The bear & the dragon: China-Russia transport & logistics relations

China’s influence on global economics is massive. Since re-establishing itself on the world stage in the nineties, it has become the world’s second largest economy, and the 21st century’s major global influencer.

To its north lies Russia. Historically, cooperation between the two great powers has been somewhat limited – at least during the height of the Soviet Union.
 
Forget that though because both states are getting closer and closer – with transport and logistics playing a key role in bringing each state together.

Sino-Russian trade set to soar

In 2016, trade between China and Russia reached dizzying heights. Russia exported a wealth of goods to its southerly neighbour worth $28.02 billion, according to data from the Chinese Commerce Ministry.

Of this, 68.3% took the form of minerals and ores, 9.5% was wood and wooden products, with another 5.1% being mechanical and electrical goods.

China’s trade was more than reciprocal. Its Russian exports amounted to $38.09 billion in 2016. 53% of total volumes were covered by mechanical and electrical goods, 8% by textiles and raw materials, and 6.7% accounted for by base metals and related products.

2017 shows no signs of such activity slowing either. In the first four months, bilateral trade has totalled $24.73 million. By 2018, the yearly total could be as high as $80 billion.

Preferential trade rules are being muted in Russia right now, according to Russian Prime Minister Dmitry Medvedev; rules that could boost trade volumes as high as $200 billion annually in the next 3-7 years.

That means the demand for cross-border logistics services, transhipment operations, and dedicated freight transportation is very likely to hot up.

Russia invests in China-facing infrastructure

China’s influence is enough for President Putin to authorise investment in Russia’s Far East. This was occurring anyway, as development of the region, which is known for its huge resource deposits, is a top governmental priority.

$43 billion of investment in new port facilities, logistics centres, rail routes and entirely new transport corridors is being spent across the region.
 
The two biggest projects are the Primorye corridors: two transport routes designed to move goods out of Northern China, into Russia and the wider world.
 
As much as 45 million tons of freight could pass along both Primorye corridors by 2030, while rail transport could be responsible for carrying 100 million TEUs a year between China and Russia. If so, that would be more than 100 times the amount of containers moved across the Sino-Russian border currently.

One Belt One Road to boost rail freight further

The hugely ambitious One Belt One Road project pioneered by China, a kind of modern Silk Road linking it to European markets, could pay dividends for Russia.

In some cases, i.e. rail transport, this is already happening. Thanks to the project’s effects, rail freight volumes are growing.

During the first nine months of 2017, says Russian Railways (RZD) President Oleg Belozerov, traffic rose 3% year-on-year, for a total of 833.5 million tons.

RZD Vice President Alexander Misharin said freight traffic between Russia and China has increased 19% during the first half of 2017 compared to the same period last year with 35.2 million tons of freight moved.

Additionally, Russia’s signing of a Customs Union with Belarus and Kazakhstan in 2012 has made it easier to transport freight between Russia and China. This agreement included doing away with previously required container inspections, which could take up to 2 days. Subsequently transit times have dropped.

There are now around 40 regular Chinese trains to Europe – many of which must pass through Russia to meet their final destinations.

In April 2017, China and Russia, along with Belarus, Germany, Kazakhstan, Poland, and Mongolia, signed an multilateral agreement to work together on moving a greater number of container trains between China and Europe – a move that could see higher freight volumes carried on Russia’s rail network.

Cross border e-commerce: another transport & logistics driver

Cooperation between the two countries, transport and logistics-wise, is also being heavily impacted by Russia’s rapidly expanding e-commerce sector.

More than 80% of total fulfilled cross-border digital sales in Russia during 2016 came from China. Demand is such that RZD and Russian Post signed a deal in October of that year to handle small packages and items via rail from China.

Connect with Russia’s transport & logistics sector at TransRussia

With the opportunities to move cargo between China and Russia growing day by day, demand for key logistics services, technologies, and solutions is heating up.

For Chinese firms wanting to meet Russia’s top logistical decision makers, suppliers of transport and logistics services, or to demonstrate your products and solutions to the Russian market, there’s only one place to be – TransRussia.

The event is Russia’s biggest transport and logistics exhibition, designed to put international businesses needing transport services in touch with Russia’s logistics service providers.

Want to learn more about the show, or want to find out how you can take part? Contact our team today to get all the information you need on TransRussia.

 

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