Russia and China: business partners, weary neighbors

Since the early 1990s, the world's attention has been fixed at the constantly evolving relationship between the Russian Federation and the People's Republic of China.
Much has been written on the costs and benefits of this relationship, and current analysis already seems to favor China as one of the leading states to emerge in the next couple of decades. It seems that Russia will play a pivotal part in this development through the transfer of military high-tech knowledge and economic resources that China so desperately needs. There is constant global attention focused on the sale of Russian military hardware to China, as well as on the increasing political and economic contacts between the two. For example, China and Russia have formed a political union among themselves and several Central Asian states, the Shanghai Five, aimed at increased cooperation and political dialogue.

On the surface, this close relationship between these regional powers has often been characterized as a counter-balance to U.S. economic and military dominance. Yet, the true extent of the Sino-Russian relationship is open to many questions, as possible areas of contention remain between the two states. These issues simmer beneath the glossy political surface, and may yet have a negative effect on both countries.

A major open question is the extent to which Russia is currently willing to underwrite China's successful emergence as one of the world's foremost states. As the Russian Federation sells high-tech military items south of its border, it is contributing to China's emergence as a powerful military force in Eurasia - a force that someday will have a chance to overshadow Russia's. Modern aircraft, land systems, submarines and even space travel technology has been sold to the Chinese for billions of dollars. This relationship is beneficial to Russia's own arms industry, as China is currently one of its largest customers. Nevertheless, at the same time, even a modest infusion of Russian military technology into China is having an exponential effect on China's growth as a military power. The Chinese leadership has made the modernization of its armed forces a top priority, and while it spends only a fraction of U.S. military expenditures, its efforts are producing regional results.

While the Russian government also seeks to modernize and reform its military, its own efforts are lagging behind China's due to the long-deteriorating conditions of its armed forces virtually across the board. At present, the Chinese military is well equipped, better motivated, and well-trained vis-а-vis its Russian counterparts. Since China's indigenous military industry is interested in producing state-of-the art hardware for its armed forces, Russia's sale of military technology is having an effect of aiding a possible competitor to its own well-established position in the arms export market. China is already one of the most active arms dealers in the world. Infusing greater amounts of Russian technology will only accelerate this trend.

Another area of possible contention is Chinese migration to Russia's Far Eastern Region. This has been a very sensitive area of discussion for both the Russian populace and its leadership. On the Russian side of the border, there are around 7 million inhabitants. On the Chinese side, there are more than 100 million. After the Soviet Union fell apart, Russia's Far East has become an economically depressed area. Almost a million of its inhabitants left for other parts of Russia and the Commonwealth of Independent States; large tracts of land and huge state farms were abandoned. Officially, living conditions in the Far East region are twice as bad as in any other part of the country. Chinese migrants began to actively move into the Far East region after 1992, taking advantage of the absence of any viable visa controls and the lax border patrol situation. Officially, the Russian government puts the number of Chinese migrants at no more than several hundred thousand. Unofficially, the number has been estimated at several million. The real number, as always, falls somewhere in between.

This issue is already beginning to put some strain on the Russian government. In 2002, former Foreign Minister Igor Ivanov had to publicly dismiss reports of a massive inflow of illegal Chinese immigrants to the Far East region, putting the number of Chinese nationals in Russia at no more than 200,000. The Russian media is also growing more vocal on this issue, with coverage ranging from benign and impartial to the suggestively foreboding. While it recognizes the economic benefit of a strong Chinese business and trade-orientedcommunity for the Russian Far East, it points out that the true benefits of this situation flow south to China. Chinese enterprises and businesses, built from the strong immigrant presence on Russia's soil, are not only selling their products back to China - products that range from fruits and vegetables to minerals and timber - but are beginning to exert strong influence on Russian businesses as well. Able to undercut even cheap Russian labor, Chinese immigrants are a source of readily available workforce capable of being mobilized at a moment's notice.

In addition, Russia's demographic situation does not look well for the native population. Official estimates predict either the overall decline of the native population, or,at best, the stabilization of the country's population at present levels, or no more than 150 million people. On the other hand, the Chinese population in the regions adjacent to the Russian Far East is expected to grow. Under these conditions, even a small-scale legal Chinese migration to Russia will have the potential of affecting the demographic make-up of the country. The Chinese migrant population is soon to become the fourth largest ethnic group in the country, without an equal equivalent among other groups. Given the present absence of migration legislation in the Far Eastern region, it is unclear how Russia will be able to respond to a possible increase in the legal and illegal Chinese migration to its territory.

Another area of contention might stem from both countries' economic improvement. Already, China's economy far outpaces Russia's, especially in the area of foreign direct investment. China is seen as the hot market where government fosters international investment. In contrast, the enthusiasm of foreign investors in Russia has been curbed first by the 1998 fiscal crises, and then by the Russian government's erratic and repressive behavior towards its large business enterprises, such as Yukos. As China grows economically wealthier, it requires more resources, such as oil and natural gas. These are located next door - in Central Asia, where Russia has been increasing its influence, and in Russia itself.

While the Russian government has not had any problems with the transformation of its economy to a largely-rentier category, it is yet unclear how it might respond to the soon-possible role of the supplier of natural resources to its much wealthier neighbor. Even if Russia exerts total economic dominance on the majority of the Former Soviet States, the overall economic output of this entity will still lag behind China's. While China pays for everything it gets from Russia in much-needed hard currency, with the present benefits for the Russian economy, much-needed large-scale internal economic development is absent in Russia -- but is present just south of its border, in China's hinterland and its dynamic eastern coast.

In the words of Igor Ivanov two years ago, present Sino-Russian cooperation is aimed at improving security in the region. For China, closer cooperation with Russia means the improvement of its economy, the fulfillment of its growing energy needs and the possible counter-balance to U.S. influence. Both countries can use closer cooperation with each other as a leverage to extract potential benefits from Washington. However, given the present economic and demographic situation, and given the inflow of Russia's high technology to China, this relationship is largely one-sided, as it is making China the stronger of the two states.

How Russia will adapt to a possible secondary role in Eurasian affairs in the near future is still an unanswered question, especially given its economic, military and political superiority over China for the last two centuries. Will Russia be able to stand aside as China emerges as the possible counter-balance to the United States, or will it try to reverse that situation by somehow checking Beijing's growing influence? These two states may yet find each other at odds over issues highly sensitive to both.

Yevgeny Bendersky

PRAVDA.Ru republished the article according to the agreement with the Power and Interest News Report (PINR) - an analysis-based publication that seeks to, as objectively as possible, provide insight into various conflicts, regions and points of interest around the globe. PINR approaches a subject based upon the powers and interests involved, leaving the moral judgments to the reader. This report may not be reproduced, reprinted or broadcast without the written permission of [email protected]. All comments should be directed to [email protected].

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Author`s name Evgeniya Petrova