China charmed by Russian Far East

"The earth along the Amur was, is and will always be Russian:" the old triumphal arch erected by Tsar Nikolai II in 1891 and torn down by the communists, has been rebuilt in Blagoveshensk, a frontier city in the Amur region. There, Russia and China look each other straight in the eye. 4370 kilometers of shared border, a legacy of the Convention of Peking (1860) signed by a forceful Russia and a Qing Empire weakened and humiliated by the Opium Wars, separate the Russian Far East from the Manchuria, the Northeast China formed by the provinces of Heilongjiang, Jilin and Liaoning. In recent years, cheap Chinese goods and raw materials (oil, gas and timber) from Siberia have been crossing the border in both directions. The trade flow, as it often happens, bring with it a human flow that - given the Chinese population size - raises many concerns. Some doubt that the region north of the Amur will be Russian forever.

The issue was revived in January after the announcement of a plan to enhance the territories of the Far East. The project came from the Russian Deputy Prime Minister, Yuri Trutnev, and was endorsed by President Vladimir Putin. According to the 'Moscow Times', Moscow would be willing to offer a hectare of free land (in the future maybe even more) "to every resident of the Far East and to anyone who is willing to come and live in the region so that they could start a private business in farming, forestry, game hunting or some other enterprise." The program - which could start as early as this year - would involve a portion of the 614 million acres of State-owned land and, as Trutnev explained, aims to "strengthen the tendendy of people's migration to the Far East". Especially, to lead them to rural areas, along the lines of the Soviet campaign for the development of the Virgin Lands launched in the 1950s with the aim to draw young people into uncultivated steppes of Siberia and Kazakhstan. The region, that covers an area of ​​6.2 million square kilometers, has a population of only 6.3 million inhabitants of which 75% is concentrated in urban areas. For obvious reasons the project has not gone unnoticed beyond the Great Wall. China and Russia had already agreed to cooperate in developing Russia's Far East development zone during a meeting between vice premiers in Beijing on Dec 11, 2014. However, Chinese media seem to give a personal interpretation of the real purpose of Trutnev's plan. According to the 'China Daily', thanks to the new initiative "the Far East will see an increase in the number of Chinese immigrants"; even suggests that, if all goes as planned, "the remote region would be the main exporter of green food to China."

The argument is attractive. The Asian country must feed a fifth of the world’s population with about 7% of its arable land, according to the UN’s food and agriculture organisation, and nearly half of that land has been 'degraded' by decades of unchecked development, writes the 'Guardian'. Analysts estimate that about 45 per cent of China’s population, or 630 million people, still make a living from agriculture, analysts estimate, but their productivity lags far behind that of developed countries. As recently admitted by Premier Li Keqiang, China had paid a huge price for its intensive farming practices with excessive use of fertilisers, pesticides and plastic sheeting causing serious environmental damage and threatening food safety. While the leadership continues to reiterate the need to promote an agricultural modernization as a catalyst for the economic recovery, Beijing did not fail to turn to imports to keep up with domestic demand: grains from the US, meat from Australia, soybeans from Brazil. Deutsche Welle’s Frank Sieren, a China expert, says that China loaned $3 billion to Ukraine in 2013 to advance its agricultural sector. The loan is to be paid back in grain supplies during a 15-year period with about four million tons of grain per year.This trend was confirmed in February last year when Beijing scrapped its grain self-sufficiency policy, doing away with a historical tenet of Communist party thought. According to a new report by the law firm Baker & McKenzie, in 2014 the Chinese foreign direct investment into Europe doubled year on year, with investors spending $4.1 billion on the continent’s food and agriculture, more than any other sector.

"My sense of the hectare of land program is that it is primarily designed to stem the outflow of population from the region," told me Harley D. Balzer, Associate Professor of Government and International Affairs and an Associate Faculty Member of the Department of History at Georgetown University. "One hectare is not enough for significant agricultural production, and consolidating a significant number of these holdings into a commercially viable entity would require significant investment in land, labor and equipment. I'm skeptical that this will produce real results. Neither Chinese nor Russians were evincing much interest in investment before the crisis. Now Russia has few resources, while the Chinese are likely to view other parts of the world as more attractive."

Moreover, the Russian version of the plan seems much more cautious. As remarked by Trutnev, the new program (which only allows to rent out the land and not to sale it), is actually aimed at preventing the free land from being sold to foreign companies and individuals. A clarification that the 'Moscow Times' called "important" given the enduring inroad of Chinese, Japanese and South Koreans into the region. Last summer, Alexander Shaikin, in charge of controlling the Chinese-Russian border, drew a bleak picture of the illegal Chinese immigration to the Far East placing the figures to 1.5 million units over the past 18 months. Although Shaikin's claim is likely exaggerated, the Federal Migration Service has repeatedly warned that Chinese could become the largest ethnic group in the Far East in 20 to 30 years. The People's Republic of China has a population of roughly 1.4 billion people, and that of Manchuria has increased by 13 percent in a little more than a decade. In contrast, Siberia, which covers three-quarters of the landmass of Russia, is home to only a quarter of the country's population: 38 million people. This is the equivalent of the population of Poland, except that Siberia is 40 times the size. There are some people who bet that the Russian Far East will become a relief valve for the crowded neighbor as the United States has been for Mexico. But there are also some who urge to downplay the phenomenon.

"According to our research and my personal understanding of the situation there is no any real rush among Chinese about this lands in Russian Siberia," told me Alexey Maslov, Head of the School of Asian Studies fo the National Research University - Higher School of Economics. "There are several points that prevent Chinese citizens against active lease of land in this region. First of all this is unclear status of this land, which means that Chinese or any other foreign citizens are really wary about long-time investments. Even today many Chinese involved to the cross-border trade or local services with Russia are worry about the personal security issues, non-transparency of local economic situation, lack of information and at the same time themselves often break Russian rules and regulations."

Maslov suggests that, to attract more Chinese tenants for leasehold property in Russia, Russian side should invest a lot to the advertisement and informational support of this project among Chinese and not to wait that a mere proposal will bring a positive effect. "Taking into consideration that the leasing land is just 1 hectare it should attract small companies and private family tenants who need support and investments. So in this case the position of Chinese banks is also very important."

Couple of years ago Russian government established several special zones for advances development in Russian Far East with very low level of taxation and attractive business environment. Unfortunately so far these zones didn’t became popular among Chinese investors and  businessman, and don’t play too much role in the local development. "Russia already had an experience of inviting Chinese farmers to Russian Far East, manly in Primorskiy region. Eventually there were a lot of complains about using of chemical fertilizers harmful for the land and general ecological degradation of the soil. In spite of may rumors about the growing number of Chinese population in Russian Far East the real number of Chinese expats is very low and there is mainly 'shuttle' kind of migration of Chinese traders. Just few of them, thousands but not millions, decided to settle in Russian for long period of time."

In spite of Chinese promises to invest billions of dollar to the projects in Russia, the general amount of Chinese investments is less that 2% from all FDI to Russia and today the Chinese investment policy to Russia is far from to be really emerging not to speak aggressive. Beside it usually Chinese banks provide credits and loans only for joint projects which are not outnumbered and finally this money returns to Chinese participants of the projects. "Speaking about Chinese 'expansion' to Russia it doesn’t started so far and we have to calculate not how many Chinese came to Russia but how much Chinese direct and indirect (sometimes non-official) investments came to Russian territory."