May 11, 2015

Agricultural developments in China and Russia is set to benefit from a US$2 billion investment between both nations, according to the Russian Direct Investment Fund.

Supported by the Russia-China Investment Fund, an element of China Investment Corp, and China's northeastern Heilongjiang province, the fund is launched during a recent three-day state visit to Moscow by China's president, Xi Jinping.

The Chinese head of state is in Russia to witness signings of commercial deals involving energy, aerospace, transport and defense. Jinping also attended the Victory Day parade on May 9, with Russian president Vladimir Putin by his side.

With the investment, Russia and China can look forward to improved cooperation in agriculture, including farming, land management, customs, procedures, food logistics and sales, MarketWatch reported. It would expedite developments of "large areas of uncropped, arable land" on the borders of both countries, said Kirill Dmitriev, the chief executive of the Russian Direct Investment Fund.

In addition, an experimental agricultural free-trade zone between Heilongjiang and Russia's farm-belt Amur region may be developed, with a direct exchange rate using the ruble and the yuan.

China has already established a foothold in the Russian agricultural sector when the country's grain company, Cofco Crop., bought over a 51% share in a Noble Group unit which owns wheat, corn and barley operations in Russia, according to MarketWatch.

Observers noted that the latest developments highlight strengthening ties between the global behemoths amidst Moscow's frosty relations with the West, sanctions against Russia over Ukraine's Crimea crisis, and a shared uneasiness towards a perceived US hegemony in the world.

While the recent agreement reveal a stronger Chinese focus on Russia in fulfilling local food demands, the US, a key corn exporter to China, copes with mounting difficulties in expanding its agricultural presence in the Mainland.

Although the corn trade was once disrupted following discoveries of the Agrisure Viptera GMOs in some US shipments, China claims that the smaller share of US corn imports (at a current 90%, from 97% five years ago) is not meant to minimise the States' involvement in the Chinese market.