China and Russia: The Partnership Deepens

Relations between China and Russia became noticeably closer in the past year and, if the numerous agreements they have appended their signatures to come to fruition, they are apt to become still closer in 2016.

Perhaps most startling has been the resumption of Russian arms sales to the PRC.  Robust sales that began after the demise of the Soviet Union and continued for fifteen years dropped sharply after 2006, with a major factor being Moscow’s annoyance at the Chinese penchant for copying Russian designs and selling the items to third countries at lower prices that undercut Russia’s.  There were as well concerns within the Russian military about selling China weapons that could someday be used against them. Whether because these misgivings had abated or, more likely,  because of desperation in Moscow due to deteriorating economic conditions, sales resumed in 2015 as abruptly as they had been reduced nearly a decade before.

In December, the two countries’ central banks signed a memorandum of understanding to expand cooperation to promote local currency settlements, bank card issuance, access to local currency bond markets, and credit-rating partnerships. Almost simultaneously, the Russian Direct Investment Fund (RDIF), Vnesheconombank (VEB), and the China-Eurasia Economic Fund (CEECF) announced the creation of a structure to finance Chinese exports to Russia and guide the flow of Chinese investment into projects in the Russian Far East and Trans-Baikal areas. At a meeting of the prime ministers of the Shanghai Cooperation Organization, Premier Li announced six platforms for regional development: security, production capacity, connectivity, financial cooperation, regional trade cooperation, and cooperation to improve the lives of the people of the SCO’s six members and their dialogue partners.

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