Russia and China Go for Real Economic Development: Turning Dollar Debts into Assets

30.10.2009 (15:50) | E.I.R.GmbH

China's one-sided importation of technology from Russia has come to an end. Nowadays, it is China's turn to help Russia build high-speed railways.

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The economic agreements signed by China and Russia during Russian Prime Minister Vladimir Putin’s visit Oct. 12-14 potentially hold the key to turning around the economic crisis worldwide, and bolstering the physical value of the dollar. The agreement, featuring Chinese help to construct a national high-speed rail system in Russia, should be decisive in lessening China's current dependency on labor-intensive exports to the West.

As a commentary published in the national Peoples’ Daily on Oct. 16 stated, the Memorandum of Understanding signed by the Chinese Ministry of Railways and the Russian Ministry of Transportation, “signifies that China's one-sided importation of technology from Russia has come to an end. Nowadays, it is China's turn to help Russia build high-speed railways. Besides, China can also import nuclear technology from Russia, while exporting to it the related technology for liquefying high-quality coal at high temperatures.”

China has been building a huge national high-speed rail network since 2005, which should have 13,000 km of track by 2012. Under their cooperative project, which will both reconstruct existing lines in Russia and build new ones dedicated to trains which can run 350 km/hour or more, Russia’s high-speed lines will increase from 650 km to 10,900 km over the next 20 years. The two countries also signed a freight transport agreement Oct. 14, to increase traffic between China and Europe.

The next day, Russian and Chinese enterprises signed an agreement to build a “super shipyard” in Vladivostok, ships, and other maritime infrastructure using the most modern technologies. Eastern Russia lacks modern shipyards, an area in which China has been moving forward, and the project will reduce Russian dependence upon foreign builders.

Other Eurasian rail cooperative projects could also be put back on the agenda. On Oct. 15, Russian Railways head Vladimir Yakunin signed an agreement with Mongolia’s Transport Minister Khaltmaa Battulga, to build a rail line which will make it possible to exploit mineral resources of the South Gobi region, and give landlocked Mongolia access to Chinese, Russian, and North Korean ports.

In India, Prime Minister Manmohan Singh has proposed using China’s massive rail construction, as the benchmark for India to expand and rebuild its own large but dilapidated rail system, the Hindustan Times reported Oct. 17. China has also been requested by Kathmandu, to expand its Tibetan rail line to Nepal.

Lyndon LaRouche commented that by making such productive investments, China is turning the U.S. debts it holds into assets, whereas for the moment they are only secured by the U.S. Treasury, which will never pay them. But when the government of China takes the U.S. bonds, and uses them as credit for large-scale railway and related agreements with Russia, and other countries, "implicitly, suddenly, that money is actually invested in something which has worth..., you have made it a negotiable asset." It acquires intrinsic worth through the physical assets being created.

In addition, projects such as high-speed rail increase the productive powers of labor, and could open the entire region of North Asia, which is the raw materials storehouse. This is true wealth, LaRouche stressed, "when you are increasing, day by day, the productive powers of labor, in an entire nation or group of nations", as opposed to someone "who comes along with some scheme to make a million dollars this way, a billion dollars that way."

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