China and Russia Announce 'Strategic Partnership'

As Russian and Chinese forces begin what could be the biggest war games ever held, what is happening between the countries behind the scenes is even bigger.

Presidents Xi Jinping and Vladimir Putin showed off their pancake-making skills for the camera, during meetings at the Vladivostok Eastern Economic Forum this week. (Photo: Screen capture from Voice of America YouTube capture of global reporter feed.)

On September 11, Beijing and Moscow launched the Vostok 2018 joint military drills. With a contingent of the Chinese People’s Liberation Army involved and Russia raising a massive show of military force, the war games are expected to be larger than the previous ‘largest ever’ exercise of this kind. That record goes to the former Soviet Union’s 1981 war games event.

Bringing two powers as major as Russia and China together in something like this says a great deal about the degree of cooperation already in place between the countries. Executing the games has already required sharing a great deal of previously confidential information between the countries. It also represents a desire to work together in an atmosphere of trust which had not existed between these countries on its current level, perhaps for all time.

Besides the military exercises, the games also provided the opportunity for Presidents Vladimir Putin of Russia and Xi Jinping of China to come together to announce what they call a new ‘Strategic Partnership’ between the countries.

That the two countries might align more closely is of little surprise. Russia's hand of friendship to the West had been repeatedly slapped and Russia designated a perpetual enemy. Russia defending its sovereignty with the annexation of Crimea from Ukraine, its backing of pro-Russian rebels in eastern Ukraine, support for Syria in the Middle East, and attempts to manipulate elections in the U.S. did not help its relationships with NATO nations.

China’s growing economic power has brought international complaints about currency manipulation, theft of trade secrets, setting of ‘debt traps’ where China loans money for international projects then ends up being a part owner of them, the seizure of rights in the South China Sea when even a UN tribunal ruled against what the country was doing, and charges of subsidizing goods before they are shipped out of the country, a process known as “dumping”. Those in turn have brought on the tariffs Trump and the U.S. have launched against the country, along with near universal condemnation for China’s expansionist policies in formerly international ocean waters not far from its shores.

What is happening now goes beyond just alignment, though. The new strategic partnership just announced covers several new agreements, several of which represent a surprise and should be of concern to Western nations watching how international power is beginning to shift in this region.

One of the biggest announcements was that the two countries plan to use their own currencies, the Russian Ruble and Chinese Yuan, far more often in trade deals. As Vladimir Putin announced at a joint news briefing held in the Russian city of Vladivostok with China’s President Xi Jinping, “The Russian and Chinese sides confirmed their interest in using national currencies more often in trade deals.” He explained a major reason for this is it would “increase the stability of banks’ servicing of export and import obligations while there are ongoing risks on global markets”.

The comments came on the sidelines of the Eastern Economic Summit in Vladivostok this week. That is a forum which is already all about encouraging investments in Russia's Far East.

This decision also has the effect of further isolating the U.S. and its past dollar dominance. China has begun to cut more trade deals of its own using the Yuan as the currency of record, including countries such as Pakistan. Russia and Iran also recently announced their intent to do more trade without reliance on the dollar.

Xi and Putin also took time to sign agreements this week covering production and investment collaboration in the Far East. They also approved plans to develop far more trade between the countries, and to work together on economic development and investment in Russia’s Far Eastern region. Reports suggest Putin is hopeful China will invest in more major projects within Russia’s borders. For China this goes beyond just goodwill and the possibility of smart investing. Xi is also looking to how investments in Russia might support its ‘Belt and Road’ economic policy to connect Europe, Russia, and the rest of Asia together in a logistics and value chain network to support China’s long-term economic growth.

The Vostok military exercises providing the backdrop for these newest agreements will conclude on September 17. What China and Russia could bring to their newly-announced strategic partnership is likely to have a much longer-lasting impact on world affairs for years to come. As President Xi announced during the joint press briefing with Putin on September 11, “In a rapidly changing international situation with growing instability and unpredictability, cooperation between Russia and China takes on even more importance.”