A Thousand Miles Begins with One Step

“Chinese enterprises engaged in the power industry are the biggest buyers of Sakhalin hydrocarbons. So far in 2011， Chinese companies have purchased 11% of the oil in Sakhalin，” Konstantin Stroganov， the first deputy governor of Sakhalin， said during an interview in Beijing in March. He also mentioned that China is one of the main buyers of Sakhalin fish and seafood， exports to China accounted for one-third of Sakhalin’s total exports.Sakhalin lies on the east coast of Asia. Although bilateral trade and investment has only been established for short time， the total volume of trade has increased rapidly. In 2008， the volume of trade made up only 3%. After one year， bilateral trade doubled to a volume of US$844.9 million. In 2010， that percentage has increased 2.4 times to 8.7% with a volume worth US$1.1286 billion. To promote bilateral trade and investment， the first vice-governor of Sakhalin， Mr. Stroganov led a huge investment delegation to China， covering fields such as finance， natural resources and the economy， as well as delegates from related enterprises. He believes that this conference will be the first step that China and Sakhalin need to strengthen cooperation.The vice-governor mentioned some important projects in particular， for instance， a 100% wholly-owned Chinese coal company named “Eastern Pearl” was established in this area. China Petroleum Chemical Group and the Russian Oil Company explored the oil block. Additionally， in the area of construction， there were many successful examples， such as one Chinese enterprise that was contracted to build highlevel hotel named Plaza in southern Sakhalin. “We are very satisfied with the quality. And this is the best hotel in the capital of our state，” the vice-governor said. Till now， around 63 Chinese companies have invested there.However， the vice-governor feels that development potential for both parties has not developed enough. He gave us some figures: “Till the end of 2010， non-financial departments of Sakhalin have received US$227.6 million through Chinese investment， accounting for 0.08% of the total foreign investment. I think that figure is not enough.” He believes that Chinese enterprises have great potential to invest more.It was reported that th Sakhalin Trade and Investment Promotion Conference provided projects with a total value of US$3.6 billion， including a project for factories producing autoclaved aerated concrete blocks with a total value of US$8 million and a project for constructing wood processing facilities worth US$200 million. He told the reporter that before visiting China， the trade delegation had considered more than 80 projects， then they finally decided on more than 20 projects for Chinese enterprises to choose from. Vice-governor Stroganov added that this time the delegation brought suggested projects. Any specific investment cooperation will need to be further negotiated by both sides.At the end of the interview， the vicegovernor expressed that the investment from China has played an important role in the development of Sakhalin and he hoped that many more Chinese companies would be involved in the cooperative projects. At the same time， he also reminded us that investors should have a knowledge of Sakhalin related laws and regulations to avoid taking any unnecessary risks. The government of Sakhalin has also provided a specific department to help give foreign investors more support.