Preparing to tap Russian potential

Chinese enterprises need to be more ready to tap the vast potential of Russia, especially after it joined the World Trade Organization last year, said Cai Guiru, president of China Business Association in Russia.

Cai said she is optimistic bilateral trade could hit the $100 billion mark in 2015 and $200 billion by 2020. This is in spite of the fact that "trade figures have been decreasing for six months straight".

"Russia's flagging purchasing power due to the lingering European crisis is one reason for the fall, but it also shows up the inadequacy of Chinese enterprises when it comes to competing in the international market," she told China Daily.

"It is not easy to regain market share once it's lost," Cai said, and big enterprises must enter the market, seek strategic projects and boost exports through innovation.

In 2012, Sino-Russian trade grew more than 11 percent to $88.16 billion, but the figure is only a fraction of the trade that Russia has with the European Union, and much less than China's current trade with the United States.

To give trade an impetus, both China and Russia are mulling strengthening cooperation in high-tech industries such as airplane manufacture and nuclear electricity, said Feng Yujun, head of Russian studies at the China Institutes of Contemporary International Relations.

The Russian market will be more open and regulated after joining the WTO, he added.

"Improved investment climate and lower tariffs are all good news for China."

However, few Chinese enterprises have realized the importance of keeping tabs on the changing market, and marketing their brands to Russia, Cai said, citing a three-year quality assurance for a three-dollar clock, which is rare in China but indispensable in Russia.

Li Lansheng, a manager at Everbest Machinery Industry, said the key to success for an overseas business is localization: Following local rules and providing what locals really need.

"There are some big Chinese companies coming into Moscow with a dozen Chinese executives who know nothing about Russia," said Li. Most of his employees are Russian.

Jiang Yi, an expert on Russian studies with the Chinese Academy of Social Sciences, said mechanical and electrical products have been China's main exports to Russia since 2007, but China's market share in Russia is far less than that of Japan and South Korea.

"South Korea gained wide brand recognition by investing heavily in market research and after-sale services, while we focused on only sales volumes," said Jiang.

Cai warned that such shortsighted strategies would hinder Sino-Russian economic cooperation in the long run.

"If we could sell more value-added products with world famous Chinese brands, instead of socks and shoes, then trade between us would achieve more than the targets set," she said.

In 2011, Cai led the establishment of the Greenwood International Trade and Exhibition Center off the highway circling Moscow to offer Chinese enterprises a platform for a better foothold in Russia.

It plans to train about 400 Chinese to understand Russian better this year.

"Years ago, some Russian shopping malls were proud they were not selling made-in-China products, but now they are gradually accepting high-quality Chinese products.

"Some have made a fortune from them," said Cai.

"I believe that with the combined effort by enterprises, both governments and organizations such as ourselves, economic cooperation will become a solid foundation for China-Russia relations," she said.