Better policy frame needed for China's investment in Russia

Senior Russian officials and industry representatives led by Russian First Deputy Prime Minister Igor Shuvalov held an investment promotion conference here on Monday, marking a renewed period of opportunity for China-Russia bilateral trade and cooperation.

Analysts said the Chinese government should stay in close communication with their Russian counterpart to improve the current policy mechanism, making practical efforts to expand investment in Russia while optimizing the structure of its investment.

TURNING POLITICAL TRUST INTO ECONOMIC FRUIT

China and Russia have both attached great importance to developing bilateral ties.

Russian President Vladimir Putin made a state visit to China just one month after taking office in May 2012. In March, Chinese President Xi Jinping made Russia the first stop on his first foreign tour following his inauguration.

During Xi's visit to Russia, the two countries agreed to deepen comprehensive strategic cooperation, vowing to turn their "unprecedented" high-level political relationship into pragmatic fruits in the economic and cultural fields, according to a joint statement.

Li Yongquan, a Russia scholar with the Chinese Academy of Social Sciences, said Russia has gradually realized that the so-called "China threat theory" is detrimental to China's development and Russia's own development, as well as an impairment to regional peace and stability.

Li said the two sides have now deemed strengthening bilateral ties a strategic opportunity. Such high-level political trust will undoubtedly create an opportunity for the business communities as well, the scholar said.

At Monday's conference, Chinese Commerce Minister Gao Hucheng said deepening pragmatic cooperation will be the central task for developing the China-Russia bilateral relationship for a period of time, with cooperation in investment a priority.

MUTUAL TRUST NEEDED FOR BUSINESS CIRCLES

Economic cooperation between China and Russia -- notably China's investment in Russia -- has been gaining steam in recent years.

Chinese official data show that China's total investment in Russia approaches 30 billion U.S. dollars, with non-financial investment up by an average rate of 40 percent each year over the past decade.

Although China-Russia bilateral ties are highlighted by a deep political relationship and enormous market potential, analysts have noted low levels of mutual trust in their business communities.

Russian entrepreneurs have not yet become acquainted with China, and their Chinese counterparts are often confused by Russia's complex tax policies, according to Chinese industry insiders.

Analysts from Russia have also pointed out that most of the Chinese capital in Russia has flowed to the property and service sectors, followed by the financial and construction industries, with little making its way into the manufacturing and mining sectors.

Despite an unbalanced investment structure, Chinese investors remain reluctant to operate their businesses directly in Russia, according to Russian analysts.

Sergey Sanakoev, chairman of the Russian-Chinese Center for Trade and Economic Cooperation, said urgent efforts must to be made by the government to foster an honest business environment.

Shuvalov said Russia holds an open attitude toward Chinese investment. He welcomed Chinese companies to invest in Russia, saying his country is working on creating a quality environment for foreign investors.

China's Ministry of Commerce, according to Gao, will also work closely with the Russian side to refine related policies and services.

China will continue to guide qualified Chinese enterprises to invest in Russia in accordance with internationally accepted rules, the minister said.

DEEPENING INVESTMENT IN RUSSIA'S FAR EAST

At Monday's conference, many Russian business practitioners said their country is in need of strategic investors, namely those who can bring advanced technology and managerial experience as well as money.

Hu Bing, president of the China-Russia Investment Fund, said ample opportunities remain unexplored in Russia in fields including manufacturing, technology and innovation, as well as sales and logistics.

One of the objectives of Monday's promotion is to attract Chinese capital into large-scale projects in the Russian Far East, a move in line with the country's larger strategy to boost the economic development of the area.

Meanwhile, the Far Eastern region breeds plenty of investment opportunities in transport, port, energy and infrastructure, Russian officials said at the meeting, adding that their government is considering amending the tax law to facilitate foreign investment.