China is continuing to reduce its investments in Russia, despite Russian officials’ attempts to bring the country’s economic policy back to the East, finanz.ru reports.
By the end of 2018, China’s total direct investments in Russia had fallen by 24%, from $3.59 billion to $2.62 billion, according to statistics published by the Bank of Russia on 30 May.
Over the year, Chinese investors withdrew another $969 million from the real sector of the economy. 80% of this amount, $774 million, resulted from the wrapping up of joint enterprises: Chinese investors’ involvement in the capital of Russian companies dropped by 40%, from $1.93 billion to $1.16 billion.
The remaining $195 million was withdrawn from debt instruments.
The flight of Chinese capital began in April, when the US hit Rusal with sanctions, and continued relentlessly each quarter, the Bank of Russia’s data shows.
In the second quarter, Chinese investments dropped from $3.58 billion to $3.13 billion, to $2.87 billion in the third, and by another $245 million by the end of the year. As a result, on 1 January the total was just over half of what it had been before the annexation of Crimea ($4.54 billion).
The Kremlin is gradually being forced to acknowledge that switching its economic policy to the East has reached an impasse, and that contrary to its expectations, China will not become a source of long-term, cheap money for Russia.
“It cannot be said that China is investing a lot in the Russian economy,” admitted Kremlin Spokesperson Dmitry Peskov in an interview with RT on 3 June.
China has de facto joined the sanctions imposed on Russia by Washington. “Not one country is free in its movements and decisions. Each government has to balance and adjust its activity in the economic area, because we are all dependent on each other. In this area – yes, of course, in our bilateral relations (with China), we feel the effect of American sanctions,” lamented Peskov (as cited by TASS).
Not a single project offered to Chinese investors has been accepted. China declined to finance the Power of Siberia gas pipeline, giving Gazprom the opportunity to pay $9 billion out of its own pocket for the megaproject. China also declared the Beijing-Moscow high-speed railway project unprofitable, crushing Russian officials’ hopes to include it in the new Silk Road. The Chinese government was also unwilling to invest in the construction of a large gas refinery in the Amur province in the Russian Far East.
Three years of negotiations to “de-dollarize” reciprocal trade have been fruitless: China has refused to sign even a framework intergovernmental agreement to abandon the dollar.
Peskov says that the Kremlin will continue to hope that “with time” the Chinese investments will increase.
However, “under conditions of persisting sanctions, deterioration of Russia’s investment image, which is also influenced by the arrest of Michael Calvey, significant growth of direct investments in the Russian economy still appears unlikely,” wrote experts from RANEPA in the June edition of its “Monitoring” report.
In 2018, the Central Bank of Russia recorded an all-time record outflow of investments from Russian companies’ capital ($6.46 billion).