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. Last Updated: 07/27/2016

Trade Still Elusive In China

HARBIN, China -- President Boris Yeltsin, fresh from sealing a new political friendship with Beijing, visited the northern city of Harbin on Tuesday in an effort to solidify that relationship with some real business.

"I am very happy that our countries' economic ties are getting better now," Yeltsin told reporters, but political analysts sensed an atmosphere of wishful thinking rather than a reflection of the true state of affairs.

Moscow and Beijing, which had been rivals for supremacy in the communist world in 1960s and 1970s, finally started mending their political ties in the late 1980s and now describe their relations as a "strategic partnership."

But despite their optimism, Yeltsin and Chinese President Jiang Zemin both appeared worried by a failure to match good political relations with solid economic ties.

This task is especially important for Moscow, which faces tough competition from the United States and Japan for China's friendship and access to its huge potential market.

Jiang hosted Yeltsin days after a successful visit to the United States; on Tuesday Chinese Prime Minister Li Peng visited Japan.

Yeltsin and Jiang signed a statement Monday in which they confirmed their new political friendship and removed a prominent vestige of the hostile past by declaring that there were no more problems with the demarcation of the 4,300-kilometer Chinese-Russian border.

They also danced and sang songs at the official dinner Monday to celebrating the success of their fifth summit, even if it was not as economically profitable as they had hoped.

Harbin is the capital of China's industrialized Heilongjiang province and was once home to many Russian settlers after Russia was granted concessions there in the late 1800s and early 1900s.

Yeltsin, First Deputy Prime Minister Boris Nemtsov and the several Russian regional governors met high-ranking Chinese regional officials in an attempt to enliven stalled cross-border trade, which once was a dynamic sector in bilateral commerce.

Nemtsov told reporters after the meeting that he had ordered some steps aimed at giving more air to the cross-border trade, chained by high taxes, tariffs and administrative limitations.

Among other things they included expansion of the free-trade border zone near the Russian city of Blagoveshchensk.

"We hope that by expanding cooperation we can enhance cross-border trade turnover which now stands at $1 billion," he told reporters. "This figure is certainly not enough and there is a great deal of work to be done.

The difficulties of cross-border trade reflect more general problems in bilateral economic relations.

Russia and China have decided to raise their trade turnover to $20 billion by the end of the century. But this year they are likely to end with a modest $7 billion, and Russian officials have acknowledged there is little hope for a breakthrough.

"We are too slow in offering benefits to domestic exporters such as cheap credits with considerable grace periods, something their Western competitors have," one government official said.

"Our companies often show lack of professionalism in dealing with the Chinese and end in loosing contracts," he added.

Russia's latest humiliation was the defeat in an international tender for a right to supply generators to the Three Gorges Dam on Yangtze River, a hugely ambitious Chinese project that will run well into the next century.

Nemtsov has said Moscow is now focused on the idea of building, together with Japan and South Korea, a gas pipeline from Siberia to China's Pacific coast, which could deliver more than 20 billion cubic meters of gas every year.

He has said the pipeline project could become a locomotive for other deals.

Russia and China signed a memorandum on the project on Monday, and Nemtsov suggested that the final deal could be signed with China next year.

But he also made clear that it still needed extra feasibility studies and said that at the current stage there was little clarity about the participation of Japan and South Korea.