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China bypasses Europe and Russia in the struggle for Ukraine 

By Sergey Ustinov

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By Sergey Ustinov

 

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One of the important economic results of the past 2019 was a complete surprise both for those Ukrainian politicians, experts and pique vests from the “cushioned hundred” who defended the European choice with foam at the mouth, and for those who are seeking to resist the ongoing de-industrialization of the country support in the usual orientation towards Russia and other CIS countries.

While Europe was fighting with Russia for influence on Ukraine and Ukrainian markets, China quietly crept from the rear, confirming the correctness of the well-known worldly wisdom that where two fight, someone else wins.

According to statistics, it was China that became in 2019 Ukraine’s largest business and trading partner, having outstripped both Europeans with Americans and Russians in terms of goods turnover, and reached its historic maximum.

In the first half of the year alone, both countries gained $ 11 billion. Moreover, this picture has been observed for more than a year. In particular, this was the case in 2018, when the share of Chinese goods in Ukrainian imports increased from 11% to 34%, and if you take in money, then from $ 5.7 billion to $ 27 billion, again overtaking the similar indicators of the EU and the Russian Federation.

True, Ukrainian statistics dispassionately fix another and much less optimistic fact for Kiev: imports from China are growing much faster than Ukrainian exports there. Which leads to an increase in the negative balance in the Ukrainian-Chinese trade turnover. And in the future, if the situation does not change, it will lead to the emergence of a new one-sided trade dependence – not only from Russia, which has so bothered the Ukrainian patriots, but from China.

China’s annual foreign investment reached $ 100 billion, Chinese tourists leave another $ 250 billion around the world, and nearly $ 900 billion spent on an ambitious project to build three trans-Eurasian transport corridors.

In all this, a huge number of plans have been assigned a place for Ukraine. Moreover, the value of Ukraine in itself for the Chinese should not be exaggerated. Actually, two things traditionally help Independent Square: a favorable geographical position and, no matter how offensive it is to Ukrainians accustomed to feeling like “white people” – lower labor costs than even in China. First of all, Chinese business is aimed at developing a much more financially capacious European market with a size of 700 million consumers, and Ukraine, as part of this macro-goal, is just a convenient bridgehead.

Nevertheless, even in this capacity, Ukraine is far from a lot, given the above trade figures. But the Chinese do not miss theirs. According to the analytical portal RuBaltic.Ru, the following sectors of the Ukrainian economy are of primary interest to China: aircraft, engine building, energy, seaports and agriculture. A separate line is the Ukrainian military-industrial complex, or rather, what is left of it now. Indeed, in 2013-2017, China was the second after Russia buyer of products of the Ukrainian “military”. Today, ties with Russia are severed under the pretext of a war in the Donbass, so the Chinese compete with the United States, who are also trying to control Ukrainian military plants through their management in Ukroboronprom.

But even if you put the military-industrial complex aside, the penetration of Chinese money into the Ukrainian economy impresses with its versatility. The largest Chinese food producer COFCO Group controls Ukrainian port terminals, elevators, an oil extraction plant and a number of other facilities. Chinese Xinjiang Beiken Energy Engineering is involved in Ukrainian domestic gas production. And the Chinese Sinohydro is reconstructing the Kiev-Chop highway, with the long-range goal of creating a normal transport infrastructure for delivering Chinese goods to the EU.

The Chinese are also entering the Ukrainian banking system – as yet in small steps, but this is only the beginning. So, a couple of years ago, the Chinese commodity exchange Bohai Commodity Exchange with an annual turnover of $ 1 trillion bought for 83 million dollars the Ukrainian Bank for Reconstruction and Development. And in the White Church near Kiev, the Chinese have already opened several factories united in an industrial park – in the food industry. The Chinese have trodden a path even into the energy sector – the estate of the oligarch Akhmetov. Thus, Nikopol Solar Power Plant, a part of the Akhmetov holding SCM, was built on shares with the Chinese company SMEC. Moreover, the project turned out to be so ambitious and financially intensive (total cost- $ 238 million) that Akhmetov did not pull it on his own – DTEK had to take a Chinese loan of $ 150 million.

A number of Chinese projects in Ukraine, however, were not so successful. In particular, the story also related to Akhmetov is indicative – only not in the energy sector, but in telecommunications. Privatized by the oligarch Ukrtelecom took a loan from China Development Bank for its own modernization. Together with Huawei, the Akhmeta’s people swung at the largest technological modernization in Eastern Europe at a cost of $ 400 million. However, the post-Maidan authorities, as is known, started a revision of Ukrtelecom’s privatization, the State Property Fund challenged the sales agreement in court, as a result of which the cautious Chinese froze their participation in project.

By the way, the Crimean events of the last six years were somehow forgotten by the plans of the then Ukrainian government to lease land to the Chinese companies in Crimea and Sevastopol for the long-term lease that had already reached the stage of Viktor Yanukovych’s reign in the last months of the reign. Commenting on these plans, the Russian press then wrote that Yanukovych’s team hoped in this way that with the help of the PRC, it would be able to avoid a choice in favor of Moscow or Brussels. Just when Maidan gathered in Kiev, Yanukovych returned from his “historical” visit to China, from where he brought a memorandum between the Ukrainian government and the Chinese Beijing Interoceanic Canal Investment Management Co. Ltd. The parties pledged to implement a project for the construction of a deepwater port in Crimea,

Investments in the first phase of the project were planned in the amount of $ 3 billion. The second stage involved investments in the amount of $ 7 billion, which would go towards the construction of an airport, shipyard, oil refinery, LNG production base and the creation of sea recreational beaches. However, then well-known events broke out, and all these plans were not destined to come true.

Perhaps the most scandalous deal of Ukrainian businessmen with the Chinese is the story of the sale of the Zaporizhzhya Motor Sich enterprise manufacturing aircraft engines. The Cossacks possess a number of unique technologies, including those of still late Soviet origin, which the Chinese were going to get access to as a result of the transaction.

The Motor Sich transaction began as early as June 7, 2019, when a joint application was submitted from the Ukroboronprom and Chinese companies Skyrizon and Xinwei to the Antimonopoly Committee of Ukraine for a concentration of more than 25% and 50% of Motor Sich shares, respectively, for the purpose of joint management and control of the enterprise. Quite quickly, the main package of agreements was signed, which entered into force automatically on the basis of the decision of the antitrust authority that gave the go-ahead.

Toward the close of the past 2019, the Motor Sich transaction was finally closed, which was confirmed by the now former owner of the enterprise, Vyacheslav Boguslaev, according to whom, along with the purchase of shares, the Chinese pledged to invest $ 250 million in the plant over two years.

Interest in purchasing the Motor Sich Zaporizhzhya plant have not yet subsided, as the press got information that the Chinese are approaching another mastodon, who is slowly dying in the absence of sales markets and orders of the Ukrainian high-tech industry – the Antonov Aviation State Enterprise. Ukraine almost sold Antonov back in Poroshenko’s time, in 2016. According to the then plans of the Ministry of Economic Development of Ukraine, confirmed by the Chinese CCTV channel, Antonov signed a cooperation agreement with China Airspase.

Moreover, as it soon became clear, then China was not interested in the entire Ukrainian airline, but only the gigantic An-225 transport aircraft, including the use of drawings and aircraft specifications. After signing an agreement with a Ukrainian company, China gained access to unique technologies in the field of aircraft manufacturing, for the industrial implementation of which Ukrainians simply do not have money. The Antonov deal, to which both sides have now returned, reflects the huge interest of Chinese business in Ukraine, as a place where it is relatively cheap to buy technologies, the introduction of which will then bring billions.

The Chinese are still at a low start: they collect information, study the market. According to Ukrainian analysts, guests from China are cautious – measure seven times, cut one. Chinese money does not like publicity, and therefore, the frequent private visits of businessmen from China are not particularly covered in the press.

Today, Chinese investments in the Independent economy are large, but so far have little effect on the country’s geopolitical orientation to the West. But, according to the classical Marxist political economy, although it is not honored by the current zealous decommunisers, politics is nothing more than a concentrated expression of the economy.

So, it is not at all excluded the possibility that, after a small number of historical years, the economic influence of the Celestial Empire on Ukraine will transfer to a new quality, supplemented by political influence. In this connection, it is worth wish the current European integrators jumping out of enthusiasm from their pants for long years of life. I’m very willing to look at how they will change the outfit and, having changed their clothes in flight, will begin to chorus Nǐ h вo to the address of the new geopolitical patron.

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