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Quasi-free trade zone being built along border
(China Business Weekly)
Updated: 2004-06-20 09:54

China and Russia have pledged to establish a 10-square-kilometre quasi-free trade zone along their borders, with an estimated investment of US$1 billion.

The free trade zone, located in Suifenhe, a border city in Northeast China's Heilongjiang Province and Pogranichny, in Russia's Far East Region, is already in its first phase of construction, being carried out by the Hong Kong-funded Shimao Group, the real estate developer of the project on the Chinese side. A Russian company will be in charge of the Russian side.

Wu Yan, manager of Shimao's Administration Department, said the first phase involves 1.53 square kilometres from China and 3 square kilometres from Russia. The whole zone will cover 3.5-square kilometres of land from China and 7 square kilometres from Russia.

The zone will offer a platform for commodity trading, tourism and entertainment sectors, service trades, a storage sector, processing trades, transit trades and a high-tech park, Wu said.

Rumours say a red light district and gambling facilities will be established on the Russian side of the trade zone.

Trade will begin as soon as the first phase is completed, which is expected to be in two years. And the whole project will take at least 10 years, Wu told China Business Weekly.

All products will enjoy low or even zero tariffs in the zone. And no visa is needed to enter the zone, Wu said.

Insiders say Shimao paid 125.6 million yuan (US$15.17 million) to win the bidding for the project.

Wu would not give the exact amount, but said the project was the company's largest investment in recent years, and they anticipated great profits from the project. A subsidiary company has been set up in Suifenhe.

Analysts say the quasi-free trade zone will enhance border trade in the region, strengthen and enrich existing trade between the two countries.

"The project is a far-sighted move,?said Tian Chunsheng, professor with the Chinese Academy of Social Sciences. "We should start now to prepare for rapidly growing trade in the region.?

With Russia's gross domestic product growing by 8 per cent annually in recent years, the trade between the two countries will boom in the near future, Tian said.

Prosperity in the region will not only stimulate economic development in Russia's Far East Region and China's Heilongjiang Province, but will also radiate to the whole of East Asia, Tian said.

Bordering cities should take the opportunity to develop their economy, she suggested .

Wang Limin, vice-governor of Heilongjiang Province, said officials from both China and Russia attached great importance to the project, and would make every effort to attract investment to the zone.

Relevant projects for the zone will be open for investment at the annual Harbin International Trade Fair, which is being held this week in the province's capital, Harbin.

With China and Russia sharing a border of more than 4,000 kilometres, among which transactions make up an important part of trade. Last year, border activity accounted for 22.3 per cent of overall trade volume, reaching 29 billion yuan (US$3.52 billion).

Experts believe the quasi-free trade zone will further stimulate rapidly increasing Sino-Russian trade.

Wu Bangguo, chairman of the Standing Committee of the National People's Congress, said during a forum on Sino-Russian border and regional synergy last month, that the two neighbours should improve the make-up of trading commodities, increase investment, promote regional collaboration among enterprises and improve the environment for economic development.

According to the National Bureau of Statistics, trade between China and Russia exceeded 130 billion yuan (US$15.7 billion) last year, up 32 per cent, an annual increase for the fourth consecutive year.

With a year-on-year growth rate of 35.6 per cent between January and April, the figure could exceed 165 billion yuan (US$20 billion) this year.

Garment and food products remain China's staple exports to Russia, while China mainly imports energy resources and timber from Russia.

Labour-intensive goods and products with low added value and primary products have taken up too much bilateral trade, which does not match the economic development, and industrial and technological levels of the two countries, Tian told China Business Weekly.

"China should increase investment in Russia in order to win urgently needed energy imports from Russia.

"Vladimir Putin's government expects foreign investment and in return sells its oil. Besides commodity trading, Russia expects foreign investment to help develop its backward Far East Region,?Tian said.

There is a trend that Russians expects products of better quality and also high-tech products as Russia's economy recovers.

Tian suggested that increases in high-tech goods and mechanical and electronic products should rise to help balance the trade.

Chairman of Council of Federation of the Russian Federal Assembly Sergey M. Mironov agrees.

He said an emphasis on new economic ties in areas such as telecommunications was needed.

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