In China, there is a phrase companies use when they are scouring the globe to find the location for their next investment: “country shopping.”
Alexander Borodkin, of the Kyiv-based law firm Vasil Kisil and Partners, remembers the term well from his visit in July to Shanghai and Beijing.
As a partner responsible for attracting new Chinese clients, he traveled to cities to tell the Chinese about investment opportunities in Ukraine. But before he could talk business, be it with private entrepreneurs or officials from state corporations, there were always other issues to get out of the way first.
“Business is always the third question,” he told the Kyiv Post. “The first two are ’where is Ukraine?’ and ‘what’s happening there in the Donbas?’”
Such concerns are by no means limited to the Chinese, with Ukraine having to work to convince outsiders that, in spite of Russia waging war on its territory, it is still open for business.
But if there ever was a time to make a special effort with China it might be now, given the country’s positions as both the world’s second largest economy and the third largest investor abroad after Japan and the United States, according to the latest United Nations figures.
The Chinese government in 1999 adopted its “Going Out” policy, encouraging firms to move beyond their own country’s borders and expand into new markets.
Beijing has been willing to support this global reach by investing in big infrastructure projects.
Among the most famous of these to date has been the “One Belt, One Road” initiative, a network of trade routes first announced by China in 2013. Ukraine joined the project in 2016, creating a corridor into the European Union which runs from China through Kazakhstan, Azerbaijan and Georgia.
But for now, the Chinese are showing little interest in developing the route. Once their shipments reach Georgia, they prefer to bypass Ukraine and send them into the E.U. via Turkey, Bulgaria or Romania.
Kyiv is hoping that the flow of goods between the E.U. and China will grow enough to attract Beijing’s interest. Until it does, China will not likely rank among the top 10 investors in Ukraine.
A political economy
The situation is helped little by the failure of Ukrainian officials to put in the groundwork to attract Chinese investors.
Chinese businesses and state corporations, says Borodkin, pay close attention to political developments in Beijing. If the Chinese and Ukrainian governments were closer, more Chinese investment in Ukraine would follow, he said.
“The Ukrainian government doesn’t do enough for any investment to come to Ukraine,” Borodkin told the Kyiv Post. “The president should go there, sign some agreements or renew old agreements, show some interest and organize a cultural exchange.”
But even if Kyiv steps up its efforts to win over the Chinese, there are no guarantees.
For many analysts, the projects that Chinese money funds across the world are based on geopolitics as well as profits.
“The official rhetoric in China describes these as win-win arrangements — connecting the world, helping other developing countries grow their economy and improving China’s access to resources and markets abroad,” says Hongying Wang, a senior fellow at the Waterloo, Canada-based think tank The Centre for International Governance Innovation. “Cynical outside observers view these initiatives and programs as part of China’s plan to build its sphere of influence in Asia and beyond, threatening the dominance of the United States in world politics.”
In Ukraine’s case, the geopolitics revolve around the Kremlin’s war in the Donbas and its seizure of the Crimean peninsula.
Beijing has not joined international sanctions on Russia and is seeking to keep Moscow among its allies. Its involvement in the conflict is limited to bland statements in support of Ukraine’s sovereignty and territorial integrity.
This policy limits China’s involvement in Ukraine, Borodkin said. “The Chinese now are playing big policy. They are playing with the U.S., with Russia, with the European Union. If the interests of this big policy are in conflict with Ukrainian interests, of course they will take decisions in favor of big policy,” the lawyer said.
Room for expansion
Chinese investment has only an estimated 1 percent of all foreign investment in Ukraine, which itself is a paltry $60 billion since statehood in 1991.
In an April 24 press conference, Chinese Ambassador Du Wei reported successful ventures had already been seen in aviation, alternative energy and information technology, but said that more effort is needed so that other Chinese investments which currently “exist only on paper” could actually happen.
