Special report: China and Russia will have good prospects for cooperation in agricultural sector.

MOSCOW, February, 19 (Xinhua) -- Russia is taking active steps to develop agriculture while China ramps up food imports. Currently we can observe a growing trend in the export of Russian agricultural products to China. According to Russian and Chinese experts, the two countries have good prospects for cooperation in agricultural sector.

Russia focuses on agriculture development

Russian President Vladimir Putin, in his annual address to the Federal Assembly, called agriculture a model industry, noting that in 2014 agricultural exports equaled to about $20 billion, a quarter more than income from arms sales, or near one-third of gas exports. Russian president is sure that "Russia has all chances to become the world's largest supplier of healthy, environmentally friendly, high-quality food products."

In the Russian anti-crisis program, agroindustrial complex is considered as one of the priority areas. For instance, plan for the first quarter of 2016 includes support of agricultural engineering in the amount of 10.5 billion rubles and additional capitalization of "Rosselkhozbank" in the amount of up to 10 billion rubles.

According to the Minister of Agriculture of the Russian Federation Alexander Tkachev, during this year interest rate for agricultural producers will remain at the same level for both short-term and long-term investment loans, which will allow to attract more than a trillion rubles to the industry.

Moreover, it has recently become known that Russian government has allocated regional subsidies in the amount of 25.8 billion rubles from the federal budget for the development of animal husbandry and 5.5 billion rubles for the construction of beef cattle breeding facilities.

Increasing exports of Russian agricultural products to China.

For 11 months of 2015, agricultural exports to China reached $1.2 billion, i.e. 24.2 percent more than in the same period of 2014, as Rosselkhoznadzor (Russia's agricultural safety watchdog) informed upon results of the working meeting in Beijing between Russian Agriculture Minister Alexander Tkachev and his Chinese counterpart Han Changfu in mid-December. In 2015, a significant increase in exports to China occurred against the backdrop of a decrease in total exports of agricultural products and foodstuffs and a drop in Chinese-Russian trade by 28.6 percent/ according to the General Customs Administration of the PRC/.

China's demand for imported food is growing. Chen Xiwen, head of China's Central Steering Group for Rural Affairs, said China is the world's largest consumer of many kinds of agricultural products.

State General Administration of Quality Supervision Inspection and Quarantine of the PRC at the Manchuria checkpoint considers the weakening of the Russian ruble to be the main reason for the increase in food imports from Russia. "This factor has made Russian goods rather competitive in the Chinese market: in conditions where goods with similar characteristics almost do not differ in price, the Chinese consumer prefers products imported from the Russian Federation as environmentally friendly and GMO-free ones," the department explains.

Roman Terekhin, an expert of the State Duma Committee on Economic Policy, Innovative Development and Entrepreneurship, notes that in recent years China has begun to see demand for Russian flour, chocolate, condensed milk, honey, juices, yogurts, vegetable oil, due to the price decrease driven by devaluation of ruble, and sometimes even surpass their Chinese counterparts in quality. "Due to exchange rate fluctuations, it is now became possible to sell these goods in the Chinese market at prices lower than offered by foreign competitors, but the range of these goods is represented by one or two brands only," the expert says.

Yang Chuan, an expert of the Beijing Diplomatic Institute on Russia, notes that Russia accounts for 30 percent of all fishery products imported by China.

In addition, Yang Chuan pointed out Russia's success in increasing wheat production. In 2013, Russia ranked third in the list of world wheat exporters. The complementarity of the economies of the two countries was also revealed in this area.

During the 20th summit of the two countries on December 17th, the parties signed a protocol on terms of Russian wheat supply to Chinese market, allowing to import Russian grain from Siberian and Eastern regions. It is important to note that the parties managed to reach a compromise on details of supply conditions. Rosselkhoznadzor (Russia's agricultural safety watchdog) clarified that the final text of the agreement did not include the condition on the mandatory import of all grain in bags, that was initially put forward by China.

According to Andrey Denisov, Russian Ambassador to China, if previous Chinese-Russian cooperation in agriculture was one-sided, cause in fact Russia just purchased some types of food products of Chinese origin, now it looks like a "two-way street" along with increased volumes. The diplomat is sure that in future trade will grow due to the supply of raw materials for food industry to China and joint processing of agricultural products both in China and Russia for further sale in the Russian Federation and Republic of China, as well as in markets of third countries.

Roman Terekhin believes that the factors hindering the increase in export of Russian food products to China mostly include difficulties in finding and establishing distribution channels and high degree of competition with food suppliers from other countries. According to the expert, some kind of professional consulting support on issues related to entering the Chinese market and adapting to Chinese legislation and real economic conditions could be helpful in solving these problems.

Joint agricultural development projects

An expert of the Beijing Diplomatic Institute, Yang Chuan, points to an imbalance in the development of Russian agriculture: while the agricultural sector in European part is quite developed thanks to Western investments, the Far East and Siberia are underdeveloped in this regard. That is why Russian government makes efforts to stimulate interaction with China.

"Large chinese enterprises assess Russian efforts to promote agricultural industry positively and are ready to develop business in the agricultural sector on Russian territory," the expert states.

According to professor of the Higher School of Economics Alexey Maslov, due to the fact that the cost of labor in Russia is lower than in China (this is especially noticeable in the Primorye Territory and the Far East), it has become profitable to produce products for Chinese market in Russian territory.

"The Northeast regions of China and the upper and middle reaches of the Yangtze River with Russian Siberia, Far East and Volga Federal District are currently most active in agricultural cooperation," Yang Chuan notes. As an example, the expert presented data about 160 joint ventures between residents of Heilongjiang Province and Russian agricultural entities and companies.

In order to implement investment projects in the field of agriculture in the Far East and promote products in Asia-Pacific countries, it was decided to create a Russian-Chinese fund for agroindustrial development. The parties agreed on this in December last year. Representatives of the Ministry of Economic Development of the Russian Federation told about plan to increase annual food export to the Asia-Pacific countries to 10 million tons by 2020.

"Chinese party provides us with the market and funding. On the Russian side, Russian companies work in the Far East and attract primarily workers and suppliers from Russia for project implementation. We hope that this will set a good precedent for developing relations with Chinese investment institutions," said Alexander Galushka, Head of the Ministry of Development of the Far East, commenting on the agreements reached.

Yang Chuan emphasized that cooperation in agriculture should be highly appreciated and developed, because it contributes to the rapprochement of the peoples of the two countries.

Source: russian.people.com.cn
Source photo: photogenica.ru