Moscow and Beijing deepen many-sided cooperation

By Vladimir V. Sytin

Recently, Russia and China have agreed on construction of the international transit corridor Europe-Western China, the Eurasian high-speed rail link between Moscow and Beijing, as well as the natural-gas pipeline 'Power of Siberia' that is under construction already. "We are consecutively modernizing the sea, railroad and automobile infrastructure, as well as increasing the carrying capacity of the Baikal-Amur Mainline and the Trans-Siberian trunk railroad, investing considerable funds in the development of the Northern Sea route so that it could become a globally competitive transportation artery," said Russian President Vladimir Putin.

It is also important to note growing cooperation of the two countries in the field of space exploration, particularly deliveries of Russian rocket engines to China, in the aircraft industry, namely joint construction of a wide-body airplane, and in the military-technical sphere. Plans are in hand to build the Great Asian Power Ring designed for Russia's electricity supplies. Further, China's CNPC and the Silk Road Fund became co-investors of the Yamal LNG project.

According to analyst and geologist Byron King, over the last few years China has deepened its trading roots with Russia and today China pays for Russian oil in yuan. Russia, in turn, uses yuan to buy goods from China.

Beyond trade in goods, within the past six months Russia has set up a branch of the Bank of Russia in Beijing. From there, Russia can use its Chinese yuan to buy gold on the Shanghai Exchange. In a sense, Chinese-Russian oil trade is now backed up by a "gold standard".

James Rickards, editor of the Strategic Intelligence newsletter, wrote that China has the second largest economy in the world, and is by far the fastest growing major economy in the world. Even though growth rates have fallen from 10% to 6.5% in recent years, that 6.5% growth is still enviable, compared with 2% growth in the United States, and less than 1% growth in Europe. China's debt burdens are manageable as long as the growth is there to support the debt.

Previously, politologist Paul Craig Roberts noted that Henry Kissinger sold U.S. president Trump on a scheme to use the removal of Russian sanctions to pry President Putin away from the alliance with Iran and China. Part of the deal being offered to Vladimir Putin is "increased access to the huge European energy market, restored Western financial credit, access to Western technology, and a seat at the global decision-making table, all of which Russia badly needs and wants". Sweetening the honey trap is official recognition of "Crimea as part of Russia". Russia might want all of this, but it is nonsense that Moscow needs any of it.

Europe has scant alternatives to Russian energy. Russia does not need Western technology. Indeed, its military technology is superior to that in the West. And it is a self-serving Western myth that Russia needs foreign loans. This myth is enshrined in neoliberal economics, which is a device for Western exploitation and control of other countries, particularly Ukraine.

Foreign loans are only important to countries that lack the internal resources for development and have to purchase the business know-how, technologies and resources abroad with foreign currencies, which their exports are insufficient to bring in. This is not the case with Russia that has large endowments of resources and a trade surplus.

When central bank credit is used to finance development projects, the supply of rubles increases, but so does output from the projects. Thus, goods and services rise with the supply of rubles. When Russia borrows foreign currencies from abroad, the money supply also increases, but so does the foreign debt.