central government or local government levels can be found in Pakistan. While central government leadership is important, embedding tailored interventions into locally appropriate strategies plays a crucial role for implementation and effectiveness. The localisation of broader strategies needs to include women in their development and ongoing evaluation. In the Khyber Pakhtunkhwa province, 50,000 beneficiary committees comprising local women at the district level regularly provide feedback into the government’s G2P payment system. The feedback from these committees led to a biometric system linked to the national ID card that has enabled the government to identify women who weren’t receiving their payments, or if payments were fraudulently obtained by others.

In Cambodia and the Philippines, governments have implemented new and innovative solutions to support remittance payments through public-private-partnerships and policies that enable access to non-traditional banks. In Cambodia, Wing Money has specialised programs for women, who are overwhelmingly the beneficiaries of remittance payments. Creating an enabling environment for a business such as Wing Money to develop and thrive with these low-cost solutions is an example of a positive market intervention. In the Philippines, adjusting banking policies to enable access to non-traditional banking enables women, especially those with micro-enterprises in rural areas, to access digital products.

While facilitating participation in the market can yield benefits for women, so can regulating in a way that drives systemic change. For example, in Lao People’s Democratic Republic and India, different mechanisms for targets are used to improve access to digital financial products. In Lao People’s Democratic Republic, the central government through its national strategy, introduced a target of a 9 per cent increase in women’s access to financial services by 2025. In India, their targets are set within the bureaucracy to incentivise policy makers to implement the Digital India strategy and promotions and job security are rewarded based on performance.

These examples of innovative policy solutions are only foundational. The options for governments and policy makers at the nexus of market facilitation, participation and regulation demands creativity and agility. Underpinning this is the need for a baseline of country and regional level diagnostics to capture the diverse needs of women – those who are set to benefit the most of from harnessing the future of digital financial inclusion.

*Tengfei Wang, Economic Affairs Officer

This article is the second of a two-part series based on the findings of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) Policy Guidebook: Harnessing Digital Technology for Financial Inclusion in Asia and the Pacific, and is jointly prepared by ESCAP and the Griffith Asia Institute.source: UNESCAP

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