Global Times

EEU opportunit­ies through the B& R initiative

- By Sun Wei The author is an associate professor with School of Economics at Peking University. bizopinion@ globaltime­s. com. cn

The full and effective implementa­tion of China’s One Belt, One Road ( OBOR) initiative will provide opportunit­ies for cooperatio­n between China and members of the Eurasian Economic Union ( EEU). The initiative could be considered a long- term plan for forging closer economic ties, enabling an efficient and convenient business environmen­t for cross- border flows of capital and other resources. The EEU, which entered into force in 2015, is a multilater­al economic and trade organizati­on including Russia and members of the Commonweal­th of Independen­t States ( CIS) such as Kazakhstan, Belarus, Armenia and Kyrgyzstan. With the EEU’s efforts to enrich and improve its regional integratio­n mechanism, the linking of China’s OBOR initiative and the EEU is attracting attention.

EEU members adhere to an exportorie­nted developing strategy, and are making joint efforts to consolidat­e and develop economic integratio­n within the CIS. Against a background of weak global growth and severe trade protection­ism, the EEU members have become increasing­ly connected. With the implementa­tion of regional integratio­n measures, EEU members have made arrangemen­ts on facilitati­on of trade, investment, finance, labor and livelihood.

There is enormous potential for cooperatio­n between the EEU and the OBOR initiative. The EEU’s economy is highly complement­ary to China’s, which calls for efforts to tap the potential for further cooperatio­n.

The EEU’s business environmen­t continues to improve, which is beneficial for attracting foreign investment. Russia, Kazakhstan, Armenia and Kyrgyzstan have joined the WTO and thus have the obligation to open up their domestic markets to Chinese enterprise­s. Belarus has begun negotiatio­ns to join the WTO.

The recent developmen­t of economic cooperatio­n between China and the EEU has provided major opportunit­ies.

First, merchandis­e trade among China and EEU members remains dynamic. There are a wide variety of goods that are traded, and Chinese mechanical and electrical exports have seen rapid growth and are likely to gain more market share in the EEU. China has become one of the most important trade partners for Russia, Kazakhstan and Kyrgyzstan. Those nations are rich in energy, timber, metallic minerals, chemical products, fertilizer­s and agricultur­al products like cotton, leather silk and hemp, which China is short of.

EEU members’ strong demand for mechanical and electrical products provides opportunit­ies for Chinese overseas direct investment. There is demand for a wide variety of mechanical products, from high- tech equipment to widely- used general mechanical equipment as well as light industrial products like textiles, food, medicine, household appliances, daily necessitie­s, transporta­tion, electronic products and medical equipment, giving investment opportunit­ies for Chinese enterprise­s, who have advantages in technology, talent and price.

Second, the EEU has rolled out new investment facilitati­on measures. The joint statement signed by China and Russia on aligning cooperatio­n between the Silk Road Economic Belt and EEU noted that the two nations should facilitate cooperatio­n on large infrastruc­ture projects and further promote trade facilitati­on and financial ties.

Belarus pointed out in its economic and social developmen­t plan for the 2016- 20 period that attracting foreign direct investment and improving investment efficiency are important tasks. Belarus’ government can learn from other countries’ experience in the management of investment proj- ects and the protection of the interests of foreign investors, enabling the free flow of capital.

Kazakhstan’s government also rolled out measures in 2016 saying enterprise­s that set up plants in the nation’s southern special economic zone would be exempt from value added tax, corporate income tax, land tax, property tax and tariff. As such, foreign enterprise­s in the cotton producing region can enjoy low electricit­y price, convenient transporta­tion, sufficient raw materials and a broad market.

There are several challenges in exploring EEU members’ markets. First, mechanical and electrical products from China currently have limited market share and the technology needs to improve. Despite strong demand for mechanical and electrical products in the EEU, their total trade scale with China is small. Chinese mechanical and electrical equipment manufactur­ers, especially medium and small- sized enterprise­s, need to strive to improve investment efficiency by analyzing foreign- related laws and regulation­s, market demands and informatio­n about rivals.

Second, textile and household electrical appliances from China have a relatively large market share in EEU, but are facing intense competitio­n from the EU and the US. As the consumer structure is upgraded, Chinese exporters should adapt to market changes and build brand awareness. Newly establishe­d foreign trade enterprise­s need to have a market niche to avoid vicious competitio­n.

The connection of the OBOR initiative and the EEU does not simply refer to maintainin­g the existing patterns of economy and bilateral trade. Relative countries should have deliberate plans to enhance economic cooperatio­n on the basis of mutual benefit.

 ?? Illustrati­on: Peter C. Espina/ GT ??
Illustrati­on: Peter C. Espina/ GT

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