The Kremlin is moving toward a Chinese-style model of "directed capitalism," where the state controls key sectors while letting the market run loose in the rest of the economy, HSBC said in a report presented Thursday.
Yet the vastly different structures of the two economies, as well as Russia's failure to enforce its own laws, means that Moscow might be making a mistake by mimicking Beijing, the bank said.
Recent attempts by the Kremlin to consolidate control over strategic sectors and to direct investor decisions are reminiscent of Beijing's policy of occupying the commanding heights of the Chinese economy, said Philip Poole, head of emerging markets research at HSBC in London and the author of the report. "The market [in China] is tasked to allocate resources lower down the food chain," he said at a presentation.
Recent evidence for HSBC's thesis includes the merger of Gazprom and Rosneft; Rosneft's acquisition of Yukos' key production unit; and the government's veto of Siemens' bid for Siloviye Mashiny, or Power Machines.
Under the Chinese model, "certain key areas are controlled, and these are the areas the [Russian] government wants to control, too," said Poole.
In his state of the nation address Monday, President Vladimir Putin mentioned infrastructure, defense suppliers, and "strategic" natural resources as areas requiring government control.
But Poole warned that in China, growth relied on areas not controlled by the state -- especially light industry, which is dependent to a large extent on exports and foreign direct investment.
In Russia, however, the Kremlin is seeking to control profitable sectors, such as oil, which have accounted for most of FDI and have been doing well without state interference, said Poole.
Moreover, Beijing has been able to convince foreign investors that its commitments are credible because it keeps its promises and enforces property rights better than Russia, Poole said.
In other words, the Chinese government's control over some sectors tends to be less unpredictable and more efficient than it has been in Russia, he said.
Poole's thesis met mixed reviews.
Yevgeny Nadorshin, an economist at Trust investment bank, said the scale of the control exercised by Beijing was incomparable to what Moscow was trying to finagle for itself. "The government in China occupies all the most important industries, keeps its eye on all the key corporations," Nadorshin said. The Kremlin, on the other hand, "would like to control only the best industries in terms of cash flows, and the only two sectors generating important cash flows are oil and gas."
Even in those sectors, Moscow has a long way to go to reach the level of control in China. "So far the economic policy of the [Russian] government has been far more liberal" than in China, said Vladimir Mau, head of the state Academy of the National Economy.
Mau noted that most of the oil and gas sector remains in private hands and that the government continues to sell off state assets. "Sure, there are political forces that are pushing towards a more planned economic model; but that happens in any society," he said.
Yet the vastly different structures of the two economies, as well as Russia's failure to enforce its own laws, means that Moscow might be making a mistake by mimicking Beijing, the bank said.
Recent attempts by the Kremlin to consolidate control over strategic sectors and to direct investor decisions are reminiscent of Beijing's policy of occupying the commanding heights of the Chinese economy, said Philip Poole, head of emerging markets research at HSBC in London and the author of the report. "The market [in China] is tasked to allocate resources lower down the food chain," he said at a presentation.
Recent evidence for HSBC's thesis includes the merger of Gazprom and Rosneft; Rosneft's acquisition of Yukos' key production unit; and the government's veto of Siemens' bid for Siloviye Mashiny, or Power Machines.
Under the Chinese model, "certain key areas are controlled, and these are the areas the [Russian] government wants to control, too," said Poole.
In his state of the nation address Monday, President Vladimir Putin mentioned infrastructure, defense suppliers, and "strategic" natural resources as areas requiring government control.
But Poole warned that in China, growth relied on areas not controlled by the state -- especially light industry, which is dependent to a large extent on exports and foreign direct investment.
In Russia, however, the Kremlin is seeking to control profitable sectors, such as oil, which have accounted for most of FDI and have been doing well without state interference, said Poole.
Moreover, Beijing has been able to convince foreign investors that its commitments are credible because it keeps its promises and enforces property rights better than Russia, Poole said.
In other words, the Chinese government's control over some sectors tends to be less unpredictable and more efficient than it has been in Russia, he said.
Poole's thesis met mixed reviews.
Yevgeny Nadorshin, an economist at Trust investment bank, said the scale of the control exercised by Beijing was incomparable to what Moscow was trying to finagle for itself. "The government in China occupies all the most important industries, keeps its eye on all the key corporations," Nadorshin said. The Kremlin, on the other hand, "would like to control only the best industries in terms of cash flows, and the only two sectors generating important cash flows are oil and gas."
Even in those sectors, Moscow has a long way to go to reach the level of control in China. "So far the economic policy of the [Russian] government has been far more liberal" than in China, said Vladimir Mau, head of the state Academy of the National Economy.
Mau noted that most of the oil and gas sector remains in private hands and that the government continues to sell off state assets. "Sure, there are political forces that are pushing towards a more planned economic model; but that happens in any society," he said.