China

Resting on a firm legal basis, Chinese-Russian contacts are progressing on equality and mutual trust principles and are aimed at strategical partnership in the 21st century.

Bilateral summits gather once a year, at the rarest. The first informal one was held during President Jiang Zemin's visit to Russia, November 22-25, 1998. A telephone hot line was established to link national leaders.

Foreign ministers also have regular conferences, and respective ministries hold consultations on a wide range of issues.

Bilateral interparliamentary contacts are also smoothly progressing. Speaker Gennady Seleznev of the State Duma visited China on October 25-30, 1998, and an understanding was made for a reciprocal visit to Russia by Li Peng, Chairman of the National People's Congress, presumably in 1999.

The establishment of a bilateral Committee for Friendship, Peace and Development came as a step towards public support of Russian-Chinese goodneighbourly relations and strategical partnership. Its maiden session was timed to the Russian president's state visit to China, November 1997.

Representing Russian interests in China are the embassy in Beijing and general consulates in Shenyang, Shanghai and Hong Kong (Xiangang). China, in its turn, has in Russia an embassy in Moscow and general consulates in St. Petersburg and Khabarovsk. On an available understanding, the Russian consulate in Shenyang will start a branch in Harbin, and the Chinese in Khabarovsk and Vladivostok.

China is Russia's third-largest foreign trade partner, coming after Germany and the USA, outside the former Soviet territory, while Russia comes eighth among China's foreign trade partners in terms of turnover.

A legal basis of bilateral trade and other economic contacts has been formed, in the main. It includes a trade agreement for 1997-2000, a memorandum of mutual understanding, an agreement on guidelines of trade and economic, research and technological cooperation, and a number of intergovernmental and interdepartmental documents on the various practical aspects of cooperation.

A resolution of the Russian government of November 1, 1997, approved the strategy of bilateral economic contacts.

A ramified mechanism of regular prime-ministerial conferences was established in December 1996. As an intergovernmental agreement has it, they are convened at least once a year with Moscow and Beijing for alternate venues. Four conferences were held for now—the latest in Moscow, February 1999, during the first visit to Russia by newly-appointed State Council Premier Zhu Rongji.

A commission was set up to prepare these regular meetings. It had a third session in Moscow, February 23, 1999, at the level of First Deputy Prime Ministers. It has five subcommissions and several ad hoc teams. All subcommissions gathered at a ministerial level before the fourth prime-ministerial conference: the research and technological cooperation subcommission had its second session in Beijing, September 1998; transport, third, Beijing, December 1998; nuclear power, third, Moscow, January 1999; power industry, first, Moscow, January 1999; and trade and other economic contacts, second, Beijing, February 1999.

As Premier Zhu Rongji was visiting Moscow from February 24 to 27, 1999, 16 documents were signed—among them intergovernmental agreements, trade and economic cooperation understandings between regional administrations, and intercorporate contracts. Notable among intergovernmental instruments was a protocol on trade and economic cooperation for 1999 (an annual document to fix mutually agreed reciprocal supplies under intergovernmental agreements) and a protocol on the principles of protection and distribution of intellectual property rights to an agreement on research and technological cooperation of December 18, 1992.

Interregional agreements on trade and other economic contacts were made between the governments and administrations of the Republic of Bashkortostan and the Liaoning province, the Altai Territory and the Xinjiang Uyghur autonomy, the Maritime Territory and Jilin Province, and the Amur Region and Shanghai. As they establish direct economic contacts, regions will proceed from mutual interests, local situations and the available potential to set up joint bodies to coordinate and extend contacts.

Of crucial importance among corporate understandings are the following:

a general agreement for feasibility studies on a pipeline to link the Kovykta gas condensate deposit in the Irkutsk Region and China (the two countries are starting the studies according to an approved construction schedule). The line is to pump up to 20 billion cu m of natural gas for 30 years or longer;

a contract between the YUKOS petroleum company and the Chinese National Oil and Gas Corporation for major supplies of crude oil and petroleum products to China—up to 1.5 million tons in 1999 later to rise to 2-2.5 million, including supplies via the Russian Far East to replace Chinese-drilled oil in Kazakhstan;

a contract between the same companies for feasibility studies on an oil pipeline from Russia to China under a long-term project for 25-30 million tons of oil to be supplied within 25 years; and

an agreement between the United Russian Power Grid Co. (RAO EES) and the Chinese State Power Corporation, in which cooperation guidelines are specified.

Contracts have been signed to supply parts from the Chinese-based TCL Co. for TV-set assembly by Rubin and Quant in Russia, up to 200,000 each by 2001; to supply parts for 1999 and later set up joint manufacture of air conditioners up to an annual 200,000 between Chunglan Co. (China) and Energia and Machinostroitelny Zavod companies (Russia); and to purchase property for Chinese department stores and a Chins business centre in Moscow to a total exceeding US million.

The year 1998 cut the bilateral trade turnover by 10% to US billion (of this 3.6 billion for Russian exports and 1.8, imports from China), as against US million in 1993. Russia's share in Chinese foreign trade shrank from 3.5% in 1992 to a current 1.9%. Machines and other equipment make a bulk of Russian exports to China (24%). Coming next are non-ferrous metals, timber, cellulose, fertilisers and other chemicals. Footwear and other leather articles, garments, meat, machinery and other technology account for 70% of Russian imports.

Over a thousand Russian-Chinese joint ventures based in Russia have a total capital exceeding US million. Concentrated primarily in frontier areas, they engage in trade, with its rapid turnover, with the exception of 200 industrial companies.

Hotel Dalni Vostok in Nakhodka, a microchip factory in Zelenograd near Moscow, and a communication equipment factory in Ufa are the largest of Russian-based joint ventures. Chinese-initiated talks are underway for a household electric appliance factory to be established in Russia.

The year 1998 saw spectacular progress in bilateral technological trade, with contracts signed to a total US billion.

The same year brought 481 labour contracts to a total US million, of which 122 million worth contracts have been implemented by now. Close on 10,000 Chinese were employed in Russia by the end of 1998.

Demarcation of the eastern frontier section from Korea to Mongolia, total length exceeding 4,200 km, was completed in November 1997, and another 55 km of the western stretch in 1998, which provided—for the first time in the three centuries of bilateral relations—a frontier clearly determined to mutual approval.

An intergovernmental agreement was signed on November 10, 1997, on guidelines for joint economic use of several islands and surrounding stretches of frontier rivers.

In April 1996 and April 1997, Russia, Kazakhstan, Kyrgyzstan and Tajikistan signed agreements with China for confidence-building in military affairs and mutual cuts on frontier contingents. A peace zone, first in the Asian-Pacific region, is being established on their basis to give rise to extensive goodneighbourly cooperation.

Russia and China share a view of the contemporary world as evolving towards multipolarity, in which they proceed from a conviction that alliances and multilateral strategical blocs spearheaded against third countries are a thing of the past. The two countries base their foreign politicy cooperation on a joint declaration of a multipolar world and the emergence of a new international order, signed by a summit of April 1997.

Russian-Chinese banking contacts proceed from two agreements between the Central Bank of Russia and the People's Bank of China on general cooperation and on cooperated monitoring of credit institutions.

Hampering bilateral trade are an embryonic network of banking correspondent contacts and other drawbacks in mutual settlement patterns, a vast share of cash transactions, especially in frontier trade, Chinese bankers' mistrust of Russian commercial banks, and other factors.

An ad hoc team for interbank contacts was set up by a February 1998 resolution of the 2nd session of the bilateral commission preparing regular prime-ministerial summits, and gathered for its first session in Beijing, in May 1998.

The Russian financial crisis of August 1998 dealt a heavy blow to interbank contacts. Two Russian banks which used to service settlements for many major intergovernmental agreements, the UNEXIMbank and the Incombank, could no longer engage in transactions, and closed their Chinese-based offices with the Rosbank overtaking the UNEXIM office. The Beijing office of the Rossiyskiy Kredit bank is also on the brink of closing down.

China's sophisticated patterns of licensing foreign banks' offices are harassing Russian bankers as they try to start new branches. This concerns, in particular, Vnesheconombank, which ventured out to service settlements under international agreements. A de facto embargo still persists for correspondent relations between Russian banks and the People's Bank of China, which is servicing the bulk of its country's foreign trade transactions.

New bank branches are in an imbalance. The Elos, a branch of the People's Bank of China, was opened in Russia in 1994 holding a general license for all kinds of rouble and hard currency transactions involving Russian residents and non-residents alike, while China still has no Russian banking office authorised at least to a limited range of transactions, due to the host country's tough legislative demands of foreign banks as they intend to start a Chinese branch.

An intergovernmental agreement on cooperation and mutual assistance in currency control, made on Russian initiative on April 25, 1996, is the basis of Russo-Chinese contacts in that field.

The joint-stock company Ingosstrakh is Russia's only corporate insurer to have smooth contacts with China and a Beijing office. Linking it with the People's Insurance Company of China are a number of partnership agreements. Russo-Chinese commercial insurance is in an embryonic stage, and insurance matterss are skipped over in major joint industrial projects, e.g., shipbuilding or nuclear power plant construction in Lianyungan. There is no health or any other kind of tourist insurance.

Russian-Hong Kong contacts. Leading trends in Russian-Chines contacts in 1998 spread to the special autonomous area, with dynamism in politics and the economic aspect lagging behind, mainly due to an all-pervading Asian financial crisis and a far-reaching social and economic crisis in Russia, which badly hit bilateral trade and undermined confidence in Russia as a steady and reliable partner.

There was a silver lining, however, to the Hong Kong crisis, as it made local political and business circles take a new look of established foreign relations and seek new fields of contacts.

A State Duma delegation, led by Speaker Gennady Seleznev, paid a visit to Hong Kong in October 1998 to meet with Dong Jianhua, chief of top executive, Speaker Rita Fang of the supreme legislature, and business people. A most spectacular event in Russian-Hong Kong political contacts, the visit brought principled understandings the implementation of which promises an impetus to mutually beneficial links between legislatures, government agencies and private companies.

V.G. Yalyaev, board chairman of a petroleum joint venture, LUKoil-Belarus, visited Hong Kong in April 1998; M.S. Meyer, rector of the Institute of Asia and Africa under the Moscow State University, in May; A.V. Ogarev, assistant head of the Russian presidential staff, and E.O. Adamov, federal minister of nuclear power industry, in June; and State Duma member A.D. Vengerovsky, in August.

A Moscow municipal delegation led by E.V. Yegorov, department head for the promotion of small business, visited Hong Kong in December to make headway in trade and other economic contacts by outlining their tentative aspects and discuss a Moscow House of Commerce to be set up in Hong Kong.

The Khabarovsk Territory in the Russian Far East was introducing itself, with a two-day business seminar and demonstration of several investment programmes as a delegation of 43 visited Hong Kong from March 15 to 22, 1998. Led by vice-governor A.B. Levintal, it represented the territorial administration and private business. The vice-governor visited the office of China's Foreign Ministry commissioner in Hong Kong and the local commerce and industry department. Delegates had contacts on the council for trade development, the association for trade with Russia, and the board of the local Chinese industrialists' association.

Close on a hundred Hong Kong-based companies, including a major firm, China Everbright, and Sumitomo, Rabo Bank, Credit Agricole, ABN Amro and other banks, were contacting the visitors with prospects for partnership, now materialised in several memorandums of mutual understanding, and preliminary agreements for timber, garments, furs and some other commodities.

Russia's Transaero Co. suspended unprofitable flights to Hong Kong in 1998, while Aeroflot cut its regular flights from a weekly three to two, and occasionally even one. Incombank Finance Co., an Incombank subsidiary, wound up its business in Hong Kong, and the local office of the Roscontract government company cut transactions.

Russia, however, remains active in Hong Kong-based expositions and seminars, and reciprocally. This notwithstanding, the Hong Kong council for trade development estimates the trade turnover in 1998 at a billion US dollars, or 200 million less than the year before.

The year 1998 did not bring any serious change to the pattern of Russian-Hong Kong trade. Russian exports are dominated, as before, by aluminium, industrial raw materials, oil products, precious and semi-precious stones, semi-conductors and fabricated metal products, while imports by watches, computers, office equipment, garments, footwear, toys and sport gear. Hong Kong remains a major re-exporter of Russian goods to Southeast Asia, and is active in financial settlements for trade with China.

Technological Contacts

The year 1999 continued Russian supplies of complete equipment sets for twelve industrial projects on technical investment lines, legally based on such intergovernmental instruments as the agreement for economic and technical cooperation in construction and updating of Chinese industrial projects of July 10, 1985, and on direct corporate contracts.

Investments involve nuclear and conventional power industry, iron-and-steel and non-ferrous metal industries, chemical industry and engineering.

Investment in power engineering in 1998. The implementation of Russian obligations under an intergovernmental agreement of July 10, 1985, concerning conventional power industry is approaching completion. Thus, Technopromexport Co. commissioned Unit No. 1 of 500 mWt of the Imin thermal power plant, November 1998. Construction and assembly went on in the Imin and Suichun thermal plants according to a schedule approved by the Chinese partner. Equipment supplies exceeded 200 million Swiss francs. Chinese commodity import and re-export contracts were implemented to 110 million Swiss francs as payment for Russian equipment.

Energomachexport Co. supplied equipment to the Huaneng-Beijing thermal power plant to US million under direct contracts with the Chinese customer. Two units were commissioned to a total 320 mWt. Another two of similar capacity are to be commissioned within 1999.

Under contracts with several Chinese and Hong Kong companies the Yekaterinburg-based Turbomotorny Zavod Co. exported four T185/220-130 and PT140/165-130 turbines to a total US million to the thermal plants Huaneng-Beijing, Sigu (in Lanzhou) and Loyang. The first two have been commissioned, and the Loyang turbine is running idle. In 1999, the company is supplying second turbines to the Loyang and Chengdu plants, and goes on with assembly and adjustment.

The Energomachinostroitelnaya power-engineering corporation and LMZ Co. met contract obligations to US million, in 1998, to supply and assemble equipment for a pulp-and-paper combine in Wuxi, Henan Province.

Sovelectro and Transformator supplied transformers to a total of US million to the Loyang and Chengdu plants in 1998 under earlier signed contracts.

Total supplies by the above companies approached US million in 1998.

Dominating investment contacts in 1998 were design, expert analyses and consultations, Chinese personnel training, and maintenance, assembly and adjustment of Russian machinery supplied to China.

Technopromexport assisted in contractual assembly works at Imin and Suizhung thermal plants. More than ninety specialists were involved in assembly and adjustment. Efforts at those two and the Zhejiang thermal plant amounted to US million. The company made expert checks, as envisaged by the contract, of steel-and-concrete waterduct blueprints for the Three Gorges hydropower plant to US,000.

Energomachexport Co. employed 18 of its experts in Huaneng-Beijing assembly work to US,000.

Sovelectro Co. joined hands with the Uralelektrotyazhmash electrical engineering plant and other Russian manufacturers for consultations requested by Chinese customers, and repairs on the Anding substation in Beijing suburbs, transformer and excitation system assembly at the thermal plants Loyang (Henan) and Chengdu (Sichuan), and maintenance under those projects to a total US,000.

Energomachinostroitelnaya Corp. was employing 13 experts to go on with equipment assembly and adjustment at the Wuxi pulp-and-paper combine in Henan to US,000.

Yekaterinburg's Turbomotorny Zavod was assembling turbines in the Huaneng-Beijing, Sigu and Loyang thermal power plants to an approximate US,000.

Energomachexport and Technopromexport are basic Russian power equipment exporters to China. Russian-manufactured equipment fully satisfies the customer, considering Chinese power industry's long experience of its operation and ability to provide maintenance and spare part manufacture.

China has recently switched over to contract drawing preceded by international tenders from a previous practice of companies' direct negotiations with Chinese governmental and semi-governmental agencies.

Overseas suppliers willing to share the latest knowhow with China and get it manufacturing items similar to their exports are regarded as preferable partners on an arrangement which will eventually allow the country to equip its new power plants with home-manufactured machinery.

China is eager to consider opportunities for manufacturing Russian-designed power-generation machinery, stressed the first session protocol (January 1999) of the subcommission for power engineering cooperation under a bilateral commission responsible for regular prime-ministerial summits.

To make their produce more competitive in China and cut down production costs, many Russian manufacturers follow Western companies to reduce end product prices by purchasing parts abroad and basing production in China, whose industrial production costs are notably lower than in Russia. These arrangements, however, cannot give a tangible impetus to Russian exports to China and make their increase a lasting trend.

Cooperation is, naturally, at its best in steadily financed projects. In too many instances, however, Russian export-oriented manufacturers cannot afford expensive high-tech production, and have to recur to loans. Thus, Technopromexport was borrowing from the transnational power corporation Huaneng to manufacture equipment it was supplying to Chinese power plants. Chinese commodities are exported to Russia or re-exported to third countries as the commodity share of Chinese payments for Imin and Suizhung thermal plant equipment. A part of export proceeds go to repay the above loan.

The Yekaterinburg-based Turbomotorny Zavod has lucrative financial contacts with Englowei corporate investors of Hong Kong, which envisage advance payments for basic equipment to be supplied to Chinese power plants. Total supplies amounted to US million in 1998, with all settlements in hard currency, as against partial barters for Chinese-made goods in the recent past.

Turbomotorny Zavod steam turbines are popular in China's power engineering market. Thus, the company has signed contracts to supply four turbines to the Jilin and Baiqiao thermal power plants to a total US million before the year 2000. Talks are underway for exports of compressorless gas turbines.

Energomachexport Co. signed a US,000 contract in 1998, to supply water boilers to the municipal heating network of Shihezi. Talks are going on with potential importers and municipal authorities of Lhasa, Shenyang, Daqing and Hohhot for similar exports to no less than US million. Involved Chinese agencies intend to secure Russian assistance as they upgrade the operating Jixiang-Panshan, Imin, Suizhung, Inkou, Shantou and some other plants, prospects for whose second stages will be considered after 2000. Energomachexport is negotiating with Chinese manufacturers of auxiliary power equipment to appear together in international power plant construction tenders and so come closer to the foreground in third countries' markets.

Lianyungang nuclear plant construction. An intergovernmental cooperation agreement of December 1992 envisaged joint construction of a Russian-designed nuclear power plant in China with two power units, each with a VVER 1000 water-cooled reactor at a total 2,000 mWt.

After China's cabinet analysed feasibility studies in October 1996, it determined to appoint the site in the Jiansu Province, near seaport Lianyungang.

A contract for blueprints was signed in May 1997, and a general contract in Beijing, December, to US billion as against 2.5 envisaged by the initial agreement, with Unit One to be commissioned in 2004, and Two in 2005, under a Russian loan for a term of 13 years at 4% per annum. Loan payments are to be started two years after Unit One is commissioned. China is to make an advance payment of 10% of the contract price, of this 5% upon contract signing (2.5% in cash and 2.5% in kind) and the other 5% in instalments as it is implemented.

The contractors, Atomenergoexport and Zarubezhatomenergostroi, merged into Atomstroiexport Co. in June 1998.

Contract implementation came against dire shortages of federal budget allocations.

Construction was commenced on April 25, 1998, to start concrete foundation laying in October 1999, according to schedule. If Russia copes with the two initial units, it will have prospects to contract for the other two.

By a letter exchange between the signatories in December 1998, the 1992 agreement was amended, and an interbank contract was signed to help China pay US million in advance, so that Russian companies may start manufacturing equipment for the project.

Other Russian-assisted nuclear projects in China. An intergovernmental agreement was signed, December 18, 1992, for a gas centrifuge plant for uranium enrichment to be built in China for nuclear power stations. Three stages of the plant are under construction in Hanzhung, Shaanxi Province. The first two top-quality stages were commissioned well ahead of schedule, and the third will be finished in January 2001, two years ahead of schedule.

An intergovernmental protocol to this agreement, signed in December 1996, envisages two additional stages on the Lanzhou gas centrifuge. Occupying the site of a gas diffusion factory, built in the late 1950s with Soviet assistance, it is to be commissioned between April and July 2002. Construction is presently outpacing the schedule by two years. Both projects have IAEA guarantees.

Evgeny Adamov, Russian Minister of Nuclear Power Industry, visited China in June 1998. During that visit and at the third session (January 1999) of the subcommission for nuclear industrial cooperation under the bilateral commission for regular prime-ministerial summits the implementation of an agreement to build in China an experimental fast-neutron and a natural safety reactors, and establish a new-generation fuel cycle was discussed. China agreed for further and more detailed cooperated work on the natural safety reactor. The fast-neutron reactor design is nearing completion, and the partners will start construction fairly soon.

The SverdNIIKhimmash research institute in Yekaterinburg entered into a contract with China, May 1995, to supply equipment for an oxalate plutonium refinement unit to be based at a military enterprise in the Gansu Province, which is shifting to civil-oriented production. China issued a certificate of end user and end use, pledging never to use the equipment for military purposes and for nuclear explosions but to recycle spent nuclear power plant fuel.

Experts of Russia's Ministry of Nuclear Power Industry are sure that the Russian equipment cannot be used by that particular project to obtain arms plutonium. The Chinese partner agreed to obtain government guarantees of the technologies used to civil-oriented purposes only and to give acess to the plant for inspections by Russian experts.

The Russian Ministry of Nuclear Power Industry and the Chinese Academy of Engineering Physics signed an agreement, on November 30, 1994, for research, technical and economic cooperation in the conversion of defence enterprises and civil use of nuclear power. Based on it is an exchange of research and technical information and personnel. Over 30 contracts were made for high-tech exports to China.

A bilateral commission was established for military industry shift to civil-oriented production. It assists research institutes and industrial companies to use high-tech know-how for joint R&D, production and sales.

A joint venture, the Shenzhen industrial technological depot, was established in the local free economic zone. Papers will soon be drawn for registration in China of a joint venture to manufacture portable medical X-ray units.

Russian-Chinese cooperation in research and technology is based on a relevant intergovernmental agreement, signed on December 18, 1992, and automatically extended in 1997 to 2002.

China is interested in having access to Russian fundamental and applied research findings, while Russia promotes its partner's shift from incidental R&D to latter-day production in fields of shared interest in order to become a notable presence in the Chinese high-tech market.

Attached to the commission for regular prime-ministerial summits is a subcommission for research and technological contacts. Presided by V.V. Nichkov, deputy minister for science and technology, for Russia, and Xue Guanghua, deputy minister in charge of the State Scientific and Technological Commission, for China, the subcommission had its latest, second session in Moscow, September 1998.

A programme of research and technological cooperation up to 2000 envisages 70 projects in such priority fields as pioneer materials, seismology, construction technologies, the agro-industrial complex, engineering, mining, iron-and-steel and non-ferrous metal industries, geology and oceanography. A majority of these projects are being implemented, and blueprints are being made for others.

The two ministries of science prolonged cooperation plans for 1999 to extend contacts between leading government research centres, in particular, for research and educational computer telecommunications and new materials R&D.

A protocol was drafted to protect and distribute intellectual property which emerges and/or is transferred under joint R&D projects. The document, scheduled for signing in February 1999, supplements the effective intergovernmental agreement on research and technological cooperation.

In December 1998, Beijing hosted a bilateral symposium on cooperated development of high and pioneer technologies. The agenda included exchange of experience on commercial use of R&D results, their industrial application, basic approaches to organisation of, and investment in such technologies, and the functioning of technoparks. China appointed the Yantai zone of technical and economic development in the Shandong Province to implement Russian technologies.

A Russian-Chinese consortium, Centre of Science and High Technologies, established in 1995 with the assistance of the Russian Ministry of Science, and a Transnational Company for Venturesome Investment, established on Russia's initiative, are guiding the application of Russian technologies in China. Granulated polymere production was launched, and a latter-day wall coating factory built. Research is on for synthesis of artificial industrial monocrystal diamonds and production of nitrogen-fixing biological preparations. China received twelve proposals in electronics, medicine, low-temperature diffusion welding, and nondestructive control methods.

Understandings were made to establish a joint centre for development and production of herbi-microbe preparations, to be supervised by the Research Institute of Agricultural Microbiology under the Russian Academy of Agricultural Sciences; a laser centre (the Moscow Institute of Physical Technologies); and an R&D centre for sublimation drying (the Research Institute of Poultry Procession Industry of the Russian-based research-and-production amalgamation, Complex).

Among the consortium founders is the Russian Centre of International Research and Technological Cooperation representing Russia's Ministry of Science on the consortium, which is establishing in China joint ventures to apply Russian technologies financed by Chinese investors. The consortium fully implemented, in 1998, its first large-scale project—a factory manufacturing canned food sublimation drying installations. Direct Chinese investment in the projects amounted to US million. Feasibility studies will soon be completed on another project, for Chinese manufacture of synthetic diamond powders with Russian knowhow, which is estimated to require US to 30 million investment.

After Hong Kong joined China as a special administrative region, Russia's Ministry of Science, with its considerable experience of work in the Asian-Pacific region, China in particular, deemed it necessary to extend contacts with Hong Kong, starting with a Russian exposition at the Techworld '99 (March 1999), which brought to its venue firsthand information about the world's latest achievements. An ad hoc commission for innovations and technologies was to offer to the Hong Kong government, in mid-1999, its initiatives for the most lucrative spending of US million out of two target funds, proceeding from the exhibition results.

Russia-China Forum, Moscow, September 16-18, 1998: military industrial conversion and cooperation. The latest, fourth forum was arranged, on the Russian side, by the centre for international research and cultural cooperation of the Russian Federation government and the Russia-China Friendship Society with support of the ministries of Foreign Affairs and the Economy; and on the Chinese side, by the People's Society of Friendship with Other Countries, the China-Russia Friendship Society, and the Chinese association for civil use of military industry and military-oriented technologies. It was convened by resolution of the intergovernmental commission for trade and economic, research and technological cooperation. The Russian federal government issued a respective instruction of February 6, 1997, and an order of August 21, 1998.

Active on the forum and its preparation were top officers and experts of Russian governmental agencies concerned—of international cooperation, finance, monetary and crediting regulation, and industrial reforms and military-industrial conversion; the military-industrial security board of the federal Security Council; and the Embassy to China.

Similar forums for business and research contacts gather once a year with alternate venues in Russia and China.

The Chinese delegation of 74 members was representing at the latest forum several agencies of the State Council, in particular, the State Committee for Military Research, Technology and Industry (CMRTI); the International Engineering Consulting Company; arms-manufacturing, aerospace, nuclear industrial and petrochemical corporations; the central logistics department of the People's Liberation Army; and government boards for petroleum, chemical, iron-and-steel, non-ferrous metal, and building material industries; and 38 research centres, industrial companies and organisations of many cities and provinces.

On the Russian side, the forum attracted over a hundred corporations, joint-stock companies, industrial and research-and-production amalgamations, and research centres and design bureaus of the military-industrial complex shifting to civil-oriented production. They represented 33 cities.

Presidents Boris Yeltsin and Jiang Zemin sent to the forum messages of greetings, which the gathering regarded as manifesting active support of bilateral efforts to step up contacts in the most promising research and industrial fields.

Receiving Chinese delegates during the forum were Gennady Seleznev, State Duma Chairman; Yuri Maslyukov, First Deputy Prime Minister; Vyacheslav Mikhailov, vice-secretary of the federal Security Council; Iosif Orjonikidze, vice-mayor of Moscow; and Arkady Volsky, president of the Russian Industrialists' and Entrepreneurs' Union.

The plenary session heard seven Russian and eight Chinese reports about conversion experience, promising channels of cooperation, and practical projects offered by either side.

The basic reports were made by Victor Salo, Russia's deputy minister of the economy, and Qian Hongbiao, deputy chairman of the CMRTI. Military industrial conversion was analysed on both countries' aerospace, electronic, nuclear and shipbuilding industries. China's central arms corporation also reported about its shift to civil-oriented production, and R&D interests of affiliated companies.

Understandings were made for joint development of metal and non-metal materials with pre-set physical and chemical properties, and a wide range of protective coatings and equipment for their manufacture (for Russia: the Bardin Research Institute of Iron-and-Steel Industry, the Research Institute of Steel, Elpa, Astrophysics and Composite research-and-production amalgamations, the Central Institute of Aircraft Engines, the Laser Physics Institute in Novosibirsk, Machinoexport Co., the Khrunichev Research Centre, and the Salyut design bureau; for China: the Nuclear Industrial Corporation, the Wuhan iron-and-steel amalgamation, the research institute of the Central Arms Corporation, and research institutes of chemical and building materials industries.

Both delegations displayed an interest in many forms of cooperation, e.g., joint ventures, technological exchanges, and joint R&D in gauge and machine production for liquid cleaning and oil regeneration, ecologically sound procession of farm produce and production of clean humus, electrodialytic water desalinating installations, low-temperature plasma technologies, thermovision and laser apparatuses, in particular, for waste reprocessing, production of photochemicals, laser printers, copying machines, etc. The efforts will involve, for Russia: the Khrunichev Research Centre, the Institute of Aerospace Instrument-Making (Kazan), the Astrophysics research-and-production amalgamation, Horizon Co., Slavich Co. (Pereyaslavl-Zalessky), Krasnaya Zvezda state company, NITI-TESAR Co. (Saratov), and Machinoexport Co.; for China, the Academy of Physical Engineering, the Nuclear Industrial Corporation, the State Institute of Building Materials and Plastic and Steel Units, the Academy of Space Technologies, the Nanjing Radar Institute, and the Chinese Shipbuilding Academy.

As Chinese delegates negotiated with Russian partners, they were willing to start joint manufacture of consumer optic gadgetry—binoculars, range finders, infrared visual devices, compasses, computerised navigation gauges for automobiles and other purposes, and multi-purpose ultrasound gauges (the Moscow Committee for Science and Technology, the Zverev Factory in Krasnogorsk, the Geophysics and Elpa research-and-production amalgamations for Russia, and research institutes and industrial companies under the Chinese Arms Corporation, the Huabei optic factory, companies under the central army logistics department, and others.

The negotiators agreed to consider opportunities for joint R&D on, and supplies from Russia, of multi-purpose detectors and classifiers, impulse fire extinguishers and other gauges (Russia's State Engineering Research Institute, Astrophysics research-and-production amalgamation and the Chinese Institute of Electromechanical Instruments).

Pride of place was given to technological cooperation in civil aviation discussed by top officers and experts of the aircraft industry department of Russia's Ministry of the Economy, the Moscow Committee for Science and Technology, the Sukhoi design bureau, the Tupolev aircraft R&D centre, the Russian Aircraft-Makers' Association, Aviaprom Co., the Air Communication Research Institute, the Zhukovsky Research Institute of Aero- and Hydrodynamics, the Ulan-Udeh aircraft works, the Soyuz design bureau from Kazan, Khimkonvers Co., Interozon consortium, the State Duma environmental committee, China's CMRTI, Aviation Technological Corporation, and engineering plants of the board of the central army logistics department.

It was emphasised that joint R&D and manufacture of civil aircraft in the next 15 years will enable both countries to cut down expenditures by more than a half as compared with purchases from the West, preserve up to four million jobs in aircraft and related industries, and promote new-generation high technologies for aviation and other industries.

Russian and Chinese delegates deemed it expedient to ask China's CMRTI and Russia's Ministry of the Economy to establish a joint ad hoc team which would draft a bilateral cooperation programme on civil aviation R&D, manufacturing and supplies in 2000-2015, to set up a Russo-Chinese aviation consortium and make proposals, according to the established procedure, concerning draft intergovernmental agreements on the above issues.

Spokesmen of Russia's State Duma environmental committee, Interozon aerospace consortium and China's Aviation Industrial Corporation agreed to prepare and convene a first international conference on ozone layer preservation by active methods proceeding from Russian laser and space technologies and using international organisations' money.

The conferees deemed it necessary to go on with bilateral meetings on business, research and technological cooperation, and proposed to discuss the chances for a fifth forum in China, 1999, under the motto, Russia-China: Investment, Finances, Banking, to be jointly organised by Roszarubezhtsentr and China's Society of Friendship with Other Countries.

The Central Bank of Russia and the staffs of both parliamentary houses approved the initiative.

It is advisable for Russian companies and agencies who have partnership relations with China, in particular, established at the fourth forum—to be represented at the fifth forum.

As they summed up the results, both delegations proposed to set up an ad hoc team under the intergovernmental commission for trade and economic, research and technological cooperation, which will assist industrial companies, research centres and other organisations of both countries involved in military industrial conversion, in the establishment of partnerships and problems of teamwork.

Frontier Areas

Russian regions are stepping up contacts with Chinese provinces and cities. In its interregional contacts with Russia, China makes it a point not to encourage antagonisms between Russia's particular parts and federal centre. Interregional contacts proceed from the intergovernmental agreement of November 10, 1997, on the principles of cooperation between the RF's constituent members and China's provinces, autonomous regions and municipalities, which entered into force December 10, 1997.

The frontier and interregional trade turnover reached US to 13 billion between 1992 and 1998. Russian exports were dominated by chemical fertilisers, cellulose, timber, raw materials for the chemical industry and rolled steel; imports by textiles, foodstuffs and consumer goods.

While overall bilateral trade is shrinking, its turnover is growing in frontier and interregional contacts. It increased by 40% in 1998 to reach US billion accounting for over 45% of the total Russian-Chinese turnover, largely thanks to privileges granted by China, in particular a 50% discount on import tariffs.

Over sixty regions and cities on either side are involved in interregional partnership. Frontier areas are the most active.

Nine members of the Russian Federation along its Pacific coast had China for their basic partner in 1998, as before.

Nonetheless, the scope and quality of interregional contacts lag far behind interstate relations. Only several cities and regions are maintaining regular planned contacts, for instance, Moscow-Beijing and St. Petersburg-Shanghai. Only one pair, the Maritime Territory and Jilin Province, have a standing agency, at the vice-gubernatorial level, coordinating their contacts.

Progress of trade and other forms of economic partnership is restrained by insufficient mutual information about the partner’s potentiality and lack of reliable patterns for mutual payments and settlement of economic disputes.

The fourth prime-ministerial summit signed agreements on trade and economic cooperation between several Russian and Chinese regions after both sides had analysed each other's proposals for direct economic links between regional and provincial administrations. Such agreements are drafted proceeding from the law of the Russian Federation on the coordination of its members' economic and other international contacts, and a draft model agreement offered by the Ministry of Foreign Affairs and other interested ministries.

In 1992, China's State Council granted the status of frontier commercial cities to Manchuria, Heihe, Suifenhe and Hunchun, bordering on Russia. Since then, China has been insistently demanding to establish joint free trade zones round the basic frontier checkpoints.

Chinese parts of commercial centres near Manchuria and Heishantou became operative late in November 1996. Russians are admitted there on lists drawn and passes issued by the local administration on an understanding between the Chita Region's and Nei Monggol's administrations. Russian visitors are entitled to simplified frontier and customs control and certain customs privileges.

Certain parts of Russia, bordering on China, are interested in joint zones. Thus, the Chita regional administration did not even apply for authorisation to federal offices as it signed, in 1992, with the Manchuria municipal administration a protocol for a joint free trade zone with a special status near the Zabaikalsk-Manchuria frontier checkpoint. The matter cannot be settled due to uncertain legal status of and regulations on such zones.

A bilateral agreement for a simplified procedure of Russian citizens' passage to trading centres on the Chinese side of the frontier was made through a note exchange, in February 1998, to encourage private commerce in the Russian frontier areas.

The second session, January 1998, of the ad hoc team for interregional and frontier cooperation under the bilateral subcommission for trade and other economic contacts determined to establish a bilateral coordination council for interregional and frontier cooperation, headed by representatives of both countries' regions. The council had its second session in Harbin, January 1999, to offer many thoroughly planned initiatives for extended partnership. Some of these initiatives are in summing-up documents of a prime-ministerial summit in Moscow, February 1999. The coordination council will develop into a coordinator of regional cooperation. It will settle topical issues and also raise in federal bodies problems requiring solution at the federal level.

Among priority projects of mutual interest is extended partnership in timber industry, promoted at the federal level; infrastructural construction project (updating frontier checkpoints, construction of an air and railway terminal in Blagoveschensk and refrigerators in the Vanino seaport, road building and maintenance, etc.), and power engineering (international pipeline laying projects, and construction of the Bureya hydropower plant in the Amur Region, to name but two). In compliance with Russian governmental decrees, the implementation of the above and other projects is to be supervised by the Russian part (trade and foreign ministries) of the bilateral commission for regular prime-ministerial summits.

Simplified frontier crossing for Russian citizens, similar to the available arrangement in Zabaikalsk/Manchuria, will eventually spread to the Chinese parts of trade centres in Blagoveschensk/Heihe and Pogranichny/Suifenhe. The same patterns will be valid for the Chinese in Russian parts of the centres as soon as they are properly fitted out.

Interregional contacts are also progressing under the international programmes of the UNIDO, PROUN and other agencies. The PROUN Tumen River Area Development Programme, one of the best-known regional projects, involves Russia, China, North and South Koreas, and Mongolia in a concerted effort for steady and environmentally sound social and economic progress of that part of Northeast Asia, with emphasis on the lower reaches of the Tumen river. Joint efforts are ficussed on transport and telecommunication infrastructures. Russia is also concentrating on transit shipments of Chinese export/import freights via southern seaports of the Maritime Territory; closer interregional links on the basis of overseas investment; ecologically safe industry and tourism.

Transport cooperation is based on intergovernmental and interbranch understandings. A bilateral subcommission for such partnership had three sessions: in Beijing, April 1997; St. Petersburg, October 1997; and Beijing, December 1998. The latest session signed a transport cooperation programme on instructions of the Russo-Chinese commission for regular prime-ministerial summits. Envisaging short-term, up to 2001, and long-term, up to 2010, stages, this is the first such programme in a particular branch of partnership throughout the history of Chinese-Russian contacts.

Rail transportation, which accounts for 65% of the entire Russian-Chinese freight turnover, is regulated by agreements of 1951 and annual railway plans. Two railway frontier checkpoints are active, in Zabaikalsk and Grodekovo, and a new checkpoint has been commissioned in Makhalino, Maritime Territory, to serve Chinese transit transport via Russia.

The year 1998 increased the freight turnover by 10%. A tentative agreement was made for direct Moscow-Beijing container trains. A Beijing-Helsinki container route via Moscow is being discussed. Preparations are made to extend petroleum and oil product transportation from Russia to China under available agreements and contracts.

Bilateral automobile transportation is governed by the agreement on transnational automotive transport of December 18, 1992. Russia and China signed a statute of passenger and freight transportation, December 1998. Frontier areas account for a greater part of freights. Prospects are under discussion for Chinese transit freight transportation via Russia's Far Eastern ports. Both countries' transport ministries hold regular conferences on compliance with the agreement. China is strongly objecting to many local highway duties. Frontier-crossing routes and checkpoints, and their development up to 2010 have been coordinated to encourage carriage expansion. A new checkpoint was opened on March 1, 1998, in Zabaikalsk (Chita Region)-Manchuria (Nei Monggol). Its construction was financed by both countries' local administrations and customs offices. The largest along Russia's eastern frontier, this up-to-date point handles a daily 2,000 cars and lorries with its twelve lines, and is of great importance for transnational passenger and freight carriage.

Of special significance in bilateral contacts is a bridge across the Amur, which is to connect Russia and China near Blagoveschensk and Heiho. The first-ever bridge to connect the two countries, it will be built under intergovernmental agreements of 1995 and 1997. April 1996 brought documents on the initial construction stage—design and hydrotechnical tests. China has earmarked necessary sums, and is going to propose construction started. Russia could not settle the financial matters up to spring 1999. Though the Most financial and construction company has joined hands with the Amur regional administration to negotiate with potential Russian and overseas corporate investors, funding will not be coming unless the project is backed by the federal government.

The Russian top is approving the bridge understanding. Thus, voicing this approval was President Boris Yeltsin, when he was visiting Harbin, on November 11, 1997, and during the maiden session, in Blagoveschensk, of a bilateral coordination council for interregional and frontier cooperation. Established on January 20, 1998, this council brings together spokesmen of the administration and business circles of Russian and Chinese frontier regions, and is led by vice-governors on a rotation arrangement.

The bridge will guarantee smooth transportation in all seasons for a turnover expected to increase, and so will promote economic progress of the Amur Region and its centre, Blagoveschensk, which promises to develop into a major transnational transit transport centre.

As the agreement of June 26, 1995, has it, the bridge will be jointly owned, managed, exploited and maintained by Russia and China.

Sea shipping contacts are based on an intergovernmental agreement of May 27, 1994. Both countries' Pacific ports account for a greater part of freights.

Transits through ports in the south of the Maritime Territory—Vostochny, Nakhodka and Vladivostok—are a promising part of bilateral contacts. At present, the three ports allow to handle an extra ten million tons of Chinese export/import cargos, in particular, coal and containerised freight. The transport subcommission closely watches the situation. Posiet and Zarubino ports will also eventually be used for Chinese freight transits. Contacts are extending in shipbuilding and ship repairs.

Several commercial projects are negotiated, in particular, for a ship leasing joint venture, and Chinese companies' participation in the updating of Ghelenjik, a Russian Black Sea port. A protocol was signed on freight transportation from seaports to Chinese inland river ports via the Russian stretch of the Amur by Chinese sea-river ships.

Air transport is based on the intergovernmental agreement of March 26, 1991, to be updated in 1999. Several companies have by now joined Aeroflot as officially authorised for passenger and cargo flights. Regular flights connect Moscow, Vladivostok, Khabarovsk, Novosibirsk, Irkutsk and Chita in Russia with Beijing, Tianjin, Shanghai, Shenyang, Harbin, Urumqi and Hailar in China. There are also several thousand charter flights every year.

The visa regulations. Russian and Chinese citizens' trips are regulated by intergovernmental agreements on visa voyages of December 29, 1993; on visaless voyages with diplomatic and office passports, of the same date (both effective since January 29, 1994); and visaless trips by tourist groups of December 18, 1992. Train crews of the Moscow-Beijing and Khabarovsk (Vladivostok)-Harbin lines also do not need visas since 1998.

Members of official delegations, persons employed in automobile transport connecting adjacent areas, and some others are entitled to free visas on official applications.

According to statistics of Russia's Federal Frontier Service, a total of two million passengers crossed the frontier at 23 checkpoints in 1997—60% more than the year before, plus 200,000 vehicles. The number of passengers shrank to 1.6 million in 1998. Zabaikalsk/Manchuria (550,000-600,000 passengers and 90-100,000 vehicles), Blagoveschensk/Heiho (500,000 and 35,000, respectively) and Pogranichny, Poltavka and Khabarovsk (100,000 passengers each) remain the largest frontier checkpoints. Russian and Chinese airports linked by regular and charter flights also account for a considerable number of passengers and cargos. Tourists, especially shoppers, make an overwhelming majority of passengers.

Numerous violations of sojourn rules by the Chinese present the worst problem in this field. An annual several thousand are expelled from Russia, 8,500 in 1997 alone. Visaless tourism is the key channel of uncontrolled entry. Simplified procedures allow entry even to such persons to whom visas are denied for various reasons. Many alleged tourists penetrate Russia with groups to stay in Russia for a long time, mainly for commercial purposes. Mutually coordinated steps are undertaken by both countries to stop those practices. More agreements are expected to be signed fairly soon to streamline reciprocal voyages.

Eurasian transport corridor projects. Growing demands for effective European-Asian transcontinental carriages and certain political factors with the emergence of newly-independent states in Central Asia prompted the development of new Eurasian transport corridor projects, which may have an impact on Russian economic interests.

There are prospects of the TRACECA, an Eurasian transport corridor to involve the Black Sea ports of Odessa, Burgas, Varna, Samsun, Poti and Batumi; railways in Romania, Bulgaria, Ukraine, Georgia and Azerbaijan; the Baku-Turkmenbashi Caspian ferryline; and the railway networks of Turkmenia, Uzbekistan, Kyrgyzstan, Kazakhstan and China.

In 1996, the presidents of Georgia, Azerbaijan, Turkmenia and Uzbekistan signed a treaty to coordinate railway transport and an agreement for cooperated transport regulation. Kyrgyzstan joined the agreement a year later. Ukraine, Kazakhstan, Armenia and Bulgaria are willing to join, too.

The year 1996 also brought an agreement on further development and operation of the Eurasian transport corridor, signed by the presidents of Ukraine, Georgia and Azerbaijan. In particular, it envisages a railway ferryline from Poti to Ilyichevsk.

In 1997, Uzbekistan, Kyrgyzstan and China signed a memorandum on the construction of a railway from Andizhan (Uzbekistan) to Osh (Kyrgyzstan) and on to Kashgar (China) to link into an integral whole the railways of China, Central Asia, Iran and Transcaucasia. Many analysts expect it to have more attraction than the Transsiberian Rail.

New routes are emerging to carry large, steady and promising freight flows from the Asian-Pacific region to Central Asia, the Gulf and Western Europe, bypassing Russian transport routes. This mainly concerns the Transsiberian Rail.

Nevertheless, this major railway can come out as the principal route linking Europe and Asia, as an international Eurasian transport conference confirmed in St. Petersburg, May 12-13, 1998.

Russia's railway ministry drafted a cabinet-approved programme to promote transportation along the Transsiberian mainline. Its transit terms have spectacularly improved with rates lowered, customs and frontier procedures simplified, containers monitored en route, and cargo safety guaranteed.

On a joint initiative of the United Nations' ESCAP and the Organisation for the Collaboration of Railways, in April 1998 the Russian Railway Ministry and interested countries arranged a demonstration speed container train travel from the Pacific coast to the western CIS frontier along the Transsiberian Rail. The train covered the distance 17 days before a similar sea route was made. It takes less than twenty days to bring containers to Germany, 31% faster than by sea.

Experts estimate quickness profits at several hundred dollars per container.

Russia can also provide haulage from northwest China, Kazakhstan and Central Asia to Central and Northern Europe, and to other parts of the world, using both existing rail routes via Kazakhstan and the emergent North-South corridor along the east Caspian coast, considering that the Volga-Don canal links the Caspian Sea with the Black Sea and the Sea of Azov.

In the context of vast freight flows between Europe and Asia, all longitudinal routes connecting the two continents should be partners not rivals.