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As Trade Tumbles, China and Russia Inaugurate New Rail Line

On Saturday, China inaugurated a “new freight route” to Russia as a train left Harbin, the capital of northeastern Heilongjiang province, for Yekaterinburg in Russia, 5,889 kilometers away.

The new route will slice 30 days off the previous 40-day journey by land and sea.

Chinese and Russian media celebrated the departure of 47 containers carrying $1.46 million of bicycle parts and other light industrial products, mostly manufactured in southern China.

Beijing and Moscow are trying to keep up appearances, missing no opportunity to publicize economic ties. Many aspects of the relationship between the two capitals are blossoming, but trade is not one of them.

Last year, bilateral commerce between the two giants amounted to a miniscule $64.2 billion, down 27.8 percent from 2014 according to China Customs.

The falloff is stunning and seems to have occurred in the second half of last year. At the end of April, Li Hui, China’s ambassador to Moscow, said that Beijing intended to increase bilateral trade to $100 billion in 2015. 

The accelerating decline must be disturbing in both the Kremlin and Zhongnanhai. China and Russia are now even further away from reaching their announced a target of $200 billion in bilateral trade by 2020.

Why is commerce between the two large economies falling? For one thing, the Russian economy is contracting, declining 3.7 percent last year according to the Russian Federal Statistics Service. In all probability, the drop was even larger.

China’s National Bureau of Statistics reported the Chinese economy grew 6.9 percent last year, but that is also likely to be wrong. There is a consensus forming that growth was about 4 percent, and there are even suggestions it was more like 1 percent.

Whatever the truth about these two economies, they are clearly ailing, with most indicators moving in the wrong direction.

Beijing, therefore, finds itself on uncomfortable ground, having to defend itself in front of a Russian audience. As the official China Daily noted early last month, Zhang Di, economic and commercial minister at the Chinese embassy in Moscow, “refuted allegations that it was the slowdown of the Chinese economy that somehow caused difficulties in the Russian economy.”

Zhang characterized the current downturn in trade as merely a “temporary phenomenon,” denied that economic cooperation between the two countries had “sunk,” and contended that “trade between China and Russia should be assessed comprehensively, not simply by a change in volume.”

The message is that the China-Russia “strategic partnership” is here to stay, despite what may happen to trade in any one year. And indeed, diplomatic and other ties seem to be strengthening recently, as the Chinese and Russian publicity surrounding the Harbin-Yekaterinburg train indicates.

In fact, these ties might tighten as both economies weaken. In this case, leaders in both Moscow and Beijing could decide they need each other more in today’s leaner times than before.

After all, China and Russia didn’t get along very well when oil and gas prices surged and Vladimir Putin felt confident. Now, however, given his rapidly contracting economy, Putin could use Beijing’s help. He could, for instance, use a few more trains traveling to Harbin bulging with Russian products.

But apart from weaponry and hydrocarbons, Russia produces little the Chinese want. In all probability, the train returning to China will be empty.

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