Ukraine has won a decisive battle for the Chinese market in December 2014. Ships fully loaded with our corn took the course to China, and the contract was completed with all the necessary support from the Ukrainian government.
This shows Ukraine can win the competition with China and Russia for the China market.
Today, the international environment on the Chinese-Asian vector is beneficial for us.
China, as the largest growing market worldwide, expands the sources of supply and the geography of suppliers. The country strives to reduce the vulnerability of its own economy from the geopolitical factors.First of all ,it tries to balance the longstanding impact of the U.S.
The economical cool-down between China and Russia plays in favor of Ukraine. In the first half of 2015, the trade turnover between China and Russia to $30.6 billion.
This contradicts Russian President Vladimir Putin’s instruction,as of October2014, to increase it to $100 billion. For the first time in five years, Russia dropped out of the 15 major foreign trade partners with China. In three weeks, China’s stock market has lost about a third of the capitalization,over $3 trillion.
The tremendous drop in the Chinese stock market releases huge amounts of money. Because of the collapse,the capital flows out of the shares. Now they have no place in the market. The only thing that this capital can be done – to get into foreign currency, or to take out of China.
According to analysts from Reuters, the crisis in Russia and the slowdown of economic development in China led to the suspension of bilateral projects worth $113 billion.
Ukraine has an opportunity to win the competition and to use new opportunities. For example, in the 2014/15 marketing year, Ukrainian companies monopolized the whole export of corn to China – more than four million tons. Five years ago, the U.S. was home for 97 percent of corn imported to China. Today the same index belongs to Ukraine.
The Ministry of Agrarian Policy and Food of Ukraine is opening the Chinese market for hundreds of Ukrainian companies.
Ukraine showed efficiency in the competitive struggle, while traditionally the main competitors on the Chinese and Asian markets are the U.S., the European countries, Australia, Argentina, Brazil, New Zealand etc. The experts see other market niches which can be used for the benefit of Ukraine’s economy. Currently we use the export potential to China by less than 10 percent. Thus, we possess great resources for development. Іn these conditions, the current agricultural penetration would become the Ukrainian agrarian expansion.
This applies not only to the grain and oil-seeds segment,where Ukraine has a leadership position.
Our goal is to promote the production of our food processing industry to Chinese supermarket shelves.The Chinese market is very competitive and comprehensive. It can easily absorb a considerable part of our production,even in the highest possible volumes.
The Ministry of Agrarian Policy and Food of Ukraine has removed all the corruption restrictions to access the Chinese market in 2015.
This creates a chance for hundreds and, in the future, for thousands of our manufacturers, exporters, logistics companies to join the largest global market.This will result in new jobs in Ukraine, taxes, and foreign exchange earnings.
Within the last year,more than 20 companies ranging from tycoons to ambitious newcomers have obtained permission for export to China. Two years ago only two or three, and last year only five companies, were present in Chinese market. The corruption chain was broken. More companies have a possibility to compete there. Of course, this process should continue.
China is ready to buy our sugar, wine, flour, chicken, pork and confectionary products.
The economic statistics shows the development of Ukrainian-Chinese agrarian cooperation. The agrarian export to China amounted to $484 million in 2013. In 2014, it was $765 million. And just in the first half of 2015, it reached $780 million. Thus, in six months, it exceeded two times the volumes of the previous year.
The main reason for the growth was the record export of grain. For the first half of 2015, it was shipped to China in eight times bigger volume than in the previous year – up to 2.74 million tons, for instance, 2.7 million tons of corn. For the same period, the export of sunflower oil grew to 330,000 tons.
Currently,China uses only Ukrainian sunflower oil. It is noteworthy that the export of vegetable oil included also soybean and rapeseed oil (32.4 and 14.1 thousand tons, accordingly).
These promising markets will continue to grow. The Ukrainian producers will be able to access the Chinese food markets and, probably, in partnership with local manufacturers, they will gain access to the end user.
The Chinese market is very specific and complicated. It is featured by a strong government regulation and the influence of state companies.
I know from my personal experience of work at the grain market with Chinese corporations how it is important that the Ukrainian government and the Ministry of Agrarian Policy and Food of Ukraine hold an active position in promoting Ukrainian products there.
Today,we have reached a real result of the trade diplomacy of the ministry.
The Chinese side stressed the absence of additional requirements to Ukrainian sugar, wine, flour, and confectionary products.
This market is very important for our chicken,pork and dairy products.We can ensure export of these items and of other production with a high-added value.
Ukraine produces components for Chinese feedstuffs
The Chinese market is dependent on import and the consumption dynamics significantly outpaces the production growth. It’s also marked by urbanization of traditional agrarian territories, increase of quality and quantity of food, for instance of meat, the transition to industrial production and increase the import of the feed group of commodities.
China has already become the world’s biggest manufacturer of pork. The Chinese nation annually consumes 39 kilos of meat per person, or one and a half times more than in Ukraine (25 kilograms a year).
On this scale, China’s increased consumption of meat just by 1 percent causes a tectonic market shift and these gaps should be filled by Ukrainian producers. The livestock of a half billion pigs needs a huge amount of feed. Its components include soybean, sunflower meal, barley and corn. Our task is to ensure that these components are of Ukrainian origin.
Overall,the Chinese market is a chance to revive the Ukrainian agrarian sector.
It will open for the long haul.
China is the world’s second economy but it falls significantly behind the world’s agricultural leaders.
First of all, it is lagging both organizationally and technologically, due to state ownership of farmland and the lack of mortgage arrangements in the country.
The analysts of Deutsche Bank conclude that farmers from South Korea are 40 times more productive than their ambitious neighbors.
And the Chinese are unlikely to overcome this technological gap soon.
Therefore, Ukraine has time and opportunities to ensure strategic agrarian expansion on the Chinese market in the conditions of the loss of the ex-Soviet republics’ markets, the fall in the domestic consumption and the mismatch with the European Union standards.
The Chinese say: where the water flows, there will be a stream. I believe that this stream will become a deep river.
Ivan Miroshnichenko, a member of parliament from the Samopomich Party, is on the Verkhovna Rada’s Committee on Agricultural Policy.
