05 June 2011

China vs. Russia: Tug of War with Siberia as the Prize

Mirnaya was once a thriving garrison town with a movie theater, a kindergarten and a park. The Soviet army maintained a base here to keep an eye on neighboring China. Then the Soviet Union collapsed and the military left. To survive, those who stayed behind gradually dismantled and sold off what was left, piece by piece. First they removed the windows from the prefabricated buildings where the officers had once lived and sold them in Chita. Then they ripped radiators and pipes from the walls and sold them to scrap dealers, who then sold the metal in China. The buildings now stand like skeletons in the steppes, evidence of a ruined country. _Spiegel
Compare China's border gate on the left, above, with Russia's gate to the right. You can see yet another load of Russian lumber moving into China. In fact, a lot of raw materials and natural resources have been moving from Russia into China, recently. The Chinese then turn the materials into finished products to sell at a significant markup.

The main thing going into Russia from China is Chinese settlers and investors, building Chinese colonies and outposts inside the very heart of Russia's source of wealth and economic power.
The border between the fallen superpower Russia and the People's Republic, which is gradually becoming a superpower, measures 3,645 kilometers, one of the longest borders in the world. And perhaps this border, where Europe's last offshoots encounter 1.3 billion Chinese, and where Christianity collides with Buddhism and Confucianism, is also one of the most important in the power struggles of the new century.

...Siberia, which covers three-quarters of the landmass of Russia, is home to only a quarter of the country's population: 38 million people. This is the equivalent of the population of Poland, except that Siberia is 40 times the size. It is a situation that many fear could once again spark the eternal rivalry between Russia and China, a rivalry that last produced military clashes in the 1960s.

Chinese investors have already bought a former tank factory in Chita, where they are now producing trucks. They already control the markets in Russian border towns, where they are the richest private business owners. "China invests more in the Russian Far East than our own government does," writes the Moscow newspaper Niezawisimaja Gazieta.

...Years ago Dmitry Rogozin, Russia's eloquent NATO ambassador, said half-jokingly that the Chinese would soon be "crossing the border in small groups of five million." And Vladimir Putin, shortly after being elected president, warned: "Unless we make a serious effort, the Russians in the border regions will have to speak Chinese, Japanese and Korean in a few decades." This hardly seems an exaggeration, given that there are six million Russians living in Eastern Siberia, compared with the 90 million living in China's northern provinces.

...Russian tourists heading to China to buy inexpensive goods are forced to wait up to 12 hours in their cars. These people, who work for distributors and are popularly known as "silk worms" or "camels," travel to China several times a month to bring goods to Russia: jeans and blouses, electric shavers and children's toys, athletic shoes made by a low-wage manufacturer called "Adidos" and chainsaws labeled "Stihl." They are pirated products, and are manufactured in southern China.

... the Chinese aren't just interested in Russian lumber. They also want Russian oil. Some 1,300 kilometers farther to the east, past empty steppes where a driver is likely to encounter no more than three cars an hour, is the small city of Skovorodino. It is the terminal point of the most expensive infrastructure project in the new Russia, a "pipeline with geopolitical significance," as Prime Minister Putin raves.... _Spiegel

Not only does China want Russian timber and Russian oil, they want Russian land and everything on and under the land. Specifically, the Chinese want Eastern Siberia. And since Russia is finding it harder and harder to staff its military with ethnic Russians or to supply its military with state of the art weaponry that actually works, eventually China will have Eastern Siberia. Not that China will be able to hold the land for long. China itself is destined to break up into warring factions sometime in the not so distant future. But Al Fin gamblers are betting that Russia goes down first.

Adapted from a posting at Al Fin Potpourri

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Blogger Bloggin' Brewskie said...

I've been predicting for some time that Russia's declining population will cause problems, and eventually, the country may split; I don't doubt Siberia will be prime poaching ground for hungry powers. However, I think China's problems will be emerging in a few years. The central government announced bailouts for local governments, of which it "estimates" they're in debt for 10 trillion Yuan (we all know it's higher).

This is just a tip of the iceberg; although everything may remain quiet for the rest of the year, eventually, the PBoC will need cleaning, the issue of NPLs - among both SOEs (who can't make an honest living without preferential treatment from government-controlled banks) and SMEs - will emerge, and the ugly albatross of the shadow banking system will bear fruit.

And of course it won't be China alone bringing turmoil to global markets in years ahead, as America's shoddy fundamentals will arise again, and I doubt the Euro surviving the end of the decade.

China obviously craves Siberia; I simply don't know if she has enough time to win her prize before (as Jim Chanos puts it) "Adam Smith has his revenge."

Sunday, 05 June, 2011  
Blogger PRCalDude said...

Notice that both buildings are complete eyesores. No one builds border gates like the Romans did at Regensburg and Trier.

I think a big sign of the health of a civilization is its architecture, meaning China, the US, and Russia are all doomed.

Monday, 06 June, 2011  
Blogger Bloggin' Brewskie said...


Especially when China's new infrastructure deteriorates at a fast rate: bridges only a few years old collapsing, 4-year-old hotels with rain leakage problems, 5-year-old buildings that appear 15... the list goes on and on.

Check out what a whistle blower says about China's high-speed rail network:

Who's going to hit the "infrastructure rubble pile" first: the US with, its antiquated collection, or China with it poorly-built bravado?

Tuesday, 07 June, 2011  
Blogger Ubaid Raza said...

Russia's planned oil pipeline to the Pacific Ocean will run behind schedule. The pipeline, also called Eastern Siberia-Pacific Ocean (ESPO), undoubtedly will change regional dynamics when it finally becomes operational, though its completion will be an expensive and time-consuming process.
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Wednesday, 08 June, 2011  

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