As Putin warned earlier in the week, they do not see the effectiveness of sanctions; but it seems he had something else in mind. By rolling back informal limits on Chinese investment, Putin has opened the door for significant capital inflows from his new best friend... and China has already agree to increase investment. While Putin is careful to note that the Chinese will not be allowed to invest in gold or diamond mining, or hi-tech projects, Russia hopes to lure cash from the world’s second-biggest economy into industries from housing and infrastructure construction to natural resources. Chinese President Xi Jinping and Russian President Vladimir Putin will meet in Shanghai May 20/21 and Chinese officials have already confirmed bilateral cooperation in the areas of investment and finance has made major progress as local currency settlement in two-way trade increases. Forget sanctions, just remove the US from the world trade equation...
As Bloomberg reports, Russian President Vladimir Putin plans to open the door to Chinese money as U.S. and European sanctions over Ukraine threaten to tip the economy into recession, according to two senior government officials.
The move would roll back informal limits on Chinese investment as Russia seeks to stimulate growth, said the officials, who have direct knowledge of talks and asked not to be identified as the information isn’t public. The government wants to lure cash from the world’s second-biggest economy into industries from housing and infrastructure construction to natural resources, they said.
The Chinese won’t be welcome in all areas: Russia plans to set “red lines” around significant gold, platinum-group metals, diamond mining and high-technology projects, the officials said.
Putin’s decision, coming as competition from U.S. and European financing slows, may offer China a good opportunity to gain access to Russia’s economy. Existing resource projects will probably be more appealing than starting from scratch, Moscow-based George Buzhenitsa, Deutsche Bank AG analyst said by phone on May 7.
“Given that China has a shortage of raw materials from iron ore to coal to copper, it may be extremely interested in gaining access to such projects in Russia,” Buzhenitsa said.
And China seems more than willing to step up...
China is ready to join with Russia to increase two-way investment, Chinese Vice Premier Zhang Gaoli said here Thursday.
Their talks were focused on bilateral investment and practical cooperation in the financial area, in preparation for the forthcoming meeting between the two heads of state.
Chinese President Xi Jinping and Russian President Vladimir Putin will meet when Putin attends the Fourth Summit of the Conference on Interaction and Confidence Building Measures in Asia (CICA), on May 20 and 21 in Shanghai.
Zhang said bilateral cooperation in the areas of investment and finance has made major progress. China has increased investment in Russia and become the country's fourth largest source of foreign direct investment.
He said financial cooperation between China and Russia is growing as local currency settlement in two-way trade increases and consultations on a package of currency swaps are on-going.
Zhang expressed the hope that the two sides increase mutual investment via the China-Russia investment fund and carry out the first batch of investment projects as planned.
He said the two sides should increase investment in the forms of greenfield investment, equity investment, bond issuance and mergers and acquisitions.
Zhang asked the Russian side to help Chinese enterprises to invest in special economic zones in the Far East region of Russia.
Who needs sanctions when China is your friend? And it would seem no matter what card the US tries to play, Putin has a trump (for now).