China's Economic Turmoil Ruins Russia's New Year
The price of crude, the linchpin of Russia’s economy, fell almost 20 percent in the first two weeks of January to just above $30 per barrel after Chinese stock indexes tumbled more than 10 percent in the first days of the year.
While the oil price falls threatened to derail hopes for an economic recovery in Russia, the turmoil on the stock markets deepened fears that Chinese economic growth, which has powered commodity prices and the global economy, could decline faster than expected. This may have serious consequences for Moscow — keeping the price of commodities lower for longer and weakening a strategic trade partner. “For Russia, this is very unpleasant news,” said Yevgeny Nadorshin, chief economist at AFK Sistema, a major Russian conglomerate.
In the longer term, worries over Chinese growth also strike Russian interests in a deeper way, knocking confidence in China as a financial ally for Moscow. Following a breakdown in relations with the West following Russia’s annexation of Crimea in 2014 — and more recently with Turkey over the shooting down of a Russian warplane on the Turkish-Syrian border — Moscow has looked to build relations with dynamic emerging markets, particularly with China.
Hopes of a flood of Chinese capital into Russia failed to materialize following the Ukraine crisis, but the longer-term aim of hitching Russia to east-Asian growth remained. That decision now looks increasingly flawed, said Neil Shearing, chief emerging markets economist at Capital Economics. Russia’s “pivot” to the east and hope that developing nations would become the engine of global growth have been undermined by recent events, he said.
http://www.themoscowtimes.com/business/article/chinas-economic-turmoil-ruins-russias-new-year/555714.html
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