Ukraine-China: Seeking Common Interest

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Kyiv and Beijing both remain cautious towards full-scale cooperation despite a number of successful cooperative actions and the increasing trade seen in recent years. Still, some plans seem to be up in the air, or very little information is available on whether or not they are being implemented.

5G’s recent emergence on the radar

As recently as last November, Ukraine’s government ratified the steps it will take to implement a 5G network, with the first tender announced in October of this year, according to CMS Legal, which adds that deployment in the country’s major cities is planned for the beginning of 2021.

However, in perhaps a sign of things to come, in December Ukraine’s Ministry of Foreign Affairs dismantled all of the Huawei equipment being used in the department’s facilities, as reported by the Unian News Agency, in accordance with Washington’s allegations that both Chinese companies, Huawei and ZTE, are a national security threat.

Big plans realized?

The foreign trade volume between the countries is growing rapidly, more than doubling from the USD 6.2 billion figure in 2015 to USD 12.8 billion in 2019. China’s key interest in their relationship are Ukraine’s military-industrial capacities and technologies.

Ukraine had 21 contracts with China worth a total of over USD 67 million within a 5-year space industry development program lasting 2012–2017, which has been extended twice and will run until 2025. Ukraine has also played an essential role in China’s military modernization, contributing to the development of Chinese aircraft and tank engines, naval gas turbines and military transport aircraft. The prospect of the purchase of Ukraine aircraft engine manufacturer Motor Sich by the Chinese and the American reaction elicited by it have sidelined military cooperation between the two sides. Kyiv cannot block the deal on the purchase of the enterprise share by the Chinese but is likely to take a political decision in order to alleviate Washington’s concerns.

Newly emerging cooperation in the field of renewable energy also looks promising: Ukraine is interested in jointly establishing factories to produce equipment and materials for renewable energy facilities, and in creating financing mechanisms for clean energy projects, and, among several renewable projects initiated, sometimes financed by Chinese concerns, a 500 mega-watt wind farm may be in the works on the Azov sea. China CAMC Engineering Co, meanwhile, has recently announced plans to construct a biomass power plant in Vinnytsia, Ukraine.

In the field of agricultural cooperation, the largest volume of investment by China has gone to enterprises in the agriculture, forestry and fishing, industry, wholesale and retail trade, as well as the repair of motor vehicles and motorcycles. China’s COFCO Agri Ukraine (previously known as Noble Agri) owned by China National Cereals, Oils and Foodstuffs Corporation (COFCO), has numerous assets in Ukraine.

Our future take on Chinese FDI in Ukraine

In December 2017, during the Poroshenko presidency, the Ukraine–China Action Plan on implementing the Silk Road Economic Belt and the Maritime Silk Road was signed, but no specific investments were mentioned in the document. While China had assigned USD 7 billion toward the deal, no one knows if any of the commitments have been fulfilled.

Three years later, in December 2020, the two sides met once again with the intention of deepening cooperation in infrastructure, industrial parks, energy, and agriculture, but the Ukrainian side has been cautious, not eager to get involved in China’s trade war with the US.

Despite a number of successful initiatives, both Kyiv and Beijing remain cautious towards full-scale cooperation. Beijing often does not deliver on its promises, which is a typical trend for the region, whereas Ukraine abstains from cooperation in sensitive areas, keeping watch for the American reaction.

Although not an EU member state, it is likely that Kyiv followed the CAI negotiations between the EU and China, and will follow the European lead in its approach.