China and Russia have agreed to strengthen economic ties after top leaders held high-profile meetings in Moscow, but Chinese investment in Russia’s underdeveloped Far East region is not a done deal.
Since mid-2022, Russian Prime Minister Mikhail Mishustin has promoted a proposal for Chinese investment in 79 projects worth about US$165 billion across energy, mining and agricultural sectors in Russia.
But the details of the projects have not been publically disclosed, even after Chinese President Xi Jinping and Russian President Vladimir Putin signed on March 21 a joint declaration to boost diplomatic and economic ties.
Putin said he hopes Chinese companies will replace the European ones that have left Russia since last year in a punitive response to his invasion of Ukraine. He said Russia’s Far East development plan will include metallurgical, machinery and pipeline projects.
While state media highlighted China’s interests in the Far East plan, many Chinese commentators poured cold water on the agreement, both by warning of the regulatory and investment risks in Russia and calling for the resolution of sovereignty disputes before committing capital to the region.
On December 5 last year, Mishustin held online an annual economic meeting with then-Chinese premier Li Keqiang. After the meeting, Mishustin said the 79 projects had been confirmed by both sides, but Beijing’s official statement did not mention them.
Mishustin then told Russian media that Russia will allow Chinese companies and capital to invest directly in Russia’s agriculture, infrastructure, mining and energy sectors.
In late December, Russian newspaper Ng.ru, or The Independent, reported that Moscow will set up a special economic region in the Far East covering an area of 6.96 million square kilometers exclusively for Chinese investments.
“As Russia-Europe relations broke down, Russia has no choice but to allow Chinese capital to enter its key industries,” a Jiangsu-based columnist wrote on December 7. “It is necessary for Russia to strategically shift to the East as no European and US capital will invest in Russia.”
The writer says it is also natural for China to invest elsewhere since the European Union has suspended discussions on the Comprehensive Agreement on Investment with China in 2021.
The same columnist says Chinese companies should beware of the investment risks in Russia.
“Although Russia’s territory has not been attacked, Chinese investors must beware of the possible escalation of the conflicts between Russia and the West,” he writes. “Chinese investors should check Russian partners’ credits and ability to fulfill its agreement.”
Another Alaska
China and Russia’s disputes in the region are deep-seated. In the late 19th century, the Qing government lost a large amount of its northeast territory to the Russian Empire. When it collapsed in 1911, Mongolia declared its independence with the support of the Soviet Union.
In 1994, then-Chinese president Jiang Zemin and then-Russian president Boris Yeltsin signed an agreement to settle the sovereignty disputes. Jiang died last November and Yeltsin died in 2007. Now some Chinese nationalists suggest renegotiating a deal as Russia seeks Chinese investment in the region.
“This undeveloped land belonged to China,” a Hunan-based columnist says on Wednesday. “Is it possible that Russia sells it back to China at this time?”
“It is alright for China to help Russia develop its Far East region but we must get enough benefits, not just small profits,” he says. “Who is begging for help? Who is the real owner of the Far East region? If Russia is sincere, it should at least return the Outer Manchuria and Kuyedao (Sakhalin) to China.”
He says if seized land is not returned, China should refrain from making investments in the region. He cited Britain’s handover of Hong Kong to China as an example of a peaceful sovereignty transfer that Russia could follow.
Prior to this, a Guangdong-based columnist who writes under a Seventh Sister pseudonym published an article entitled “Will Far East become another Alaska?” on January 12.
She suggested as Moscow has failed to boost the Far East economy and population with its previous schemes, Russia should consider selling the region to China – similar to its sale of Alaska to the United States in 1867.
She also warned Chinese people of empty Russian promises.
“When Russia faced difficulties in 2014 due to Western sanctions, it proposed a plan to set up a special region with tax benefits, making a lot of Chinese people very excited,” she says. “But after its economy recovered, Russia has not mentioned the plan again. It is like cheating.”
Wait-and-see approach
Russia first unveiled its Far East development plan in 2014, soon after it was sanctioned by Europe for its occupation of Crimea. Many Chinese investors rushed into the region with the opening, building new casinos, theme parks and hotels in Vladivostok.
But then after the Russian economy rebounded due to eased sanctions and rising global energy prices, the development plan lost momentum.
As such, many Chinese commentators say Beijing should adopt a wait-and-see approach to Russia’s latest overture.
A pro-Beijing YouTube channel known as “Large country has something to say” published a video to comment on Russia’s Far East plan on January 9.
“Russia can only choose to cooperate with India and China as its economy is now on the edge of collapsing amid Western sanctions,” an anchor says in the video. “Russia has already signed a lot of cooperation agreements with India but its main goal is to get Chinese investments.”
She says it will be a huge growth opportunity for China if Chinese capital can directly invest in Russia’s Far East region, which geographically is 69 times larger than South Korea and 200 times bigger than Taiwan. She says the Far East region has several times more fossil fuels and minerals than China but Russia lacks the capital to efficiently extract them.
The anchor suggested China is willing to contribute capital, equipment and workers to the Far East but Russia’s current rules and regulations are unwelcoming to Chinese immigrants.
As Russia has gradually allowed more Chinese farmers and construction workers over the past decade, many locals have become increasingly worried that the land occupied by their ancestors will one day be taken away by Chinese immigrants.
She says Chinese investors will likely wait and see for further details until the next Eastern Economic Forum, which takes place annually in Vladivostok in September.
On February 14, China’s Ministry of Natural Resources published a new version of its world map which directed a return to the use of Chinese names for eight cities and areas occupied by the Russian Empire.
Under Beijing’s new directive, Vladivostok is referred to as Haishenwai (meaning Sea Cucumber Bay) while Sakhalin Island is called Kuyedao. The Stanovoy Range, meanwhile, is referred to as Outer Xing’an Range in Chinese.
Read: China’s ironic reticence on land grab in Ukraine
Follow Jeff Pao on Twitter at @jeffpao3