Pivot East: Legal Support for Mutual Investments

We continue to be long-term geopolitical and economic partners of the People’s Republic of China. We do not always share the same views, but a similar, unified approach to many issues serves as an important foundation for economic relations. […] Trade between the two countries increased by 35% in 2021 over 2020, to USD 40 billion, and the roadmap that was signed on 4 February 2022 between the two countries envisages an increase to USD 200 billion in trade turnover. That’s not just 2021. In 2022, the momentum has increased. […] I am sure that as an economic partner China is definitely our future. Of course, Russia cannot be dependent on a single partner, but it is something we definitely cannot do without — Rustem Akhmetshin, Senior Partner, Head of Tax Practice, Pepeliaev Group.

Despite export growth in the past 5 months, overall from March to May ... exports from China to Russia have declined for three consecutive months. We’re talking 5%, 33%, and 12% decreases. It seems to us that demand from Russian companies for Chinese goods, primarily equipment and machinery, is growing rapidly. [...] Goods made in China will be able to carve out a decent niche from what Western companies left behind — Sheng Guofei, Director of the Foreign Investment Promotion Department, China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME).

Chinese society as a whole is interested in learning about the Russian economy, about the conditions for doing business. Of course, the vast majority of this interest does not translate into practical terms, but it seems crucial to use all channels of mass communication in China to bring accurate information about doing business in Russia to local audiences. […] I should mention that we sometimes also lack [information - Ed.] about Russia’s investment potential, and that includes material for presentations on macroeconomic developments, regulations for investment, and specific projects. We also sometimes encounter a lack of professional reference and analytical materials on legal issues related to investment... in English or Chinese, to be able to plainly present these [materials] to potential Chinese investors — Alexey Efimov, Trade Representative of the Russian Federation in the People's Republic of China.

As an entrepreneur, I can also see the other side of the coin - apart from the fact that we help through the financial business association – that’s more bureaucratic work. I myself have more than 20 years of experience building a business in China... in food sales, shipping to China, and not just from China to CIS countries, to shopping centres and chains. What I see... the ‘Made in Russia’ brand isn’t a strong brand in China. There is the image of Vladimir Putin as a strong leader, but there is no understanding of high-end, high-precision products or consumer goods, or tasty and environmentally friendly food, or reliable honest partners — Evgeny Bazhov, Head of the Representative Office, Financial and Business Association of Eurasian Cooperation in the People's Republic of China.

We understand that in principle it’s important for companies to build these channels, and in this regard, I would like to make a proposal in the resolution. More than 50% of the companies that participated in the survey asked to be given the tools to find out how to work. In this regard, in practice, we are faced with a difficultly in understanding which bank to go to, Russian or Chinese... to build a settlement relationship. Here it would be good - as a recommendation - for the government and business associations to build a system to inform about possible counterparties, a certain confidentiality is needed here, but even so it could be done, and secondly, about the procedures themselves... combating money laundering, currency control, which has now become very time consuming in Russia, and in China it is also time consuming. This information system as a recommendation is the first step, so that the second step can happen, and a certain harmonisation of our approaches in the regulation of these issues — Andrey Lisitsyn, Managing Director, Financial Policy and Financial Markets Department, Russian Union of Industrialists and Entrepreneurs.

It will be very difficult for Russian goods and products in China to compete with counterparts from Southeast Asia. Why? Because China and Southeast Asia have signed agreements on duty-free trade. Accordingly, Russian goods and products cannot compete price-wise. We need to be competitive in some other way. In what way? [...] This is the role of marketing experts with a knowledge of the finer points of the Chinese market — Evgeny Bazhov, Head of the Representative Office, Financial and Business Association of Eurasian Cooperation in the People's Republic of China.

As for business priorities in terms of currencies, we’ve made an interesting discovery here. If at the end of 2020 there was, in fact, a drop in interest in the yuan, i.e., previously companies recorded that approximately 19% of their total turnover was, I repeat, in yuan, this figure really surprised us, because we thought it was less. And a desire to settle in yuan, I stress, for 2020, only 10%. Now, of course, the situation has changed significantly. By the way, there is a drop still, if we’re talking about yuan. Next, we broke down which currencies were being used for settlements in which regions. Here I would like to point out that most of our business with Asian countries is settled in dollars - 89%. But about 50% would like to give up dollars, i.e., no more than 40% of companies would like to keep the turnover. As for the yuan, 28% now settle in yuan, while 22% would be willing to continue settling in yuan. The interesting thing is that 61% are still willing to pay in roubles. There is a clear trend here. On the one hand, the yuan is becoming more interesting, and on the other hand, the rouble is even more interesting — Andrey Lisitsyn, Managing Director, Financial Policy and Financial Markets Department, Russian Union of Industrialists and Entrepreneurs.