China, Russia Propose Vast Eurasian Free Trade Zone & SCO Development Bank

Trade & Policy

China, Russia Propose Vast Eurasian Free Trade Zone & SCO Development Bank

Both China and Russia have proposed to establish a free trade area between members of the Chinese and Russian-led Shanghai Cooperation Organization (SCO). Such a free trade area would facilitate regional economic cooperation and would enhance trade and economic cooperation between SCO members.

The proposal also called for the expedited establishment of an SCO development bank, which would provide funding for regional projects together with other multilateral funds and development banks.

The SCO includes China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, with India, Iran and Pakistan poised to join. Dialogue partners include Armenia, Azerbaijan, Cambodia and Nepal, along with the existing dialogue partners of Sri Lanka and Turkey. In addition to these countries, Afghanistan, Belarus, Iran and Mongolia are observer nations, while guests include the trade blocs of ASEAN, the CIS and Turkmenistan.

The proposal therefore raises the potential of a Free Trade Zone with significant countries such as China, India, Iran, Pakistan and Russia, and possibly at a later stage, Turkey.

Beijing has suggested that SCO members "should build an economic think tank alliance to offer long-term intelligence support for regional economic cooperation."

This initiative is also supported by Russia, with President Vladimir Putin being quoted in the Russian Sputnik News Agency that Moscow has proposed integrating the Silk Road concept (One Road, One Belt initiative), the Eurasian Economic Union, the SCO and ASEAN into a "Big Eurasian Partnership", subsuming most of the trade blocs in Asia and Europe.

The proposals for a Shanghai Co-Operation Organisation Free Trade Zone or even a Big Eurasian Partnership are game-changers.

Although details have yet to fully emerge, the fact that the highest authorities in both Beijing and Moscow have suggested this means it will almost certainly take place in some form. An FTA that involves China and India, let alone Russia, Pakistan and others is going to be of huge significance. It also absolutely determines where the bulk of China's Overseas Direct Investment is going to be heading - to Eurasia.