Andrei Gusev Managing Partner at Nordic Star Law Offices, spoke to the office’s Chinese business partner – Jackie Cho, Head of YJD Consult in the Asia-Pacific region, about trade barriers, legal risks and their minimisation. Special attention was paid to forecasts for the future of Russian-Chinese economic co-operation in the new realities.
Trade barriers and new opportunities
How have the sanctions imposed against Russia affected trade relations between Russia and China?
– The imposition of sanctions against the Russian Federation by Western countries has resulted in significant barriers to trade and economic relations between our countries. These barriers include restrictions on exports and imports of certain categories of goods and technologies. At the same time, the sanctions have contributed to the emergence of new opportunities for economic co-operation between Russia and China. In particular, trade volumes in national currencies have increased, which minimises dependence on the US dollar and euro. Russian energy exports to China have increased, and Chinese companies are actively participating in infrastructure projects in Russia.
– What measures are being taken to overcome barriers?
– Russia and China are intensifying cooperation within the framework of international organisations such as the Shanghai Cooperation Organisation (SCO) and BRICS, on the basis of which economic ties are being strengthened and joint projects are being implemented. The network of free economic zones is being developed and expanded, which stimulates investment attraction and promotes trade. For example, the establishment of a free trade zone in Harbin provides Russian companies with favourable conditions for doing business in China.
– In which sectors of the economy is co-operation most actively developing?
– These are the energy sector, agro-industrial complex, high technology and infrastructure development. Russia remains the leading supplier of oil and gas to China, which contributes to further strengthening of the energy partnership. Agriculture also shows high potential, especially in the export of grain, meat and dairy products. In the high-tech sector, co-operation in IT and telecommunications is developing, opening up prospects for joint innovation initiatives.
One of the most significant initiatives, the ‘One Belt, One Road’ project, provides ample opportunities for infrastructure development and trade between Russia and China. As part of this initiative, China is investing heavily in the construction of transport corridors, which helps improve logistics and increase trade turnover. Another promising area of co-operation is the development of the digital economy and the implementation of joint innovation projects, which opens up new horizons for technological co-operation and scientific research.
Legal risks
– What legal risks should I keep in mind when doing business with Chinese partners?
– The main legal risks are related to international sanctions regimes, currency control and protection of intellectual property rights. Sanctions create legal uncertainty, which can lead to serious legal problems for companies. Particular attention needs to be paid to exchange controls, which in both countries impose high compliance requirements for financial transactions. Intellectual property protection also remains a key issue, especially for companies operating in high-tech industries.
– What can companies do to minimise these risks?
– It is necessary to ensure high quality legal support for all transactions and projects: regular consultations with experts in the field of international law and sanctions regulation, as well as constant updating of knowledge about current changes in the legal field. It is also important to develop and implement internal policies and procedures aimed at compliance with regulatory requirements, including currency control and intellectual property protection. Active engagement with government agencies and professional associations is another important element of a strategy to minimise legal risks.
By including arbitration clauses in contracts, companies can ensure predictability and fairness in resolving potential disputes. It is important to choose arbitration institutions with a high reputation and experience of working with Russian and Chinese parties.
– What role do international arbitration courts play in resolving disputes between Russian and Chinese companies?
International arbitration courts play a key role in resolving disputes between Russian and Chinese companies. Arbitration procedures provide a neutral and independent platform for dispute resolution, which is particularly important in the context of sanctions pressure and a complex geopolitical environment. Including arbitration clauses in contracts allows companies to ensure predictability and fairness in resolving conflicts. It is important to choose arbitration institutions with a high reputation and experience of working with Russian and Chinese parties.
Carrying out settlements
– What challenges do Russian and Chinese companies face when making payments and what are the ways to overcome them?
– The main challenges include restrictions on the use of international payment systems such as SWIFT, as well as difficulties in opening and maintaining bank accounts in foreign banks. These factors increase the risk of payment delays and result in additional financial costs for businesses.
Companies can utilise several alternative settlement methods. One of them is switching to settlements in national currencies, such as the Russian ruble and Chinese yuan, which minimises dependence on international payment systems and avoids currency risks. Another option is the use of cryptocurrencies and blockchain technologies, which offer additional opportunities for secure and fast cross-border payments. Co-operation between the national banks of Russia and China continues to develop in order to create new payment and settlement mechanisms. The market is also actively developing international intermediary services of payment agents that help with payments, although their costs and practices are still in the formative stages.
– Can companies minimise the risks associated with payments?
– Companies should diversify their payment methods by using several alternative payment systems. It is recommended to enter into long-term contracts with reliable financial partners and banks with experience of operating under the sanctions regime. It is also necessary to regularly monitor financial and political risks in order to make timely adjustments to the settlement strategy. In addition, companies may consider insuring currency risks and entering into contracts to fix exchange rates.
Prospects
– How do you assess the prospects for further development of economic co-operation between Russia and China in the coming years?
– The prospects seem very positive. Further strengthening of economic ties and the development of joint projects are expected. Energy co-operation, given the strategic importance of Russian energy resources for China, will remain a key area. Investment in infrastructure projects, including the construction of railways, ports and logistics centres, is also forecast to grow.