China offers Russian exporters untapped business potential

China’s immense and increasingly affluent population represents a relatively untapped market for food and drink importers. Russian firms, which currently face difficulties in accessing many western markets, should consider the planet’s most populous nation as a great business opportunity.

This increasingly appears to be the case, with bilateral trade growing by an impressive 21.8 % during the first six months of 2017[1]. If Russia and China continue to nurture the right conditions for trade investment growth, analysts predict bilateral trade could reach $200 billion by 2020[2], according to the Russia China Investment Fund.

There is a clear appetite for this. Both countries have notably reduced their reliance on the US dollar for doing business in favour of their own currencies[3], and agreements on Russia-China production and investment cooperation were recently signed at the Eastern Economic Forum in the Russian city of Vladivostok[4].

Food export opportunities

The food and drink sector represents an important chunk of this trade. Key imports from Russia include frozen fish as well as soy, sunflower and soybean oils, all crucial ingredients for Chinese food production. According to Russia’s food safety regulatory Rosselkhoznadzor[5], China is now the 13th top importer of Russian grain, and will likely enter the top ten shortly. The two countries are currently constructing a new grain transportation port in Fuyuan, China, which will create smooth new shipping routes for Russian grain[6].

Fruit and vegetable juice exports to China have also dramatically increased in recent years. Russian confectionery and baked goods have proved popular with Chinese tourists, who have then spread the word once they return home.

Receptive market

One reason for this growth in Russian exports has been China’s burgeoning middle class, which has the cash to spend on imported goods and a desire for more exotic experiences. China has almost doubled its GDP per capita since 2007, with average annual salaries growing dramatically over the past few years[7]. With this in mind, it is likely that Chinese demand for imported goods will continue to increase. All this has created a receptive market on Russia’s doorstep at a time when other global markets are becoming less accessible due to embargoes and sanctions.

This is something that Russian exporters can and should capitalise on. Lucrative new markets are emerging for more high-end products such as such as mineral water, honey, butter, wine and vodka, and distributors will want to get in on the first floor here. Understanding and anticipating local demands - and having supply chains up and running on the ground – will be crucial to export success.