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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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Towards Re-Globalization: Defining a New Social Contract for the Global Economy

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“As the tides of re-globalization reshape our world, a new social contract emerges, illuminating the path towards a reimagined global economy. Through the embrace of collective cooperation and equitable practices, we can forge a future that transcends borders, empowering individuals and fostering a harmonious global community.”

Underlying every economic system is a social contract, which establishes the norms, values, and beliefs of the people involved. This contract dictates how individuals should behave within the economy, defines their reciprocal obligations, and shapes the way the economy operates. In numerous market economies worldwide, including both advanced and emerging nations, there is a prevailing materialistic social contract that is increasingly failing to address the basic needs of its citizens. Globalization, in its essence, is not inherently positive or negative. It possesses the potential to bring about immense benefits. However, to ensure that the globalization process remains balanced and prevents excessive control of financial institutions over the global economy, we need a world governing body that is accountable to the people of all nations.

To those who support globalization, often linked to the embracing of capitalism in an American fashion, it is seen as a path to progress. They argue that developing countries must embrace globalization in order to experience growth and effectively combat poverty. However, many individuals in the developing world have not witnessed the economic benefits that were promised with globalization. In Africa, the lofty hopes that emerged after gaining independence from colonial rule have, for the most part, gone unrealized. Instead, the continent finds itself descending further into distress, with declining incomes and deteriorating living conditions. Even the hard-fought advancements made in life expectancy over the past few decades have started to erode.

The critics of globalization claim that Western countries are guilty of hypocrisy, and their argument has merit. These countries have pressured impoverished nations to dismantle trade barriers, while simultaneously upholding their own barriers. Consequently, developing countries are unable to export their agricultural goods, leading to a detrimental loss of vital export income. The Western countries, even when not engaging in hypocrisy, have played a significant role in driving the globalization agenda. As a result, they have obtained a disproportionate share of the benefits, often at the expense of developing nations. This was not solely due to the refusal of more advanced industrial countries to open their markets to goods from developing countries, while insisting on open markets for their own goods. These advanced countries also persisted in subsidizing agriculture, creating obstacles for developing nations to compete, while simultaneously demanding that these nations eliminate subsidies on industrial goods.

When it comes to economic globalization, one controversial and almost draconian policy of the international financial system led by the International Monetary Fund  (IMF) is the requirement for developing economies to open up their markets to foreign competition, sometimes prematurely. These countries often feel compelled to comply with IMF demands because the provision of IMF funds is contingent upon swift trade and capital market liberalization. In contrast, developed societies, such as the United States, have historically protected industries considered unable to compete with foreign markets, until those industries became strong enough to thrive in a free market economy.

Perhaps most striking is the perceived hypocrisy of Western countries, who advocate for trade liberalization in the products they export, while simultaneously safeguarding sectors where competition from developing countries could potentially threaten their own economies.

For many years, the voices of the impoverished in Africa and other developing nations have often gone unnoticed in the Western world. Those who toiled in these countries were aware that something was amiss as financial crises became more frequent and the numbers of poor individuals grew. However, they had limited means to alter the rules or exert influence over the international financial institutions that dictated them. Those who held democracy in high regard observed how “conditionality,” the conditions imposed by international lenders in exchange for their aid, eroded national sovereignty.

The issue of governance lies at the core of the problems associated with the IMF and other international economic institutions. The decision-making power is primarily held by the wealthiest industrial countries, as well as by commercial and financial interests within these countries. As a result, the policies of these institutions tend to align with these dominant influences. It is often remarked that these institutions lack representation from the nations they serve, and the management positions are typically selected by major developed nations that are mostly driven by their own specific interests. Traditionally, the head of the IMF has always been a European, while the head of the World Bank is always an American. The selection process for these positions occurs behind closed doors, without any requirement for the head to have any prior experience in the developing world.

Economic theory does not guarantee that every individual will benefit from globalization, but rather suggests that there will be overall positive gains, allowing winners to potentially compensate the losers and still come out ahead. However, conservatives have argued that in order to maintain competitiveness in a globalized world, tax reductions and reductions in welfare state provisions are necessary. In the United States, for example, taxes have become less progressive, with tax cuts mainly benefiting those who benefit from globalization and technological advancements. This has resulted in a situation where countries like the US, and others following their lead, have become wealthy nations but with poor people.

The appeal of capitalist economies is often based on the principle of a material social contract, where people support this economic system because it promises higher living standards and greater economic freedom compared to alternative systems. The underlying assumption is that material prosperity can fulfill human needs. However, in many countries, this economic model has resulted in increasing inequality across various dimensions such as income, wealth, education, health, skills, and social esteem. It has also led to reduced social mobility, growing social divisions, and a widespread sense of disempowerment in response to the uncertainties associated with globalization.

In advanced economies, disparities have increased among different generations, with younger individuals falling behind their older counterparts, as well as between metropolitan and rural areas. These inequalities have eroded social cohesion, leading to reduced trust in government, lower civic engagement, decreased political participation, and a rise in support for populist ideologies. Policies such as corporate tax reductions and decreased welfare provisions have benefited a small portion of the population, who have then utilized their newfound economic power to shape the political process and media discourse to their advantage.

The interactions between successful business leaders, politicians, and journalists have contributed to a cycle of inequality, deregulation, and the gradual dismantling of social safety nets. This has been perpetuated through notions of “trickle-down prosperity” and the perception that there is a trade-off between equity and efficiency, suggesting that greater material prosperity can only be achieved at the cost of less material equality. As a result, an increasing portion of GDP growth has been channeled towards the top 1% of the income distribution.

The issue at hand is that economic globalization has progressed at a faster rate than the globalization of politics and mindsets. While our interdependence has grown, necessitating collective action, we lack the proper institutional frameworks to address these challenges in an efficient and democratic manner.

The main obstacle to successful globalization reforms lies not only within the institutional structures but also in the mindsets of key decision-makers. It is crucial to prioritize concerns such as environmental sustainability, ensuring the participation of marginalized communities in decision-making processes, and promoting democratic principles and fair trade. However, the challenge arises from the fact that these institutions often reflect the priorities and mindsets of those in positions of power. Typically, central bank governors are more focused on inflation statistics rather than poverty statistics, while trade ministers prioritize export numbers over pollution indices. This misalignment of priorities hinders efforts to fully realize the potential benefits of globalization.

Establishing a new social contract that is grounded in sustainable principles can help reconnect economic activity with the fulfillment of essential human needs. This redefined contract requires a fresh understanding of the responsibilities of businesses, households, and governments. It is evident that globalization can undergo change, but the crucial question is whether this change will be driven by a crisis or the result of deliberate, democratic deliberations. If change is crisis-driven, there is a risk of generating a negative backlash against globalization or haphazardly reshaping it, which could lead to potential problems in the future. On the other hand, taking control of the process offers a potential avenue to reshape globalization, enabling it to truly live up to its potential and promise of improving living standards for all individuals in the world.

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Why BRICS matters for Pakistan



BRICS represents Brazil, Russia, India, China and South Africa, encompassing 41% of the global population and 24% of the global GDP. The 15th BRICS Summit being held from August 22 to 24 in Johannesburg, South Africa. About 40 countries participated in this year’s BRICS summit where some key decisions were made adding six new members namely Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the UAE. The new membership will be effective from January 1, 2024.

In a historic first, Pakistan’s participation in the BRICS’s seminar, ahead of the summit, was encouraged by Beijing, which wants to integrate Pakistan into the alliance. However, Pakistan surprised the international community for not being the part of BRICS’s summit in Johannesburg. By joining BRICS, Pakistan could potentially benefit in multiple ways.

First, BRICS is the emerging power Centre of the world. Joining BRICS could open up economic opportunities for Pakistan. The country could engage in trade with other member states, benefiting from their growing economies. Pakistan’s exports could find new markets within the framework of BRICS. Muhammad Karim Ahmed analysed, “These BRICS countries are emerging economies and they have improved their country, their economic conditions, manufacturing, and found markets for themselves through joining the bloc”. Certainly, the economic prosperity will minimize unemployment, poverty and illiteracy in Pakistan.

Moreover, developing nations are dissatisfied with the stringent conditions imposed by western-dominated financial institutions like International Monetary Fund (IMF). BRICS has also created two new financial institutions, the New Development Bank (NDB), also known as the BRICS Bank and the Contingent Reserve Arrangement (CRA). CRA, which has a capital of more than USD 100 billion, can help member states withstand any short-term balance of payment crises. Pakistan if allowed in BRICS, can easily access the USD 100 billion CRA as well as the comparatively lenient loan conditions of NDB, without improving the functioning of the Pakistani state.

Second, BRICS membership could boost Pakistan’s geopolitical leverage by providing a platform to collaborate with other emerging powers on global issues. Pakistan has always been blackmailed by its traditional allies. Becoming a BRICS member could offer Pakistan an opportunity to diversify its diplomatic relationships. As a BRICS member, Pakistan could potentially demand for reforms in global governance structure. This could lead to a more equitable international order.

Third, some political analysts suspected that Pakistan’s inclusion in BRICS may generate disturbances with India, leading to a defunct group. However, it appears that India’s opposition to Pakistan joining the bloc is dying down. Recently, Indian Prime Minister Modi has supported BRICS expansion. South African president also welcomed Modi’s remarks, who remarked, “delighted to hear India supporting expansion of the BRICS”. Senator Mushahid Hussain Syed told Arab News that “First of all, Pakistan should apply for membership in BRICS, where the lead role is with China and where India is the weakest link due to its proclivity to be part of the West’s new Cold War against Beijing.” So, BRICS membership will certainly increase Pakistan’s diplomatic leverage with regard to India in the region.

Fourth, BRICS membership could also alleviate Pakistan stature in other regions of the world. For example, in East Asia there’s Regional Comprehensive Economic Partnership (RCEP), again China is in the lead there, but Pakistan isn’t ‘Looking East’! Why? Somewhat inexplicable, not seizing opportunities when these arise.

Fifth, BRICS membership will also introduce correctness in Pakistan’s foreign policy objectives. International community brands Pakistan as a terror sponsor state. Through joining BRICS, Pakistan could divert its security-oriented approach in foreign policy in line with BRICS manifesto. Even India used BRICS forum in Xiamen to condemn Pakistan-based militant groups like Lashkari Tayyaba. So, Pakistan could also use BRICS forum to project its soft image in the world.  

In the past, Pakistan has suffered immensely by aligning itself with one group against other.  There appear clear indications that Russia and China have shown clear intent to use BRICS to counter G-7, the grouping of powerful wealthy western nations. By orienting its foreign policy away from block politics, Pakistan could potentially get more economic benefits.

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The Concept of Sustainability for the World’s Cotton Industry Amidst Geopolitical Challenges

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The textile industry is one of the industries that contributes to the largest air pollution in the world. Responsible for 10% of global carbon emissions and 20% of global water waste, the fast-fashion phenomenon also contributes to this problem. If this is allowed to continue, the effects of global warming will get worse. The concept of sustainability itself can also be a polemic for the textile industry because they are experiencing global fluctuations caused by high inflation, weakening demands, and large inventory amounts.However, high global warming will also backfire on them and weaken this industry. Cotton, which is the raw material for making textile fabrics, deeply requires water and fertile soil. With the upcoming heatwaves that will occur, many dry lands will cause difficulties in world cotton production. The United States, as one of the largest cotton producers in the world, is starting to worry about this issue. Moreover, the energy crisis adds further complexity to this problem.

The textile industry itself is trying to revive itself due to many geopolitical problems such as the trade war between China and the United States, the post-Covid-19 situation, and the war between Russia and Ukraine. Even though the Government has been aggressive in advancing green transformation, many customers’ behavior places their spending on assets, automotive, housing, and so on. The problem of inventory buildup is due to textile production continuing to run and increasing but customer enthusiasm is always decreasing, coupled with the thrifting phenomenon which is currently rising.

To focus on green sustainability is a long homework for the textile industry. Although the textile business remains slightly positive in general in the first half of 2023, there are still fears of a global recession as the Federal Bank continues to raise interest rates. However, concerns about the issue of inventory buildup have begun to be resolved. In Cotton Day 2023 held by the United States non-profit organization Cotton Council International in Jakarta, Indonesia, one of the speakers, namely Bruce Atherley (Executive Director of CCI), stated that textile business actors have begun to be careful and control the turnover of textile commodity inventories, and this has resulted in decline in world cotton demand. However, he also stated that this effort could be a good thing and there is optimism about the stability of the textile industry ecosystem. With inventory being depleted across the supply chain, it can be expected that the cotton and textile industry will return to normal and positive demand.

Referring to sustainability and green transformation programs, many textile industry business players have made a commitment to only use sustainably grown cotton by 2025. They have also made a commitment to carbon reduction. This is contained in the regulations of the European Union and the United States, Investment Groups, as well as Focus Media and Non-Governmental Organizations. CCI also stated that the trust protocol will drive continuous improvement in key sustainability metrics by leveraging quantifiable data and variable data while delivering unparalleled visibility into supply chains for brands and retail members.

The concept of circularity must also be considered in green transformation efforts in the world textile industry. Circularity is the concept of minimizing waste and reusing resources. The circular model aims to create production and consumption that can be recycled (closed loop). Circularity is the solution for sustainability. Circular strategies include eco-friendly recycling, easy-to-reset designs, products as a service (PaaS), and increased producer responsibility. The benefits we will get from this concept are reducing the amount of waste, maximizing resource conversion, increasing investment, reducing carbon emissions, increasing economic opportunities, and improving brand reputation. However, this concept can also give rise to challenges such as technological limitations in developing recycling technology, supply chain complexity in traceability and transparency, complicated regulatory framework which includes supporting policies and regulations, and unpredictable consumer behavior. Hopefully more textile and cotton commodity industry players will pay more attention to the importance of the concept of sustainability in their production processes so that carbon emissions and pollution can be reduced which then prevent the worsening condition of global warming.

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