Where will friendship with China take us?
"When a person does not know
to which pier he is heading,
no wind for him
will not be favorable.”
Seneca
“Russia has only two allies -
its army and navy."
Alexander III
to which pier he is heading,
no wind for him
will not be favorable.”
Seneca
“Russia has only two allies -
its army and navy."
Alexander III
Does Russia have national interests? Turns to the West, now to the East: foreign manufacturers are enriching themselves, ours are losing orders. Why did Boris Yeltsin destroy the remnants of the USSR industry? Why does a sovereign country need any orientation? Maybe it's time for us to turn to ourselves? Isn’t this what Alexander III spoke about, instilling fear in all of Europe, that we have no allies except the army and fleet?
Turning to the East: is it possible to close losses?
Russia has lost the European energy market and “turning to the East” cannot compensate for it.
Here are the Federal Customs Service data: our foreign trade balance for January–November 2023 decreased to $126,9 billion from $310,1 billion for the same period in 2022. Russian exports during this period decreased by 40% – to $385,9 billion from $538,1 billion. Russian gas supplies abroad over the 11 months of 2023 decreased in physical volume by 34% in annual terms, revenue from Russian gas supplies year-on-year decreased by 69%, and oil by 7%. Added to this is the problem of settlements with India, whose rupees we do not need because of their illiquidity.
What are the consequences of the “reversal”? In order to help exporters and the budget, the ruble was devalued in the second half of 2023 by approximately 30%, which led to the Bank of Russia raising the rate to 16%, which will reduce the GDP growth rate in 2024 to the usual 1,0–1,5%. In turn, inflation increased, hitting the growth of household incomes. According to the Central Bank, inflation in the Russian Federation in 2023 is 7,42%. According to FU associate professor estimates, it is 25–30%. According to calculations by the Romir company, inflation from March 2022 to October 2023 is 48%.
China is a very conservative and cunning trading partner: understanding our weaknesses, it demands discounts from us for gas, not at all supporting the expansion of gas flow from us and not wanting to participate in investments in the construction of gas pipelines to its territory.
The issue of the Power of Siberia-2 gas pipeline was on the agenda during the president’s visit to the Celestial Empire in September 2023 and was never resolved, but an agreement was signed on additional volumes of gas pumping for 2023 through the Power of Siberia-1.
As Kommersant writes, as a result of a sharp drop in revenue from gas exports against the backdrop of rising costs and capital investments, Gazprom’s gas business turned out to be unprofitable in the first half of 2023. According to RAS, the net loss of the parent company in the first half of the year amounted to 255 billion rubles against a profit of 996 billion rubles for the same previous period. The revenue of PJSC Gazprom itself fell by 65%, to 2,74 trillion rubles, including revenue directly from gas sales fell 2,1 times, to 1,7 trillion rubles. According to Kommersant and a number of other experts, the price of gas in China could be about $309 per 1 thousand cubic meters, i.e. much lower than in the EU.
Full loading of “Power of Siberia-1” of 38 billion cubic meters is planned for 2027, the cost of the project is about 1,1 trillion rubles. According to Gazprombank estimates, the payback period is 10–15 years.
According to Forbes experts, a turn to the East will not replace the loss of the European gas market, which, including Turkey, provided 150–180 billion cubic meters. m, and sometimes up to 200 billion cubic meters. m. export. In 2023, only half of the supply remains via the pipeline through Ukraine and Blue Stream through Turkey, which cannot provide more than 60 billion cubic meters. m. Both pipes to China (Power of Siberia-1 and 2) can provide about 60 billion cubic meters. m subject to full load.
Power of Siberia-2 will take at least 10 years to build, and investments could amount to $55 billion. According to the plan, Gazprom should reach payback in 2048.
Almost all the proceeds from the sale of gas went to pay for the import of Chinese cars - $11,5 billion, which, judging by the prices, we clearly did not get as cheaply as our gas.
At the same time, the Chinese economy is slowing down, and the possibility of a crisis cannot be ruled out. And what will happen then?
The key question: what will happen to the ruble exchange rate and the Central Bank rate a couple of months after the elections?
Unequal exchange: we are raw materials for them - they are finished goods for us
Trade turnover between China and Russia in 2022 amounted to $190 billion, an increase of 29% compared to 2021. In 2023, trade turnover grew by 26,3% to $240,11 billion, a record.
According to the General Administration of Customs of the PRC for 2022, about 92,8% of our exports to the PRC are ordinary raw materials - mineral fuels, ores, metals, wood, etc.
Conversely: imports from China – over 90% – are value-added products. As one Russian businessman stated:
“China welcomes everything related to the supply of gas, wood or metals, immediately solving organizational issues. Other business in the trade sector has not progressed for years.”
Let us quote a memorandum from the Spanish Minister of Finance, Luis Ortiz, a famous 16th-century economist, who warned his ruling class about the decline of the empire, which eventually succumbed to industrial England, to King Philip II:
“From the raw materials of Spain and the West Indies... which they buy for just one florin, the foreigners produce finished goods, which they then sell back to Spain for between ten and one hundred florins... buying back their own raw materials from the foreigners at exorbitant prices, The Spaniards are becoming the laughing stock of all Europe.”
Friendship with China: what the West did not achieve, China will achieve
After the start of the SVO, the situation changed radically; sanctions deprived us of traditional imports, on which we had been dependent since the 90s. Switching to suppliers from China seemed like an obvious step. But we step on the same rake, not developing our own, but again and again buying someone else’s. They started producing something, but it’s not mainstream. I. Stalin, perfectly understanding the essence of capitalism, refused to buy finished products in the USA during industrialization: he bought technologies and factories. But this is precisely what we categorically do not want to do.
Can Chinese cars replace European ones? Do we even need our own car production?
You can recognize our orientation by the cars on the streets. This is ridiculous for a great power that, in 33 years of market conditions, has not been able to establish mass production of its own cars, although we have good developments - for example, Vesta. In the 2000s, we were “friends” with the USA - Fords roamed our streets, where are they now? Then Skodas and Volkswagens knew the main place. And now 2 years - and the main thing you can see is China.
According to RBC, thanks to Russia, China has become a world leader in the production and export of cars. Exports of Chinese cars to Russia in 2023 increased almost sevenfold, increasing from $1,6 billion in 2022 to $11,5 billion. Over the 11 months of 2023, we received 841 thousand cars, including cars, trucks and buses. The share of Chinese cars in Russian auto imports increased from 10% in 2021 to 92% in 2023.
Have we received discounts on cars from China?
In September-October, the average price for a car in Russia is about 3 million rubles, and cars from China of a similar type are 3,4 million rubles. Their cars look expensive: maybe they look no worse than European ones, but for now it’s a pig in a poke, how will they show themselves after 3-5 years of operation? Everyone remembers very well what happened to their cheaper predecessors. This is despite the fact that five years ago you could buy an average European car for 1,5 million. A devaluation of 30% for 2022 plays a role, but still. As of December 2023, car dealers began to overstock their warehouses with Chinese cars - about 175 thousand cars had accumulated.
Let us recall that in a similar situation after the 1998 crisis, Primakov’s government was able to increase industrial output, including cars. Our factories cannot produce normal cars at a price of 1–2 million that we could buy?
The Moskvich plant, which began assembling Chinese models instead of its own, is a wonderful symbol of our industrial policy. Cars at the offered price were not in demand. According to the plant’s reporting, for 2022 it received a loss of 2,4 billion rubles, and revenue for 2022 was 42,6 billion rubles, having decreased over the year from 155,1 billion.
With reference to Interfax there is newsthat Russian factories have decided to reduce car production volumes. In the fourth quarter of 2023, capacity utilization in the Samara, Ulyanovsk and Nizhny Novgorod regions, where the largest plants are located, decreased for the first time in 1,5 years.
Our automotive industry is in a problematic situation. After the departure of Western companies, factories were closed, mothballed, and there was a shortage of components. A reversal could lead to the fact that what the West did not finish off, China will finally finish off.
As MK writes: “China is attacking: instead of import substitution, Russia has become even more dependent on imports. “Chinese partners” are dumping and ruining the last mammoths of domestic mechanical engineering.”
As an engineer at the Ust-Srednekanskaya HPP said: “If earlier circuit breakers were supplied by the Swiss concern ABB, now they are supplied by the Chinese Rockwill; previously, video surveillance cameras were purchased from Bosch, now from Hiseeu,” says the expert. “If we talk about complex electronics for an advanced Russian enterprise, then it is entirely Chinese - we simply have no analogues.”
But the main question is different: China has become a world leader because their authorities create the most competitive conditions for their industry, while ours, together with the Central Bank, are doing everything to make it unprofitable for us to produce ours.
China and Russia have changed
Once upon a time, Russia was the elder brother for China, they looked in our mouths, admired the power of the USSR, we helped the PRC in the military field, also building the foundations of industry and heavy industry in the PRC.
The average rate of economic development in Russia for the period from 1992 to 2023 was only 0,89%; for the comparable period, China, whose GDP in 1980 was only (!) 39% of Russia’s, has now overtaken the US economy in terms of PPP, ranking in In 2022, first place, and we are in 5th place, with a GDP approximately 5,6 times less.
Life and infrastructure in Russia have improved, but all this time we have been practically marking time. At the end of 2022, the excess of Russia’s GDP level over the 1991 figure was only 30%. Over the same period, China's GDP grew 14,5 times! During the same time, US GDP increased almost 4 times from 5 to 963,1 billion dollars.
Now everything has changed: we are asking the PRC to expand gas purchases, all our cooperation is connected mainly with raw materials projects, in order to appease our neighbor, we are opening all markets to him, switching to his cars, leasing huge territories and allowing him to rule on our land . Both the rapid development of the PRC and our degradation of raw materials are in many ways the fruit of the no less rapid activity of the United States, which initially developed the PRC as an anti-Soviet and industrial project, and us only as a raw material project.
What is the difference between Russia and China?
If our liberals copied and carried out everything that Washington told them, then China initially used Keynesian approaches and the experience of the USSR in the economy. China, like the USA, knows how to play chess - we do not understand this game. China's pragmatism was so high that they probably initially fooled the United States: the United States thought to leave China in its harness like silent Europe and Japan, but the Celestial Empire has a completely different national philosophy.
In fact, the PRC supported Washington’s “anti-Soviet game” in 1978, but they only needed technology and sales markets from the United States. Copying technology - yes. Eastern cunning, cunning? Yes. “Chinese politics is an endless path of cunning” (Sun Tzu, Chinese politician of the XNUMXth century BC). And the fact that the United States exists at the expense of the whole world is also a fact. And China openly hints at this.
The Minsk agreements, the Istanbul and Kherson maneuvers, the grain deal show that it is possible and even necessary to “bargain” with us. Such things do not happen with China. The PRC has its own interests in Ukraine: China is the largest buyer of Ukrainian grain. And although there is no longer a deal, the “grain corridor” exists. We are playing along with both Turkey and China.
Despite its dependence on the United States, China is quite strict in its reluctance to carry out anyone’s will. China, in response to increasing customs duties on Chinese products, countered by increasing tariffs on imports from the United States. We did not use symmetrical measures against the West and Western companies.
This is because the leaders of the PRC are wise, they do not listen to the mantras of Western economists, they have learned the essence of things and do not need anyone’s advice, and the country is rich, has a strong army, a huge population, and many countries, including the United States, are already dependent on from them.
China has far surpassed not only its former “big brother” Russia, but also made the United States its patron, taking first place in the ranking of the world's largest economies by PPP in 2022.
What have we achieved? "Lethargic sleep"?
China and Russia: what unites us?
Russia and China are not “friends” and certainly not allies, but the countries’ relations with the United States are pushing us into each other’s arms, although they have an insoluble contradiction in their depths in the form of Chinese lands annexed to Russia by Alexander II.
China was initially critical of the West when we blindly followed it to the slaughter. But the reality of NATO’s encirclement and the Ukrainian setup also forced Russia to adhere to principle, at least in international politics, although we were previously dictated to the mantra that we have no differences in economic ideology with the West.
We and the PRC have a common socialist past, and this is also a factor. What Russia and China have in common is that they both recognize the depravity of America's global rule - and this is much more than it might seem.
Yes, China does not clearly support us, does not recognize Crimea and emphasizes, especially for the United States (and this is true), that there is no alliance between us. But China offers plans to resolve the conflict and meets us halfway in ensuring exports and imports and the current conditions against the backdrop of the EU, albeit against the backdrop of falling US trade, and this is a huge help. And China is far from India, which is making deals with the United States, with which it is clearly not interesting to trade in useless rupees.
The Wall Street Journal writes that Chinese representative Li Hui, during his visit to Europe, said: “The Chinese envoy referred to the PRC peace plan, which contains a clear message: US allies in Europe must demonstrate their independence and demand an immediate ceasefire, leaving new ones for Russia territory."
Recently, China's permanent representative to the UN, Zhang Jun, called on the United States to stop supplies weapons Armed Forces of Ukraine (AFU) and make efforts to start a dialogue for the sake of concluding a lasting peace, unattainable through sanctions and escalation of the situation.
The US has repeatedly said that Russia and China have violated the “rules-based international order.” There are four main countries of this kind in the world: Russia, Iran, China and North Korea - and it is this bloc that gravitates towards each other, despite completely different religious and cultural concepts. Russia and China, although not an alliance, are a real restraining force that prevents US hegemony from developing to its full potential.
Is a weak Russia beneficial for Beijing?
Russia proceeds from a completely rational concept that the PRC has no other way than to support us - if the United States “deals” with us, then they will do it alone with the PRC. At the same time, the West’s nightmare is the reality of our union.
According to Andrzej Lomanowski (Rzeczpospolita):
“Russia hopes that China will support it in the conflict with NATO, but it is primarily interested in gas. It is beneficial for Beijing that Moscow’s conflict with the West... weakens it, forcing it to cooperate with it on its terms. However, the West is openly afraid of a military alliance between Russia and China.”
Another opinion is expressed by Holly Elliat (CNBC, USA):
“Relations between Russia and China can be compared to a search for a middle ground. Beijing wants Russia to be both not too strong and unable to challenge it, and not too weak, since in this case China will be alone with the West.”
Kirill Kotkov, head of the St. Petersburg Center for the Study of Far Eastern Countries, also believes:
“China needs a weak Russia, but weak to certain limits...” In another interview, he said: “Is it beneficial for China to weaken Russia? - Yes, definitely. – What do the Chinese want from Russia? “China wants Russia to be economically, and subsequently politically, as tied to China as possible.”
According to political scientist Ivan Mezokho:
“We must face the truth and say that Russia and China do not have fraternal relations. But recently, in recent years and decades, they have developed genuine partnerships based on mutually beneficial economic and political cooperation... China today, in its statements, is trying to be so balanced as not to spoil relations with Russia, and this is already a lot.”
But from a global perspective, the weakening of Russia is certainly beneficial for the overpopulated PRC, since it will be easier for it to seize part of its “historically” lands near the Far Eastern border.
So what will happen tomorrow?
Neither Russia nor China were interested in complicating relations with the United States. The Russian elite still does not understand the impossibility of returning 20 years ago and categorically does not want to use the current situation to finally “disengage” and strengthen itself, following the path of the USSR. They still call the West "partners." They benefit from “sleeping Russia,” which could be used as a “cash cow” without making titanic efforts to develop the country.
Russia should value cooperation with China, although they do not clearly support us on many controversial issues, but they tend to offer more rational solutions to them than the West. Comrade Xi Jinping also treats us personally quite normally because he belongs to the older generation, which remembers our relationship. However, if he is replaced by a younger politician, which is inevitable in the future, the pragmatic position of the PRC may go the other way.
The saddest thing is that Russia is choosing the same peripheral model in relations with China as with the West. We are a raw material appendage and a sales market for the Celestial Empire. Cooperation with China will not give us any development, just like with the West. China has almost all the technology, but clearly does not remember that the basis of their industry was built by the USSR.
To bring our relations to a new level, Russia needs to make a turn neither to the West nor to the East, but to itself, its native, beloved and dear mother. And when the PRC understands that Russia is as serious as the USSR, our relations will move to a different plane.
Stop walking around with your hand outstretched and asking for investment, imports and technology. It's time to surprise the whole world with the fact that we can do everything ourselves and much better. And Rosatom, the world leader in the most high-tech industry, shows what we can be. But they don't give it to us. And everyone knows perfectly well who these people are by name.
In the conditions of overpopulation of the PRC and the inevitable growth of nationalism, the main issue for them is the return of their former territories in the Far East, which were ceded to us during the time of Alexander II under the Aigun Treaty with China - an agreement between the Russian Empire and the Qing Empire, signed in 1858. This treaty established new borders in the Amur region and Primorye (Ussuri region). And in 1860, the Treaty of Beijing was concluded, confirming the Aigun and Tianjin treaties and finally defining the eastern border between the possessions of Russia and China. In other words, these lands for the PRC are the same as what we “slaughtered” for Ukraine during Lenin’s time.
And this is the most dead-end issue in our relations, which is now trying to be resolved by leasing land that we cannot help but develop and populate due to the decline of our civilization.
Thus, the Chinese state “Cartographic Service of Standard Maps” released new officially approved maps of the PRC for 2023, on which part of the territories of Russia is marked as part of China.
Russians are not Chinese, we want to save the world, and have saved it more than once, but they only want to benefit from it. Our problem is that our elites do not want the development of their country, because all this will deprive them of power. They use her as a cash cow. Hence our extinction and marking time.
Epilogue: does Russia have its own national interests or is Gaidar again and always with us?
Do we have our own national interests? Or do we have nothing more important than the interests of big business and oligarchs, who have not been seen in their desire to develop the country and improve the lives of its people? Or is the main thing – the export of capital, the growth in the number of billionaires and the interests of our “partners”?
The ongoing arguments that we do not need to “replace everything” and we can close our “holes” with imports from so-called “friendly” countries, believing that ours will be “expensive”, do not stand up to criticism.
They say Mr. Kovalchuk is an adviser to the president. Let's listen to what he says:
“Economy and politics have always, from the very beginning of civilization, been determined by technology... today the colonization that existed in earlier centuries has been replaced by technological enslavement.”
Parasitism and passivity are the national disease of our elites, raised in the vicious field of serfdom - which only Peter I and Joseph Stalin could cure. The situation is such that fate may send us a new “innovator” who will make a new “big leap”. A forecast of why this is so is given in the work “2024–2025: Should We Expect Changes?” The problem is not with our “partners”, but with us – our elite.
Why should we make cars when we can buy them in China? Remember the winged:
“Who needs your shitty machines?! If you need it, we will buy everything abroad.”
Or why can’t we launch mass production of our own aircraft – is there anyway for this? Because our elite are the faithful disciples of Gaidar and Yeltsin, and there is nothing new under our sun yet.
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