Belt and Road and Northern China: Heihe, Thriving on the China-Russia Border

Heihe, Heilongjiang’s most northwestern city bordering Russia, is set to play a major role in the development of cross-border e-commerce in China’s northernmost free trade zone, while also seen as likely to prove crucial in moves to boost cross-border infrastructure connectivity.

The city of Heihe in northwest Heilongjiang province lies on the Chinese border with Russia. Across from the city, on the other side of the Heilong Jiang (or Amur River), is Blagovéshchensk, the third largest city in the Russian Far East and capital of the Amur Oblast region. The two cities are called the “Twin Cities of China and Russia”. In 1992, Heihe was included among the first set of border ports in China’s “opening up” programme. In 2019, after nearly three decades of development, Heihe became the northernmost free trade zone in China with the inauguration of the China (Heilongjiang) Pilot Free Trade Zone (FTZ).

Cross-Border E-Commerce Hub

As its external trade expands, Heihe is actively assembling a cross-border e-commerce platform to accelerate the growth of its import/export business and industrial sector. In 2015, the city began building a cross-border e-commerce park. Two years later, this became one of the first provincial e-commerce demonstration zones in Heilongjiang. The aim of the park is to set up a number of cross-border e-commerce platforms and support a sizeable e-commerce import/export sector. Its activities have been extended across the border, with the setting up of an incubator and offshore warehouse in Blagovéshchensk. In the first half of 2019, transaction volume at the Heihe cross-border e-commerce park topped Rmb570 million, and comprised 60% of Heihe’s total e-commerce transactions.

In recent years, Russian enterprises have devoted great efforts towards venturing into the mainland Chinese market. Some Russian products, such as flour, foodstuffs and oil, health products and snacks, are particularly popular among consumers in Heilongjiang. Epinduo is an e-commerce trader operating in the Heihe cross-border e-commerce industrial park. The company deals in a wide range of imported Russian products, buying its merchandise in bulk through its overseas sourcing centres in major Russian cities like Moscow, Yekaterinburg and Ulyanovsk. For the benefit of Chinese consumers, QR code tracking tags with product information in Chinese are attached to these products. Epinduo intends to set up an operation base in Harbin to open direct sale and franchise stores, integrating the online and offline sales models to offer Russian goods to different parts of the country.

Despite this, carrying out bonded processing in Heihe is still an attractive option for some sectors - in particular those whose products are subject to national import quotas, such as foodstuffs. One example of this is flour. Russian flour is popular with Heilongjiang consumers, but imports of it are limited by quotas. However, companies can process flour in the comprehensive bonded zone into downstream products like bread and noodles. In this way, they can get round the import quota system, using raw materials imported from Russia and selling the finished products in the mainland market.

Cross-Border Infrastructure Connectivity

The Heihe port is the nearest Chinese port to the Russian border. As Heihe lies across the Amur River from Blagovéshchensk, river transport is the main way of carrying passengers and freight between the two cities. The two cities’ passenger terminals are only 650 metres apart, with the ferry journey taking a mere 10 minutes. Freight transport is also relatively straightforward, the distance between the two cities’ cargo terminals being just 3,500 metres. After goods are loaded onto trucks in Blagovéshchensk, the trucks are ferried across the river to Heihe. The goods are then transferred to Chinese trucks for delivery to different mainland destinations. Goods transported between the two sides through this channel include imports of soybean and wheat from Russia and exports of Chinese fruits and vegetables to Russia.

Heihe port’s transportation capacity is, however, somewhat constrained by seasonal factors. As Heihe’s winter is very cold and the spring and autumn seasons fall into a “drift ice period”, river transport is only available for 240 days in a year. To counter this disadvantage, Heihe and Blagovéshchensk started constructing pontoon bridges in 2012 to enable trucks and passenger vehicles to cross the river and customs to operate for a longer period during the “drift ice period”. Since the construction of these bridges, the port’s capacity has reportedly risen by 30%.