Source: Valdai Club             Published: 2020-12-09

The tactical tasks of adapting Russia to the new situation are directly related to the current crisis: a “turn to the East” is necessary for the transition from economic recession to growth. In this regard, the most important task is to restore and increase the volume of Russian-Asian trade. However, these tactical issues have little to do with macro trends and their solution will not ensure the long-term and successful involvement of Russia in the new Asia, writes Anastasia Likhacheva, Director of the Centre for Comprehensive European and International Studies (CCEIS) of the Higher School of Economics, who participated in the 11th Valdai Club Asian Conference.

Just as old phone models are sometimes unable to run new software, so Russia’s Turn to the East policy, which has been in place for a decade and achieved a number of successes, must either dramatically increase capacity for the new demands of Asia, or start to “freeze”. The participants of the 3rd session of the 11th Valdai Club Asian Conference spoke about the reserve capacities of Russian politics and new trends in the development of Asia.

East Vol.2.0.2.0

The pandemic and the countries’ response to it have sharply accelerated trends that have been developing exponentially in Asia for several years. Asia’s increasingly inward focus in consumption, lending, institutions, accelerated digitalisation and the growth of intraregional connectivity, is sometimes merely symbolic, such as the signing of an agreement on RCEP, but at other times is quite active, through trade, investment, and person-to-person contacts. The closed borders of other countries and regions have only activated these trends. This is aside from the obvious success of the Asian countries, both in the fight against the pandemic, and in economic development against its background — this ‘victory of the East’ was stressed by all of the participants of the session, without exception.

The new configuration presupposes the ambitious tasks that the region sets for itself today. According to one of the speakers, Anton Tsvetov, Deputy Director of the Department of Multilateral Economic Cooperation and Special Projects of the Ministry of Economic Development of the Russian Federation, the troika can be defined as follows:

1. Digital leadership: At the industry level, this means an increasingly significant superstructure of technology over the resource-intensive economy of Asia and, more rapidly than in the West, over the economy of traditional services. According to Professor Wang Wen, Executive Dean of the Chongyang Institute for Financial Studies at Renmin University of China, humanity will finally move into the digital era by 2025, when 90% of the population will use digital technologies — online shopping, online education, telemedicine etc., but the digital divide between countries is likely to widen; The East is more inclined to introduce fundamentally new systems and approaches. Already more than 40% of online purchases are made in Asia, and by 2030 more than 50% of Internet users will be concentrated there. These are colossal opportunities for the industries of the digital economy.

2. From quantity to quality: Asian countries are faced with the task of transitioning to intensive growth, improving its quality, and the mitigation of existing imbalances (urban versus rural, economic inequality, economy versus environment). The demand for a high-quality digital contactless infrastructure, resistant to emergencies, for green technologies and the development of social environment (healthcare, education) will increase. Against the backdrop of the damage from the pandemic, which the countries of the West have already faced, the East has gained at least a few years for development, while elsewhere, nations are engaged in compensating for their failures.

3. Regionalisation: By 2040, more than half of Asia’s trade and investment will be intraregional. This cannot but lead to profound changes in the global financial system, created after World War II, which does not reflect the role of new leaders.

The locomotive of these changes in Asia has already become China, the first country to face the coronavirus and so far the most dynamic country in the year 2020. This success is already influencing its vision of the future. So, the policy of dual circulation — the priority of domestic production and domestic consumption, will be strengthened: in May, Xi Jinping spoke about the need to gradually create a new development situation, but a month later he already emphasised that the process needs to be accelerated, to which Professor Alexander Lomanov, Deputy Director for Scientific Work at the Primakov Institute of World Economy and International Relations (IMEMO), drew the attention of the session participants.

Nevertheless, the effects of dual circulation are still ambiguous, and diametrically opposed expert opinions were voiced at the session. The first stressed the preservation of openness, which presupposes that the Chinese economy will remain as open as it has been or become even more open, which will presuppose, in particular, the preservation of the philosophy of the Belt and Road project and the strengthening of regional integration with the participation of China. This point of view was supported by the Chinese participants in the session, and official PRC sources share it. The alternate view can be described as sceptical and wary: the doors of the Chinese economy will not be closed, but the priority of domestic production will inevitably lead to a reduction in imports of foreign goods. The latter is important for Russia and Eurasia as a whole, since such a prospect portends the formation of two economic and technological poles, the centre of one will be China. As a result, according to Alexander Lomanov, “Russia will have to think over to which of the two Easts to turn to.”

At the same time, the second-largest economy of the region, Japan, is trying not to remain in the position of a passive observer. Taisuke Abiru, Senior Research Fellow at the Sasakawa Peace Foundation, repeatedly noted in his speech Japan’s desire to balance the strengthening of China in the region, which implies both more active involvement of the United States in Asian affairs (and this approach, of course, separates Russia and Japan), and the search for a third force for those countries that do not want to choose between the United States and China, first of all — the ASEAN countries. Such a request is fully correlated with the role that Russia can play in Asia, and which Japan welcomes.

Turn Vol 2.0.2.0.

The tactical tasks of adapting Russia to the new situation are directly related to the current crisis: a “turn” is necessary for the transition from economic recession to growth. In this regard, the most important task is to restore and increase the volume of Russian-Asian trade, first of all, trade with China. However, these tactical issues have little to do with macro trends and their solution will not ensure the long-term and successful involvement of Russia in the new Asia.

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