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Economies of Russia and China

Russia and China provide two of the most compelling investment opportunities of the present day. Strong economic fundamentals in both countries have captured the attention of investors worldwide. Their performance has led to an increased awareness of the importance of a bilateral economic relationship between the two countries. With government backing and deep familiarity with the local markets in both countries, the Russia-China Investment Fund is well positioned to make key investments in the most promising areas of growth.

 
foreign
exchange
reserves
exceeding
$510bn

Solid Fundamentals: Russia has one of the lowest levels of public debt and was ranked 8th out of 194 countries in 2018. It also stands 18th by “double surplus” of nearly 10% of GDP in current account and general government balances. Russia successfully adjusted its government budget to US$40/bbl oil price (in 2017 US dollars) after introducing the new “fiscal rule” and cut its fiscal breakeven oil price to US$45-50/bbl. Russia’s foreign exchange reserves approached US$500 billion in 2018 and will continue growing in coming years due to the “fiscal rule”. Russia’s monetary policy has been extremely prudent aimed at keeping 4% inflation and the RUB has been a free-floating currency since 2014.

Russia

One of the Largest Economies: Russia is the 6th largest economy in the world with GDP (PPP) of US$4.2 trillion in 2018. It is the largest among the BRICS countries. The Russian economy is expected to grow to US$5.2 trillion by 2024, according to a recent IMF forecast, while the government aims at bringing GDP to US$5.5 trillion to become the 5th largest economy globally. The National Projects of the government are able to lift GDP growth to 3% or above already in 2021.

Large Domestic Market: Russia has one of the largest domestic markets in the world by population of 144 million, ranking 9th out of 194 countries by IMF. Russia’s middle class will likely continue recovering in coming years.

Resource Rich: Russia is the world’s top commodities producer. In addition to well-known major commodities such as oil, gas, coal and metals, Russia has the world’s largest reserves of timber, fresh water, agricultural land, fertilizers and many other resources. What is also important is Russia’s well-educated and competitive labor force compared to many other developed and emerging peers.

Government Support for Investment: The Russian government is committed to increasing competitiveness and making Russia a more attractive investment destination. With a flat personal income tax rate of 13% for residents, corporate tax rate of 20%, and VAT rate of 20%, Russia has one of the most generous non-offshore tax regimes in the world. Russia has been ranked 31th in the World Bank’s Doing Business survey outperforming some other major economies.

China

Expanding Economy: Since 2014 China has been the world’s largest economy with GDP (PPP) of $25.3 trillion in 2018, ie nearly 25% bigger than the 2nd largest US economy. Annual GDP growth averaged 7.9% over 2009-2018 and is expected to stay around 6% until 2024, according to IMF, sharply outpacing the projected global growth of 3.6%. China’s foreign exchange reserves are by far the world’s largest at $3.1 trillion as of March 2019.

Huge Domestic Market: China became the world’s largest energy consumer in 2010 and is seen generating about 25% of the expected increase in global energy demand until 2040. As one of the indicators, China surpassed the United States as the largest automobile market in the world in 2009 with private car ownership growing to 187 million in 2018. China has been the fourth-most-visited country in the world with about 63 million international visitors in 2017 largely due to increasing global business contacts and cultural exchange.

Industrial Powerhouse: China is the world’s largest exporter and leading industrial power. It is a member of the WTO since 2001 with a total international trade value of US$4.6 trillion in 2018, including US$2.49 trillion in exports. Its output of major industrial products including crude steel, coal, electricity, cement, fertilizer and woven cotton fabrics is the highest in the world.

Stability and Reforms: China has enjoyed decades of relative social and political stability thanks to the steadily-high economic growth and prudent policy mix. Its unemployment rate has been declining consistently over years and hit a new all-time low of 3.8% in 2018. Several years ago the government shifted its attention to various reforms aimed at changing the economic model from the export to domestic demand-driven one while still prioritizing pro-growth agenda and economic stability.

 
total
international
trade
value of
$4.16tn