Russian-Chinese trade and economic co-operation is steadily on the rise. The rapid development of bilateral economic ties and exchanges recorded over the past several years is based on a firm foundation of strategic partnership and co-operative relations in the political area and on steady economic growth in Russia and China.

According to China's customs statistics, bilateral trade between the two countries grew by 37.8 per cent to US$17.74 billion in January-August 2005.

Bearing in mind the trend towards growing trade, it is reasonable to anticipate that trade turnover could top the level of US$27 billion by the end of the year.

At the same time, it is necessary to take into account that favourable prices for the commodities that Russia traditionally exports to China, primarily oil and oil products, timber, ferrous metal products, and chemical products, contribute significantly to the maintenance of a high growth rate of trade between the two countries.

In these commodity categories, the volume of exports in terms of their value have exceeded their exports in terms of physical volume.

For instance, while crude exports increased in physical volume by 15.3 per cent, they grew in terms of value by 64.9 per cent. Exports of fertilizers grew by 11.7 per cent and 46.6 per cent, and metal ores by 39.4 per cent and 74.3 per cent respectively.

Unfortunately, the last several years have seen a trend towards a decline in Russian machinery exports to the Chinese market and their share in the Russian export structure is shrinking.

In particular, this figure dropped from 28.7 per cent in 2001 to 4.8 per cent in 2004. This year, exports of Russian machinery and equipment to China have continued to decline.

The most promising seems to be supplies of power equipment for expanding and modernizing a number of thermal power plants in China and continued co-operation in constructing nuclear power plants.

As for new trends in the development of economic relations between our countries, what should be listed first of all among them is signs of more active investment co-operation. Russian-Chinese investment forums that were successfully held in Khabarovsk and St. Petersburg in 2004-2005 have laid the foundation of bilateral co- operation in this area. A set of major joint projects worth about US$2 billion has been planned.

Taking into account these circumstances, and provided that both countries preserve high economic growth rates and that the situation in the world economy and trade remains stable, the goal of increasing the level of bilateral trade to US$60 billion-80 billion by 2010, set by our leaders, is quite achievable, however ambitious it may seem.

At the same time, even given the factors promoting the further expansion of mutual trade, one should bear in mind that increasing bilateral trade to US$60 billion-80 billion will call for the mobilization of all available reserves to intensify trade and economic co-operation between the two countries.

Among these reserves might be the following:

The improvement of the commodity structure by increasing the share of goods with a higher level of added value, primarily machinery and equipment and other high-tech products.

The implementation of several major projects in a number of traditional areas of Russian-Chinese co-operation, such as nuclear energy, the construction of thermal and hydropower plants and civil aircraft construction.

The development of investment co-operation in the processing industry sectors.

The expansion of the product mix in mutual trade by including new commodity groups.

More active development of trade in services.

The optimization of trade in such traditional commodities as timber, fish and other seafood and the prevention of the smuggling and illegal harvesting of these resources.

The practical implementation of joint projects in the extraction and transportation of hydrocarbons.

The further intensification of border and regional links. Co- ordination of socio-economic development programmes for northeastern China and Russia's Eastern Siberia and the Far East.

The intensification of multilateral co-operation, chiefly in the format of the Shanghai Co-operation Organization.

It is natural that the development of co-operation in these areas will call for the development of co-ordinated measures.

To this end, Russian and Chinese experts have drawn up a midterm programme for the development of trade and economic co-operation for 2006-2010, the key provisions of which, I hope, should become a kind of roadmap in developing specific measures to encourage further progress in mutually-advantageous trade and economic co-operation.