China is not ready to take risks from concluding economic agreements with Ukraine, resorts only to tactical investments and does not undertake to develop its projects in Ukraine without creating special comfortable conditions for them. These conclusions were reached on September 24, in Kiev, by the authors of the study “China’s economic footprint in Ukraine”, conducted by the Center for Economic Strategy (CES) with the support of the Center for International Private Enterprise (CIPE).
China, as a growing superpower, affects all economies of the world, but “Ukraine did not fall into its orbit, as it happened with some other Eastern European countries,” the published study notes. Although over the past seven years, China has increased a significant volume of trade with Ukraine, acquired relatively large assets in the energy and agriculture sectors, and also tried to acquire an aircraft engine company.
The greatest risks are non-transparency and government interference
As follows from the text of the study, China exports to Ukraine the lion’s share of high-tech goods, and imports mainly industrial and food raw materials. At the same time, the level of direct Chinese investments in the Ukrainian economy at the beginning of 2021 remained insignificant and amounted to only 107 million dollars. Many projects and deals were never implemented, probably due to the requirements for the provision of special conditions to the Chinese side. For example, benefits bypassing public procurement legislation.
But the biggest challenge for Ukraine’s economic relations with China remains the preference for political expediency over economic benefits, said Erik Hontz, CIPE Deputy Regional Director for Europe and Eurasia. He recalled that countries with greater transparency in decision-making and powerful democracies build their economies better. “Despite the sympathy of some Ukrainian politicians for the Belarusian model, which some people find attractive, Ukrainians believe in free enterprise. And they see that excessive government interference is a threat to economic growth,” summed up Khontz.
Benefits of Rapprochement with China
Official Beijing’s support for Chinese business appeals to the Ukrainian government, and the interest of Chinese companies to take part in projects aimed at European integration of Ukraine is in line with Ukrainian national interests. This was stated by Taras Golub, staff adviser to the Deputy Prime Minister for European and Euro-Atlantic Integration of Ukraine. “To consider Ukraine as a separate market, China as a geopolitical player is not very interested. It is interesting for him to look at Ukraine as a part of the European space, so over the past year and a half we have revised the priorities of economic cooperation with China,” Golub said.
He recalled the telephone conversations between the leaders of the two states earlier this year, and the mutual invitations of the top officials to visit both countries. However, the government visit of the Ukrainian delegation to China due to the strict quarantine measures introduced by Beijing is not expected until next summer. Accordingly, the official visit of President Volodymyr Zelenskyy, which should become an impetus for the development of Ukrainian-Chinese economic cooperation, is expected no earlier than the end of the 22nd-beginning of 2023, Golub said.
In turn, Advisor to the EU Delegation in Ukraine and former Deputy Minister of Infrastructure for European Integration Viktor Dovgan said that cooperation with China could be useful if we take into account the experience of overcoming corruption risks in transactions with Chinese investors in previous years. “In 2016, as the Deputy Minister of Infrastructure, together with my team, I had to rake the loans that the Yanukovych government gained in 2012-13. Non-transparent and at commercial interest rates,” Dovgan said.
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