Here's how China can double trade volumes with Russia

Their partnership eyes $200bn by 2020.

According to DBS, Russia was China’s ninth largest trading partner in 2012 and China is Russia’s largest trading partner. The two countries have set a goal to more than doubling trade volumes to $200bn by 2020. 

DBS noted that to reach this goal, volumes would need to grow by about 11% per year, easily achievable in our view, given that volumes have already grown 17% on average over the past five years. China’s and Russia’s nominal GDP have been growing 14.4% and 14% respectively on average over the past five years. 

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The balance of economic power has clearly shifted to the east from the west since the global financial crisis in 2008. Although China’s exports to the US and EU remain large in terms of absolute size, the growth potential of other newly emerging markets such as ASEAN, Africa and South America is immense.

Another super partner emerging for China is Russia, which formally joined the WTO at end-2011. As import tariffs fall over time, the market potential for China to develop stronger bilateral trade ties with Russia is enormous given the advantage of geographical proximity. 

China’s trade with Russia was roughly balanced in 2011 and 2012. We reckon this is no coincidence as China and Russia’s needs complement each other. 

While China offers a large market for Russian goods; Russia provides “safety of supply” for China, particularly in primary goods and energy. Going forward
then, the focus will not be about addressing trade imbalances, as is the case in Africa, but on how to strengthen trade ties in specific sectors.