Cross Border Russia-Heilongjiang Trade Heats Up
- Business incentives and China market access developing for Russian investors along the border with China
- Increasing numbers of Russian businesses setting up in Chinese border Free Trade Zones
China’s northeastern province of Heilongjiang is taking advantage of the Belt and Road Initiative and its own geographical position bordering Russia and developing new trade infrastructure and development with Russia and Northeast Asia.
Heilongjiang is China’s biggest province at 454,800 km², and a population of 32 million. The regional capital is Harbin, which was developed as a Russian city in the 1920’s before returning to Chinese control in 1945. Heilongjiang shares a border of almost 3,000 kilometers with the Russian regions of Primorsky Kray, Khabarovskiy Kray, the Jewish Autonomous Oblast, Amur Oblast and Lake Baikal, and has specific development goals to better develop Russian trade within its Provincial 14th Five-Year Plan (2021-25) for Economic and Social Development and a policy paper called Long-Range Objectives Through to the Year 2035.
Trade between Heilongjiang and Russia rose dramatically during the period of the country’s 13th Five-Year Plan (2016-20), accounting for 20% China’s total trade volume with Russia and 60% of Heilongjiang’s total imports and exports.
In August 2019, the Heilongjiang Pilot Free Trade Zone, China’s northernmost Free Trade Zone, was officially established, and offers tax and duty incentives for investors. Harbin, the provincial capital, became one of the three areas within the zone, along with the cities of Suifenhe and Heihe. These have a combined population of about 15 million with numerous factories and other business and manufacturing facilities.
The Free Trade Zone is advantageous for Russian businesses as it permits the importation of Russian or other component parts into the Free Trade Zone duty free, allowing them to be consolidated with Chinese sourced components which may be cheaper than those sourced from within Russia or the Eurasian Economic Union. Free Trade Zone labor may also be less expensive or more freely available than in Russia. The completed finished product can then either sold onto the Chinese, Russian or other North-East Asian domestic markets at competitive prices. Analyzing the cost aspects of matching Russian and Chinese labor availability and component parts is a key aspect of understanding where the economic and competitive advantages lie.
In 2014, Harbin Bank established an online payment platform for Sino-Russia cross-border e-commerce, the first such platform in China. It provides more than 10 payment and settlement methods, with over 60 different currencies, solving the problems of difficult online settlement, the high logistics cost for e-commerce exports to Russia and lengthy payment processes.
By the end of last year, the platform had dealt with more than 44 million transactions, with a total settlement amount of 15 billion yuan ($2.33 billion) and provided services for more than 6,000 cross-border e-commerce websites.
The border city of Heihe has been doing business with Russia for more than 130 years. Heihe port, as a national first-class facility, plays an important role in China’s economic and trade cooperation with Russia, according to the city government. In 2011, Heihe and Russia’s Amur Oblast started cooperative projects in sectors including transportation, resources, culture and tourism. The first road bridge connecting China and Russia has been completed and is now being prepared for traffic. It spans 1,284 meters across the Amur River, connecting Heihe with Nizhneleninskoye. When it opens, annual cross-border passenger flows between the two cities is expected to reach 1.4 million, with cross border freight volumes reaching 3 million tons. A cross-border cableway that spans the river is also under construction.
The cableway, which links Heihe with Blagoveshchensk in Russia’s Amur Oblast, is 972 meters long, is expected to be completed next year and have an annual transportation capacity of 2.5 million people.
Currently, visitors take ferries or hovercraft to cross the border on warmer days, while buses use a floating bridge built on the frozen river during winter.
190 kilometers from Vladivostok, Suifenhe is the biggest Sino-Russian trade hub in Heilongjiang. In 2011, Harbin Customs officially approved the establishment of a free trade market in Suifenhe to promote cross-border trade in the city. Under the policy, Suifenhe residents can each buy duty-free commodities to the value of 8,000 yuan (US$1,250) per day, equivalent to a potential annual purchasing power per person of US$456,000.
By 2020, Suifenhe’s free trade zone with Russia was open to businesses from 14 more countries, including from Mongolia and South Korea, turning the zone into a regional cross-border hub.
Last year, more than 174,000 tons of commodities were imported to the Suifenhe Free Trade Zone with a total value of 800 million yuan, (US$125 million) according to Suifenhe’s local government. That has also attracted many Russians, who have started trading businesses. The Suifenhe city government has established the ‘Russian Startup Street’ which provides rent free premises for three years, while taxes and duties are also low. Suifenhe also offers access to the North-East markets of China, and especially Jilin, Liaoning, and Shandong Provinces, with a combined population of 171 million.
Russian investors interested in the China market and Heilongjiang free trade opportunities should contact Maria Kotova at email@example.com. Our 2021 Doing Business in China Guide also refers and can be downloaded free of charge here.
Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at firstname.lastname@example.org for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.