(cont.)
You can't give in
While most of the Russian mechanical engineering industry seeks to find a replacement for Western suppliers in China, and many do, some industries are already sounding the alarm and want to limit or ban supplies from China. For example, in the railway engineering industry, the entire certification system is set up to protect the Russian market, says one of Kommersant’s interlocutors: you cannot simply buy a unit of rolling stock in China and import it into the Russian Federation.
This situation should be maintained, Kommersant’s source is sure, otherwise the situation of the mid-2010s will be repeated, when the market was flooded with Chinese parts of dubious quality, and Russian factories were operating at half capacity. Now there is a shortage of wagons, their cost has risen sharply. “However, under no circumstances should we give in, otherwise our factories will take a begging position in order to overcome the momentary shortage,” says Kommersant’s interlocutor. “We will write off several thousand cars from the future production of Russian enterprises. The SMO will end, people will need to be occupied with civilian products, and that day is not far off.”
The situation would be different if China were not so developed in terms of railway production, but the industry of both countries is at its best, says another Kommersant interlocutor. Thus, one of the problematic parts—cassette bearings, the availability of which dropped sharply in 2022 due to the departure of all three main foreign partners from the Russian market—had been largely resolved by the fall of this year. By September, our own production covered 82% of the Russian Federation's needs, although bearings continue to be imported en masse from China. The EEC, while maintaining duties on Chinese supplies, noted that Russian manufacturers have localized everything except rollers and lubricants, which they plan to do by the summer of 2024.
"According to one of Kommersant’s interlocutors, cooperation with China in the field of purchasing components, which are also produced there under a foreign license, can bring unpleasant surprises."
He talks about an attempt to purchase in China critically needed components for railway engineering, which both here and in China were produced by joint ventures with the participation of the same manufacturer from an unfriendly country. The approved parts for the Russian and Chinese markets are different, so it was not possible to purchase the Chinese version. And the foreign partner stopped the attempts of the Chinese joint venture to manufacture a part according to Russian drawings. However, another Kommersant interlocutor says that such situations are almost always surmountable, since most licensed production facilities in China have an enterprise “across the fence” that “offers a similar product, but with a different name.”
Over the past two years, China has become a market for Russian exporters and importers that has allowed them to survive. However, as companies begin to think about the transition to more sustainable development, few of them want to increase the scale of these connections. For most exporters, they are the least marginal, and the continuation of a sharp increase in imports is increasingly in conflict with the position of the industry lobby and Russian industrial policy. The solution could be a higher degree of integration and the creation of joint ventures with Chinese companies. But, although Russian officials talk about the correctness of this path, Chinese business in practice has not yet sought to follow it.
You can't give in
While most of the Russian mechanical engineering industry seeks to find a replacement for Western suppliers in China, and many do, some industries are already sounding the alarm and want to limit or ban supplies from China. For example, in the railway engineering industry, the entire certification system is set up to protect the Russian market, says one of Kommersant’s interlocutors: you cannot simply buy a unit of rolling stock in China and import it into the Russian Federation.
This situation should be maintained, Kommersant’s source is sure, otherwise the situation of the mid-2010s will be repeated, when the market was flooded with Chinese parts of dubious quality, and Russian factories were operating at half capacity. Now there is a shortage of wagons, their cost has risen sharply. “However, under no circumstances should we give in, otherwise our factories will take a begging position in order to overcome the momentary shortage,” says Kommersant’s interlocutor. “We will write off several thousand cars from the future production of Russian enterprises. The SMO will end, people will need to be occupied with civilian products, and that day is not far off.”
The situation would be different if China were not so developed in terms of railway production, but the industry of both countries is at its best, says another Kommersant interlocutor. Thus, one of the problematic parts—cassette bearings, the availability of which dropped sharply in 2022 due to the departure of all three main foreign partners from the Russian market—had been largely resolved by the fall of this year. By September, our own production covered 82% of the Russian Federation's needs, although bearings continue to be imported en masse from China. The EEC, while maintaining duties on Chinese supplies, noted that Russian manufacturers have localized everything except rollers and lubricants, which they plan to do by the summer of 2024.
"According to one of Kommersant’s interlocutors, cooperation with China in the field of purchasing components, which are also produced there under a foreign license, can bring unpleasant surprises."
He talks about an attempt to purchase in China critically needed components for railway engineering, which both here and in China were produced by joint ventures with the participation of the same manufacturer from an unfriendly country. The approved parts for the Russian and Chinese markets are different, so it was not possible to purchase the Chinese version. And the foreign partner stopped the attempts of the Chinese joint venture to manufacture a part according to Russian drawings. However, another Kommersant interlocutor says that such situations are almost always surmountable, since most licensed production facilities in China have an enterprise “across the fence” that “offers a similar product, but with a different name.”
Over the past two years, China has become a market for Russian exporters and importers that has allowed them to survive. However, as companies begin to think about the transition to more sustainable development, few of them want to increase the scale of these connections. For most exporters, they are the least marginal, and the continuation of a sharp increase in imports is increasingly in conflict with the position of the industry lobby and Russian industrial policy. The solution could be a higher degree of integration and the creation of joint ventures with Chinese companies. But, although Russian officials talk about the correctness of this path, Chinese business in practice has not yet sought to follow it.
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