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China-Russia trade battered by global economic downturn

ZHOU Deshun looked disheartened at his store in Suifenhe, a small city near the Chinese-Russian border, as there was not even a single customer for almost a whole day.

"Business is hard hit this year as there are far fewer Russian customers because of the deepening financial crisis," said Zhou, who is engaged in border trade in the northeastern Chinese province of Heilongjiang.

Zhou was not alone in the slumping border business. Many other venders nearby were playing cards together to kill the time.

A Russian businessman, who only gave his first name, Alexander, and was on a purchasing tour to Harbin, acknowledged that he faced more funding pressures this year.

"I only purchased half as much as I did a year ago. Worse still, the profit margin is much lower," he said.

The hard times came following sharp declines in trade between China and Russia since late last year as the worsening economic conditions took a toll on export sectors.

In January, Russia's imports from and exports to China plunged 51 percent and 27 percent, respectively, year on year, the first decline in 10 years, said Sergey Tsyplakov, a Russian trade representative in China.

The monthly data contrasted starkly with the full-year 2008 figures. Two-way trade stood at US$56.8 billion last year, an increase of 18 percent over 2007, according to China's General Administration of Customs. The growth rate, however, was lower than the 44.3 percent in 2007.

Yang Chuang, a professor at the China Foreign Affairs University, said the global financial crisis weakened the Russian economy where income and demand were falling.

The sluggish domestic demand, worsened by the devaluation of the Russian ruble, led to a decline in imports from China, while sharp declines in the prices of energy and raw materials have hurt Russia's exports, he said.

Severe challenges

Bilateral trade faces severe challenges in the first half of 2009, but conditions are expected to improve as early as the second half, according to Tsyplakov.

In 2008, China remained Russia's second-largest trading partner after the European Union, while Russia ranked as China's ninth largest, compared to seventh in 2007, according to the Chinese Ministry of Commerce.

Despite the current difficulties, the global financial crisis would not change the long-term growth prospect for China-Russia trade, Yang said.

The professor noted that the crisis has not affected the Sino-Russian strategic partnership of cooperation, a driving force for the bilateral economic and trade cooperation.

"From a long-term perspective, there is huge growth potential for bilateral trade," he said.

Last month, the two nations signed a deal under which China offered Russia US$25 billion of long-term loans in return for 300 million tons of Russian oil, delivered through pipelines to China from 2011 to 2030.

The two sides have also agreed on the construction of a pipeline from Russia's Skovorodino in its far east to China's northeastern city of Daqing.

The bilateral trade cooperation was still in an initial stage, said Artem Semenov, chairman of the Association of National Companies Promoting the Development of Trade and Economic Relationship with China.


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