World Economy

Putin Plans to Develop Russia’s Far East

Putin Plans to Develop Russia’s Far EastPutin Plans to Develop Russia’s Far East

Chinese Vice Premier Wang Yang said Saturday that Russia’s push to revamp its run-down Far East region coincided with Beijing’s strategy, backing President Vladimir Putin’s drive for new sources of growth.

At the Eastern Economic Forum in the Pacific Port of Vladivostok on Friday, Putin promised favorable business conditions and state support to Asian and domestic investors willing to come to Russia’s most remote land, Reuters reported.

“The Far East development strategy coincides with China’s strategy of northeast rebirth,” Wang said. “(The) Russia-Chinese partnership will definitely bring generous fruits.”

But for Putin’s campaign to attract Asian funds to Russia, timing may be his worst enemy: the slowdown in the Chinese economy poses risks.

Putin’s turn to Asia comes at a time when relations with the West have hit their lowest since the Cold War, following Moscow’s involvement in the Ukraine conflict.

Russia needs money badly—sanctions and falling oil prices have hit the economy hard, with gross domestic product expected to fall 3.3% this year after growing 0.6% in 2014. China’s growth, meanwhile, is slowing and its stock market falling, forcing Beijing into rate cuts and a yuan devaluation to buttress the economy.

Ian Ivory, a partner at Golstblat BLP, said the Chinese slowdown will hardest affect emerging markets which are providers of raw materials.

“Russia is another classic example that will feel the pain, and China will be a further negative drag on the Russian economy,” Ivory said in emailed comments.

Andrey Kuzyayev, a former head of overseas operations at Lukoil, Russia’s No. 2 oil producer, played down the worries, saying the development of the Far East was not a temporary whim, but a long-term goal for the country.

“We need to make up time we have lost,” he said. “Cycles in any economy are the norm, not deviation. There will be a slowdown but obviously there will be acceleration later.”

The Chinese government’s growth target is 7% this year, down from 7.4% in 2014 and the slowest in a quarter of a century.

Wang’s address to the forum Saturday was short and he left immediately afterward, in the middle of the session, followed by Chinese officials, including Wang Yilin, chairman of the board at China National Petroleum Corp.

“This was unexpected but this was okay, we managed,” said Boris Titov, chairman of the Russian part of the China-Russia Friendship Committee for Peace and Development.