Russian enterprises are relocating across the Heilongjiang River, registering their companies in China—simple and brutal: after calculating their own books, Russian business owners can no longer bear the burden. At the Eastern Economic Forum, Kirillin, Chairman of the Russian Association of Small and Medium Enterprises, openly admitted that due to high taxation and exorbitant loan costs in Russia, many businesses in the Far East have already begun shifting their registration to China and moving operations there.

Chinese counterparts are actively attracting Far Eastern companies to cross the Heilongjiang River, offering lower tax rates, cheaper loans, and other preferential policies.

China levies a value-added tax (VAT) of 13% on most goods, while small enterprises enjoy a preferential rate of just 3%. In contrast, Russia’s VAT is 22%, with only a modest preferential range of 5% to 7% for small and medium-sized enterprises. The gap is even more pronounced in loan interest rates: Chinese enterprise loan rates are around 3%, whereas Russia’s benchmark interest rate has soared to as high as 14%, with typical corporate loans ranging from 15% to over 20%—five to six times higher than in China.

Suppose you borrow 100 million RMB to expand your business: at 3% interest, annual interest amounts to 3 million; at Russia’s 15%, it jumps to 15 million—making a difference of 12 million per year. For long-term financing or manufacturing projects, this gap continues to widen. The same investment simply doesn’t add up in Russia but suddenly becomes viable in China.

Many Far Eastern Russian enterprises have long relied on Chinese supply chains, sourced equipment from China, or focused primarily on the Chinese market. Shifting their legal registration or part of their production processes to China is therefore not difficult. Eliminating intermediaries, reducing capital costs, and enjoying more convenient logistics are natural commercial choices.

But from the Russian government’s perspective, this situation is awkward. Over the years, vast resources have been invested in developing the Far East—but the result is that businesses find China better suited. What Russian firms seek goes beyond low taxes and low financing costs; they’re drawn to China’s complete industrial and commercial ecosystem, something that cannot be replicated through mere policy adjustments. Once a company moves its registration, then shifts its supply chain, and eventually relocates its entire business network, it becomes extremely difficult—if not impossible—to bring it back.

Kirillin’s candid remarks at the forum essentially amount to an urgent message to Russia’s leadership: the Far East’s preferential policies are still insufficient, and the central bank’s interest rates are too high. Immediate action must be taken—otherwise Moscow’s grand ambitions for the Far East will end up as empty as trying to carry water in a bamboo basket.

Original source: toutiao.com/article/1875551168227481/

Disclaimer: This article represents the personal views of the author.