“CHINESE FDI IN THE RUSSIAN ECONOMY: OPPORTUNITIES AND PROSPECTS”
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INTRODUCTION 3
CHAPTER 1. RUSSIAN-CHINESE ECONOMIC RELATIONS IN THE CONTEXT OF
INTERNATIONAL GLOBAL PROCESS 7
1.1. Theories and Approaches to the Definition of FDI, its Subject and Role in International
Economical Mutually Beneficial Interaction 7
1.2. Russia and China’s place in the investment market and the importance of interaction 16
1.3. The problem of the investment attractiveness level in Russia 22
CHAPTER 2. THE DYNAMICS OF RUSSIAN-CHINESE DEVELOPMENT INTERACTION. . 29
2.1. The statistics of the current situation between China and Russia in the investment area 29
2.2. Influence of COVID-19 on the interaction between Russia and China in the foreign direct
investment area 36
2.3. Russia as a destination of OFDI from China in the framework of the initiative “One Belt -
One Road” 40
CHAPTER 3. PROSPECTIVE OF THE DEVELOPMENT IN THE BILATERAL INVESTMENT
INTERACTION 46
3.1. The investment strategy of Chinese investors 46
3.2. The prospects for further development of Chinese FDI in Russia: challengies and
opportunities 53
CONCLUSIONS 59
LIST OF REFERENCES 62
CHAPTER 1. RUSSIAN-CHINESE ECONOMIC RELATIONS IN THE CONTEXT OF
INTERNATIONAL GLOBAL PROCESS 7
1.1. Theories and Approaches to the Definition of FDI, its Subject and Role in International
Economical Mutually Beneficial Interaction 7
1.2. Russia and China’s place in the investment market and the importance of interaction 16
1.3. The problem of the investment attractiveness level in Russia 22
CHAPTER 2. THE DYNAMICS OF RUSSIAN-CHINESE DEVELOPMENT INTERACTION. . 29
2.1. The statistics of the current situation between China and Russia in the investment area 29
2.2. Influence of COVID-19 on the interaction between Russia and China in the foreign direct
investment area 36
2.3. Russia as a destination of OFDI from China in the framework of the initiative “One Belt -
One Road” 40
CHAPTER 3. PROSPECTIVE OF THE DEVELOPMENT IN THE BILATERAL INVESTMENT
INTERACTION 46
3.1. The investment strategy of Chinese investors 46
3.2. The prospects for further development of Chinese FDI in Russia: challengies and
opportunities 53
CONCLUSIONS 59
LIST OF REFERENCES 62
Currently Russian-Chinese relationship development is one of the major topics in the context of the further mutual interaction. Especially nowadays, when the situation around the world stays quite unstable and difficult for predictions, a range of possible paths regarding the future growth is addressed to Asia Pacific region, namely, to China. As we may see from the agenda, due to the sanctions imposed on Russian economy by western countries, some of the experts are claiming that nowadays we may see some of the signs of the so-called “Turn to the East”. Consequentially, it is quite important to estimate and evaluate the possible threats, scenarios and solutions of the developing economic situation.
Relations between Russia and China, according to official formulations, are relations of comprehensive partnership and strategic interaction entering a new era. As the leaders of the two countries constantly emphasize, they are developing on the principles of equality, consideration of each other's interests, freedom from political and ideological conjuncture. In this regard, there is a need to understand the place and role of the Russian Federation and China in the new geopolitical and economic situation and possible prospects for the development of their investment relations in the context of globalization.
Currently, Russian politicians are increasingly making statements about a "Turn to the East" - the reorientation of economic activity from the predominance of the western region to the eastern regions. Strategic objectives to increase trade, investment and other forms of economic interaction with China are highlighted as one of the directions of the "Turn to the East".
As one of the most recent example of mutual interaction on the highest levels between the two great powers, president of the People's Republic of China Xi Jinping, at the invitation of President of the Russian Federation Vladimir Putin, made a state visit to the Russian Federation on March 20-22, 2023. The heads of state held talks in Moscow. The leaders signed the Joint Statement of the Russian Federation and the People's Republic of China on deepening comprehensive partnership and strategic cooperation entering a new Era, which included an agreement on various issues of cooperation. Furthermore, the document defined the pathway for further cooperation development which, as it is supposed, should become the driving force for the multipolar world order reforming and preserving.1
As the Minister of Economic Development of Russia Maxim Reshetnikov, who took part in the meeting, noted, the high level of the event and the detailed elaboration of an extensive list of issues for discussion confirm that relations between Russia and China are entering a new stage. He noted, "there are more and more projects when Russian and Chinese enterprises start producing together. More and more Chinese companies are investing in Russia. The joint package of investment projects amounts to $165 billion - about 80 serious projects in gas chemistry, transport, woodworking, which are actively developing".2
The research is devoted to the topic of Chinese investors’ place in Russian economy. The relevance of the research can be seen in the fact that the question of the place of Chinese partners in Russian economy and in the market as a whole has been arisen recently. The master thesis is sufficiently concentrated on the problem of investment climate of Russian Federation, Chinese investments in Russian economy, its distribution and possible prospects of FDI from China to Russian Federation.
The aim of the master thesis is to research the current situation in the sphere of Chinese foreign investments in Russian economy, to determine the place of Chinese FDI in Russian market, define the main challenges and opportunities for Chinese investors and, subsequently, to describe the further prospects of its development in Russian Federation.
Based on the specified aim of the research, the following objectives are set:
• To determine the nature and subject of the FDI phenomenon, to research the main theories of FDI and its interpretation;
• To define the importance of mutual investment interaction between Russia and China;
• To clarify the role of FDI inflow from China in Russian economy;
• To determine the current situation regarding Chinese FDI in Russian market and its role;
• To identify the peculiarities and problems of investment climate in Russia;
• To research the strategy of Chinese investors abroad, particularly to the Russian Federation;
• Considering various sources of data including articles, monographs, statistical resources of national, international resources, define the prospects of further development of Chinese FDI in Russian economy.
The object of the research is bilateral economic interaction in the context of Sino-Russian relationship; the subject of the research is the FDI from China to Russia, its role and the future of Russia and China investment interaction.
The theoretical and methodological basis of the research is the articles and publications of domestic and foreign researchers on the role of FDI in economic growth as a whole, role of Chinese FDI in Russian market, role of state in this sphere, legal documents, as well as government programs.
...
Relations between Russia and China, according to official formulations, are relations of comprehensive partnership and strategic interaction entering a new era. As the leaders of the two countries constantly emphasize, they are developing on the principles of equality, consideration of each other's interests, freedom from political and ideological conjuncture. In this regard, there is a need to understand the place and role of the Russian Federation and China in the new geopolitical and economic situation and possible prospects for the development of their investment relations in the context of globalization.
Currently, Russian politicians are increasingly making statements about a "Turn to the East" - the reorientation of economic activity from the predominance of the western region to the eastern regions. Strategic objectives to increase trade, investment and other forms of economic interaction with China are highlighted as one of the directions of the "Turn to the East".
As one of the most recent example of mutual interaction on the highest levels between the two great powers, president of the People's Republic of China Xi Jinping, at the invitation of President of the Russian Federation Vladimir Putin, made a state visit to the Russian Federation on March 20-22, 2023. The heads of state held talks in Moscow. The leaders signed the Joint Statement of the Russian Federation and the People's Republic of China on deepening comprehensive partnership and strategic cooperation entering a new Era, which included an agreement on various issues of cooperation. Furthermore, the document defined the pathway for further cooperation development which, as it is supposed, should become the driving force for the multipolar world order reforming and preserving.1
As the Minister of Economic Development of Russia Maxim Reshetnikov, who took part in the meeting, noted, the high level of the event and the detailed elaboration of an extensive list of issues for discussion confirm that relations between Russia and China are entering a new stage. He noted, "there are more and more projects when Russian and Chinese enterprises start producing together. More and more Chinese companies are investing in Russia. The joint package of investment projects amounts to $165 billion - about 80 serious projects in gas chemistry, transport, woodworking, which are actively developing".2
The research is devoted to the topic of Chinese investors’ place in Russian economy. The relevance of the research can be seen in the fact that the question of the place of Chinese partners in Russian economy and in the market as a whole has been arisen recently. The master thesis is sufficiently concentrated on the problem of investment climate of Russian Federation, Chinese investments in Russian economy, its distribution and possible prospects of FDI from China to Russian Federation.
The aim of the master thesis is to research the current situation in the sphere of Chinese foreign investments in Russian economy, to determine the place of Chinese FDI in Russian market, define the main challenges and opportunities for Chinese investors and, subsequently, to describe the further prospects of its development in Russian Federation.
Based on the specified aim of the research, the following objectives are set:
• To determine the nature and subject of the FDI phenomenon, to research the main theories of FDI and its interpretation;
• To define the importance of mutual investment interaction between Russia and China;
• To clarify the role of FDI inflow from China in Russian economy;
• To determine the current situation regarding Chinese FDI in Russian market and its role;
• To identify the peculiarities and problems of investment climate in Russia;
• To research the strategy of Chinese investors abroad, particularly to the Russian Federation;
• Considering various sources of data including articles, monographs, statistical resources of national, international resources, define the prospects of further development of Chinese FDI in Russian economy.
The object of the research is bilateral economic interaction in the context of Sino-Russian relationship; the subject of the research is the FDI from China to Russia, its role and the future of Russia and China investment interaction.
The theoretical and methodological basis of the research is the articles and publications of domestic and foreign researchers on the role of FDI in economic growth as a whole, role of Chinese FDI in Russian market, role of state in this sphere, legal documents, as well as government programs.
...
Relations between Russia and China, according to official formulations, are relations of comprehensive partnership and strategic interaction entering a new era. As the leaders of the two countries constantly emphasize, they are developing on the principles of equality, consideration of each other's interests, freedom from political and ideological conjuncture.
Currently, Russian politicians are increasingly making statements about a "Turn to the East" - the reorientation of economic activity from the predominance of the western region to the eastern regions. Strategic objectives to increase trade, investment and other forms of economic interaction with China are highlighted as one of the directions of the "Turn to the East". Under the conditions of Western sanctions against the Russian Federation, large-scale business is forced to look for investment partners in the East. China can and is ready to become one of such partners - a country that already has a positive history of relations with the Russian Federation and successfully implemented and implemented projects in various industries.
China and Russia are neighboring countries, and one of the largest powers in the world. Russia and China are actively deepening cooperation in many areas, constantly expanding trade and economic cooperation and its scope, improving the quality and level of interaction. At the moment, there is a shortage of industries in Russia to attract Chinese direct investment. The mining, oil and gas industries in Russia is the most developed industry, but Russia does not provide a great number of opportunities to attract foreign investment in this industry. If foreign investors want to start a new business in Russia, they will face too many obstacles, so the period for creating a business will be relatively long.
It is difficult to overestimate the importance of further development of bilateral cooperation and increasing the attractiveness of Russian business for subsequent Chinese investments. It is also important to mention that, of course, we cannot talk about total isolation or the final withdrawal of Western investors from the Russian market, but we can note the interest of entrepreneurs from China in the investment development of the Russian Federation.
In conclusion, it should be noted that the objectives set when writing this course work have been completed. Namely:
• the nature and subject of the FDI phenomenon was determined, the main theories of FDI and its interpretation are researched;
• the importance of mutual investment interaction between Russia and China was defined;
• the role of FDI inflow from China in Russian economy is clarified;
• the current situation regarding Chinese FDI in Russian market and its role is determined;
• the peculiarities and problems of investment climate in Russia are identified;
• the strategy of Chinese investors abroad, particularly to the Russian Federation is researched;
• the prospects of further development of Chinese FDI in Russian economy are considered.
The subject and the role of FDI in the economy was determined. Foreign direct investment refers to an investment made across borders where an investor from one economy acquires a substantial degree of involvement and establishment in an enterprise situated in another economy. It is widely accepted that FDI generates both direct and indirect benefits in the host countries. Indirect benefits, popularly known as spillover benefits, include greater efficiency of domestic firms as a result of an increase in competition from the entry of foreign firms. Other economic benefits are faster adoption of new technologies by domestic firms and increase in the mobility of domestic resources— financial capital, improvement in the management structure of the domestic economy, net skilled labor migration as a result of centralization of substantive managerial decision making in the parent firm, etc.
The current situation regarding Chinese FDI in Russian market, its role and statistics related to the topic of the research identified and described. During the study of this topic, it was found that the topic of importance interaction between Russia and China in the investment context is quite disputable nowadays due to the political issues happening from February till the present moment. Under the conditions of Western sanctions against the Russian Federation, large-scale business is forced to look for investment partners in the East. China can become one of such partners - a country that already has a positive history of relations with the Russian Federation and successfully implemented projects in various industries.
At the same time when considering the statistics on the research topic, we may conclude that the place of Chinese FDI in Russian economy is not one of the highest, since the leaders in the list of countries with the highest FDI outflow to Russian economy were Cyprus, Germany and the United Kingdom. However, due to the sanctions imposed on Russian economy it is expected that the amount and volume of FDI from these countries should sufficiently decrease in near future.
Moreover, after analyzing the situation related to the dynamics of accumulated FDI from Hong Kong and China to the Russian Federation, we can note the fact that Hong Kong is used by Chinese investors as a transit location, since there are more developed international stock and financial markets there, Chinese firms have more opportunities to attract financing or get more favorable loan terms, consequently, such investment flows to Russia may be more attractive. This is especially noticeable in the information sphere, since in general it is easier for digital companies to work through a proxy of the country than with a traditional business.
The investment climate in Russia was investigated; its peculiarities and problems were determined. Hence, we may conclude that this may be a possibility of Russian companies to attract the investments from China. The problem that was defined is the problem of the development of investment climate in Russia. Currently it faces some quite serious problems which may be solved by progressive and durable actions. The possible solutions which may be taken into consideration are:
1) The continuation of the process of arranging mutual bilateral strong relationship in political and economic context in order to deepen the involvement of Russia and China in the programs of further development;
2) It is necessary to adopt and improve laws and regulations, optimize the business environment in Russia;
3) Efforts to combat corruption should be intensified, the legitimate rights and interests of investors should be protected, and their confidence in investing in Russia should be strengthened;
4) Encourage enterprises to innovate, optimize relevant technical standards, appropriately reduce the number of technological barriers for foreign investors, etc.
When it comes to the niches where the replacement may take place, they are mostly: 1) high technology sector with automobile and household appliance production; 2) customer services and retail projects, especially related to the tourism and hotel industry; 3) energy sector with the large- scale projects of Yamal LNG etc.
...
Currently, Russian politicians are increasingly making statements about a "Turn to the East" - the reorientation of economic activity from the predominance of the western region to the eastern regions. Strategic objectives to increase trade, investment and other forms of economic interaction with China are highlighted as one of the directions of the "Turn to the East". Under the conditions of Western sanctions against the Russian Federation, large-scale business is forced to look for investment partners in the East. China can and is ready to become one of such partners - a country that already has a positive history of relations with the Russian Federation and successfully implemented and implemented projects in various industries.
China and Russia are neighboring countries, and one of the largest powers in the world. Russia and China are actively deepening cooperation in many areas, constantly expanding trade and economic cooperation and its scope, improving the quality and level of interaction. At the moment, there is a shortage of industries in Russia to attract Chinese direct investment. The mining, oil and gas industries in Russia is the most developed industry, but Russia does not provide a great number of opportunities to attract foreign investment in this industry. If foreign investors want to start a new business in Russia, they will face too many obstacles, so the period for creating a business will be relatively long.
It is difficult to overestimate the importance of further development of bilateral cooperation and increasing the attractiveness of Russian business for subsequent Chinese investments. It is also important to mention that, of course, we cannot talk about total isolation or the final withdrawal of Western investors from the Russian market, but we can note the interest of entrepreneurs from China in the investment development of the Russian Federation.
In conclusion, it should be noted that the objectives set when writing this course work have been completed. Namely:
• the nature and subject of the FDI phenomenon was determined, the main theories of FDI and its interpretation are researched;
• the importance of mutual investment interaction between Russia and China was defined;
• the role of FDI inflow from China in Russian economy is clarified;
• the current situation regarding Chinese FDI in Russian market and its role is determined;
• the peculiarities and problems of investment climate in Russia are identified;
• the strategy of Chinese investors abroad, particularly to the Russian Federation is researched;
• the prospects of further development of Chinese FDI in Russian economy are considered.
The subject and the role of FDI in the economy was determined. Foreign direct investment refers to an investment made across borders where an investor from one economy acquires a substantial degree of involvement and establishment in an enterprise situated in another economy. It is widely accepted that FDI generates both direct and indirect benefits in the host countries. Indirect benefits, popularly known as spillover benefits, include greater efficiency of domestic firms as a result of an increase in competition from the entry of foreign firms. Other economic benefits are faster adoption of new technologies by domestic firms and increase in the mobility of domestic resources— financial capital, improvement in the management structure of the domestic economy, net skilled labor migration as a result of centralization of substantive managerial decision making in the parent firm, etc.
The current situation regarding Chinese FDI in Russian market, its role and statistics related to the topic of the research identified and described. During the study of this topic, it was found that the topic of importance interaction between Russia and China in the investment context is quite disputable nowadays due to the political issues happening from February till the present moment. Under the conditions of Western sanctions against the Russian Federation, large-scale business is forced to look for investment partners in the East. China can become one of such partners - a country that already has a positive history of relations with the Russian Federation and successfully implemented projects in various industries.
At the same time when considering the statistics on the research topic, we may conclude that the place of Chinese FDI in Russian economy is not one of the highest, since the leaders in the list of countries with the highest FDI outflow to Russian economy were Cyprus, Germany and the United Kingdom. However, due to the sanctions imposed on Russian economy it is expected that the amount and volume of FDI from these countries should sufficiently decrease in near future.
Moreover, after analyzing the situation related to the dynamics of accumulated FDI from Hong Kong and China to the Russian Federation, we can note the fact that Hong Kong is used by Chinese investors as a transit location, since there are more developed international stock and financial markets there, Chinese firms have more opportunities to attract financing or get more favorable loan terms, consequently, such investment flows to Russia may be more attractive. This is especially noticeable in the information sphere, since in general it is easier for digital companies to work through a proxy of the country than with a traditional business.
The investment climate in Russia was investigated; its peculiarities and problems were determined. Hence, we may conclude that this may be a possibility of Russian companies to attract the investments from China. The problem that was defined is the problem of the development of investment climate in Russia. Currently it faces some quite serious problems which may be solved by progressive and durable actions. The possible solutions which may be taken into consideration are:
1) The continuation of the process of arranging mutual bilateral strong relationship in political and economic context in order to deepen the involvement of Russia and China in the programs of further development;
2) It is necessary to adopt and improve laws and regulations, optimize the business environment in Russia;
3) Efforts to combat corruption should be intensified, the legitimate rights and interests of investors should be protected, and their confidence in investing in Russia should be strengthened;
4) Encourage enterprises to innovate, optimize relevant technical standards, appropriately reduce the number of technological barriers for foreign investors, etc.
When it comes to the niches where the replacement may take place, they are mostly: 1) high technology sector with automobile and household appliance production; 2) customer services and retail projects, especially related to the tourism and hotel industry; 3) energy sector with the large- scale projects of Yamal LNG etc.
...
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