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Alexander Tsybulskiy: Chinese investors are eager to set up business in Russia

02.11.15

Last year saw a boom of Chinese investments in special economic zones of Russia, Deputy Minister of Economic Development Alexander Tsybulskiy told the "Dyknanie Kitaya". He is sure that it is now the time for investments in Russia, and, with the weakening of the ruble, the labor force has become cheaper than in China.

Just one small thing is lacking: the Russian society will have to overcome the fears of the Chinese capital, and the Russian authorities - to learn how to present investment opportunities to the Chinese investor, who is now no less demanding than the Western investor.

Alexander Vitalyevich, why is Russia interesting for Chinese investors?

Alexander Tsybulskiy: Commodity nomenclature of the Russian export to China remains very narrow. 70% of export is accounted for by mineral fuels, oils and products of their distillation, and about 10% of exports is accounted for by wood and pulp and paper products.

However, China's economy reached such a scale that at the government has decided to expand investments in foreign markets. We must first take advantage of it, become the important direction of investment of Chinese capital. Moreover, the Chinese economy is now presented not only by consumer goods that are produced for the whole world, but also by high technologies.

And we have a large market, good specialists, advantages from the standpoint that labor costs in Russia now have become cheaper than in China. We even have examples that the Russian business, previously localized their production in China, is returning now to Russia, realizing that it has become economically more profitable.

27 Russian regions declared their participation in the fair, and 11 Russian regions will be represented at the level of governors, the Russian exposition will be located on an area of about 3 thousand square meters. Today, nobody comes and spends money for such events just for the sake of it, the time has changed. Hence, the regions do not doubt the effectiveness of such platforms.

Interviewer: Has it become a trend?

Alexander Tsybulskiy: This can hardly be called a trend, but at least these are not isolated cases, when there is a return of capital. We must understand that these competitive advantages will exist not very a long time. And now the more we "sell" them in the Chinese market, the more positive we will then receive in response.

The Russian society involves with China a lot of phobias, ranging from faulty goods to the fear of losing at least the Far East...

Alexander Tsybulskiy: I would say that the phobia about the desire of China to invade our territory is the greatest one, followed by the fears that they manufacture inferior products but now it is applicable to China to a lesser extent.

Does it affect the work with investors?

Alexander Tsybulskiy: Indeed. When it comes to Chinese investors, the problem arises in full growth. Remember the recent initiative of the Governor of Trans-Baikal territory, when more than 100 thousand hectares of land were assumed to be provided in a long term lease to the Chinese for agricultural production - I have not seen ever such a storm of feelings of the population on this occasion. Although, in my opinion, there is nothing terrible in this project. We, in Russia, certainly have no problems with the land. There are problems with people who would work on this land, and the Chinese in this regard could help us.

But here the real issue is that the reason of these phobias is still within us. Because people are afraid of not the fact that the Chinese just will come, but they are afraid of the fact that they will uncontrollably apply pesticides, and after them there will be a desert, and they fill up our market with such harmful products. But if you look at our legislation, you will see that our agricultural production is probably the most regulated in the world. And if the Chinese comply with all our sanitary-epidemiological standards, standards on land use, and other, no fears should arise. But the fear exists, and it is absolutely justified. It addresses to us. We should change the way to treat ourselves. To make people believe - if the government invites investors, it is able to ensure the fulfillment of our laws. Then no one will think that there will come the Chinese, all will pay bribes and will do what they want.

The Chinese have such phobias towards Russia, don’t they?

Alexander Tsybulskiy: It seems to me that the Chinese have no phobias at all. They go where they see the opportunity to earn. But you should not think that the Chinese will invest where they are told. It's a Chinese investor to dictate where he is willing to invest. But we must understand that we need it or not. We have long tried to go the other way, told them: invest only in high-tech manufacturing, and preferably in the Far East. And the Chinese reasonably answered: invest yourselves first there, and then call us, but now we are interested in your raw material, and let's proceed from this. We did not agree with that. In fact, we need to find mutually interesting projects.

To what extent is it important for Chinese investors that any project in Russia is supported by the authorities?

Alexander Tsybulskiy: It is critical. Moreover, it is important both for large-scale projects and smaller regional ones. If the Chinese see that the project is supported at the level of regional authorities, it is 20% of success, if the project is included in the agenda of the federal government or, for example, the federal government has been watching and patronizing it, then it is 40% of success at the entrance.

Do Chinese investors need to be offered ready-made projects, or can they choose to look for them at own risk?

Alexander Tsybulskiy: Today, the Chinese investor already wants to come to the finished project. It is a solvent investor who believes he must be treated the same way as investors from the EU and the USA. His request is like this: Create me the necessary conditions.

From this it follows that we need to learn how to properly pack and sell the prepared draft. Packing should be different - for Chinese and German we should even prepare different presentations. They are often interested in different nuances, although investment policies are roughly the same - reducing risk and increasing returns on capital.

Have the Chinese entrepreneurs believed to the seriousness of the free port in Vladivostok?

Alexander Tsybulskiy: This project is of great interest, they truly believe in its perspective. Perhaps, today they are interested in it more than in our special economic zones.

In particular, due the obvious benefit which is easy to calculate. They are hoping that it will be practically implemented as we have prescribed it in the law.

And what is their attitude to special economic zones?

Alexander Tsybulskiy: Since last year there is a boom of Chinese investments in the SEZ. There were three large investors, including LifanMotors (Lipetsk), "Geliotechnika Sirius" (Alabuga) and "ABC Steel" (Alabuga) with a total investment of about 17 billion rubles. After two years the Chinese were in fourth place in total volume of declared investments on all SEZs. In addition, "Alabuga Motors" with a total investment of 191 million rubles, is planning to produce in the "Alabuga" SEZ the cars of one of the Chinese brands.

And here a certain chain reaction arises - when one Chinese company becomes a SEZ resident and can show a history of success, then behind it the line of those wishing to try myself in this field arises. For them the main thing - to believe. If we now can prove to those companies who have believed and entered in the SEZ that it really works as we promised (the reduction of administrative, tax costs, regime of a free customs zone), I am sure that you will get fold increase in investment from China.

Will Chinese investors be able to be peers with European ones in terms of accumulated investment?

Alexander Tsybulskiy: I do not think that it is appropriate to set such an objective. We have to work with all investors. And I cannot say that Western investors have become less interested in Russia since the imposition of sanctions. We so far have been receiving from them the applications for obtaining the status of SEZ residents.

In 2014, we approved 40 new applications, 7 of them with foreign capital from Germany, China, Finland, Spain, UK, and two existing residents have attracted foreign investors from Germany and Italy. This year we have approved 36 new investors, 9 of them with foreign capital from Germany, Italy, USA, Poland, Korea, Turkey, Kazakhstan and China.

Igor Zubkov

"Rossiyskaya Gazeta"

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