Chinese Provincials "Making Eyes" at Russian Regions

11.12.2009 — Analysis

In the nearest future, a new avalanche of industrial and consumer goods from the Celestial Empire will descend upon the Urals. Companies from Beijing and Shanghai were followed to the region by businesses from China's provinces. The RusBusinessNews observer has assessed the scale of the forthcoming "second coming".

In 2009 representatives of Chinese companies frequented the biggest cities of the Urals Federal District with their business missions. Today's specific feature is that the business is represented by China's provinces. For instance, in October leaders of more than two dozen companies from Daqing have conducted business meetings with local companies in Tyumen. They demonstrated projects in greenhouse industry arrangements, establishing a medical centre and a maintenance centre for Chinese motor vehicles, as well as in construction and chemical industry sectors.

Provincial companies are betting high on the Russian market. "The Director of one of the Chinese companies turned out to be so keen on continuing the negotiations that he was prepared to give up his ticket and stay for a few more days," Alexander Sakhnov, the Head of the Protocol in the Tyumen Administration, told RusBusinessNews.

Last month two Chinese missions visited Ekaterinburg - the city hosted a presentation of Harbin's industrial potential and a contact exchange with leaders of 23 companies from the Hebei province. The Urals industrialists are happy that the economic cooperation is becoming active, since they hope that this will help the Russian economy get out of stagnation.

"Today we receive delegations coming not just from Beijing and Shanghai but also from provinces of the People's Republic of China," Yuri Matushkin, President of the Urals Chamber of Commerce and Industry, pointed out. "We're certain that the visit of an impressive delegation from the Hebei province will make it possible to further expand the collaboration between our regions' businesses."

The key goal for Chinese provincial business people is to assess the consumer capacity of the Urals market and the Russian market in general, find dealers, and commence large-scale sales of their products - from gas pipes to pushbikes and canned beans. "So far we had no experience of working in Russia. We look for gas companies in the Urals to which we could offer pressure controllers, shutdown valves, and auxiliary equipment," Gu Hongjun, President of Hebei Huixing Pressure Regulator Co. Ltd, told RusBusinessNews. "We sell quite a lot in China, and now we would like to come to the Russian market."

The number of Chinese provincial companies willing to find sales in Russia is growing day by day. "We would like to start shipping foods to the Urals - beans, red dates, frozen fruit and vegetables. To this end, we're looking for wholesale buyers," Nina Feng, Director of COFCO Hebei International Trading Co., Ltd, told RusBusinessNews. "We work in Moscow now and hope to develop commerce in other Russian regions. Many companies from our Hebei province would like to trade with Russia."

The Chinese themselves point out several reasons why provincial companies started accessing the global market later than those from Beijing and Shanghai. The first one is related to the transportation logistics; the second is the lack of required information. "Beijing and Shanghai are directly connected by air with very many big cities of the world. Therefore, companies from these Chinese megapolises started accessing external markets before others. China's provincial cities haven't got such an advantage; moreover, they have less information on the opportunities for economic collaboration with Russia," Liu Jianshe , the Head of China JiuJiu Group Co., Ltd, explained to RusBusinessNews.

Today, however, economies of a whole range of Chinese provinces and cities have become so powerful that each of them is capable of independently providing Russia with a wide range of products. For instance, PRC's largest oil refineries have been built in Daqing. In the same area in 1992 a new and high technology development zone was established - an industrial district with an area of 16 square kilometres. The development zone comprises over 300 high technology businesses with a total gross product of over 1 billion U.S. dollars.

Hebei hosts nearly 400 joint venture operations, of which 42 are among world's largest 500. The total volume of foreign capital investment in the province's economy has exceeded 22 billion U.S. dollars.

"The Hebei province has many companies willing to work in Russia. These companies have grown; many of them take the lead in China in their respective segments," Jiang Hui, Director of Qinhuangdao Haina Electrical Measurement Co. Ltd, told RusBusinessNews. "For instance, our company is China's second largest manufacturer of electrical equipment in terms of production volumes."

It is worth noting that the majority of provincial companies are still only assessing the Urals market, looking into various aspects of collaboration, not limiting themselves to mere sales of their products. They are looking for dealers and assessing prices for local raw materials for possible purchases. "Your region has a lot of resources, and cheap resources at that. Our company is considering the opportunity of investing in the construction of a production facility making copper parts in the Urals. We are looking for Russian partners to do this," Chen Guoqiang , director of Zaoqiang Xinya Chemical Industry Co., Ltd, told RusBusinessNews.

The Urals RF subjects may benefit significantly from the second wave of the Chinese business. The competitive advantages of provincial business people's goods and technologies have already been tested in the Chinese market; furthermore, in the majority of cases Europe is not yet aware of them. Great opportunities to establish a mutually profitable collaboration to access the global market together are opening for the Urals companies.

Pavel Kober