The second half of the match between the Russian and Chinese economies is coming to an end. China is well ahead. All that Russia can do at this point is score few goals so the defeat is not so disgraceful. These were the thoughts that came to my mind after visiting a conference RBC held in Shanghai and Beijing on November 5-10.

Businessmen are quite skeptical nowadays about the competitive value of Russian goods. While before it was considered that Russia topped China in terms of quality and technologies, this illusion has been done away with completely by now. As sad as it may be to admit it, for the most part the Chinese now have better technology and quality.

Foreign trade statistics speak about it most eloquently. In just a few years, the share of Russia's automotive and equipment exports to China has shrunk from over 20 to 2 percent. And now China has already begun supplying these high-technology products to Russia. The share of vehicles and equipment in Chinese imports has reached 20 percent.

Leonid Kazinets, President of construction corporation Barkli, predicts that it will be Chinese and Turkish companies that will compete in construction tenders, in which Turkey will be more likely to lose to China. According to him, the Chinese priced a construction project in Novokuznetsk at $450 per square meter, whereas Russian builders would not budge at any lower than $650-700. An outrageous fact also became known recently: the Chinese exported cement and reinforcing bars from their homeland, while cheaper electricity is supposed to make it possible for Russia to produce the most competitively-priced cement on its own soil. However, due to its monopolism and corruption, Russia is unable to benefit from such a huge advantage as the affordability of energy and raw materials in the development of its many industries.

Yevgeny Kolesov, a consultant from Guangzhou, told Amtel-Vredestein CEO Alexei Gurin that over the past few weeks, two Chinese companies had declared their intentions for a full-fledged advent onto the Russian tire market. This made Alexei Gurin ponderous, because the Chinese are known for their ability for flagrant dumping. A similar process is happening on the chemicals market. For example, Bashkirskaya Khimia General Director Sergei Chernikov has called on the government to be more active in using such a tool as anti-dumping investigations regarding the Chinese.

What are the alternatives then? Legislative initiatives fund president Grigory Tomchin suggests that Russia should take a strategic position of a transport corridor between Chinese manufacturers and European consumers. According to his calculations, if the speed at which container shipments move across the country is increased by 30 kilometers per hour, which is severalfold, "the Suez Canal will not be able to compete with us." Grigory Tomchin asked Deputy Prime Minister Alexander Zhukov when this would be possible, and was told that it would only happen in a couple of years. The Deputy Prime Minister also pointed out that already the trans-Siberian and the Baikal-Amur railways could transport millions of containers. By this, he meant, in essence, please do ship containers, there is nothing standing in the way. Alexander Zhukov must not have heard the heartrending story about a large Korean company, which had agreed to ship through Russia, but faced such problems with the customs authorities that next time, it would rather ship to Europe via Australia or someplace else, only to avoid Russian risks. Officials are saying very little if anything at all about possible political guarantees for normal operations of the transit corridor. The corridor will not be able to operate unless such guarantees and clear rules are provided.

Still, Alexander Zhukov hopes to raise the high technology share of Russia's supplies to China with the help of thermal and hydropower engineering industries, the construction of nuclear plants and sales of Tu-204 aircraft, as well as exports of bio- and nano-technologies. To secure such contracts, it is important that the Russian government does not completely betray the interests of other Russian manufacturers. The Chinese can boast cheap labor force and the lack of officials that keep draining money from businesses.