After seven years of no high-level visits between the two countries, President Viktor Yanukovych’s trip to China on Sept. 2-5 to meet his counterpart, Hu Jintao, opened a new page in bilateral relations.
But after the initial euphoria of renewed bilateral cooperation and investment promises ebbed, the question still remains how far relations will go beyond official declarations.
While most of the agreements signed in China were non-binding memorandums of understanding, at least one contract was inked as a result: a $950 million loan to build an eight-kilometer high-speed train from Kyiv to Boryspil airport, Ukraine’s largest and busiest air travel hub.
The project, which also foresees the construction of four stations and the purchase of high-speed trains, is expected to start next year and be finished by the beginning of the Euro 2012 soccer tournament that Ukraine co-hosts with Poland.
Other agreements include: construction of the Shchelkino steam-gas plant in Crimea, leasing of a drilling platform for Black Sea shelf exploration and sales of jet engines for China’s L-15 plane, among others. All the agreements signed in China are worth $4 billion, according to the president’s administration.
Starting in November, the visa regime between Hong Kong and Ukraine will be canceled. Ukraine state company Ukragroleasing plans to list on the Hong Kong’s exchange, one of the world’s 10 biggest exchanges.
“Since the establishment of diplomatic ties between Ukraine and China, we have experienced the best moment in our relations,” said Zhang Weili, counselor at the Chinese Embassy in Ukraine.
Ambitions are great
Trade between the two countries, at $5.7 billion last year, is something that Yanukovych wants to double by 2012 as a sign of greater ambitions.
China, which recently surpassed Japan as the world’s second largest economy and which has outpaced Germany as the world’s biggest exporter, is exploring new trade routes for its goods to Europe – and Ukraine’s geographic position makes it well-positioned to cash in.
According to parliamentarian Valery Konovaluk, who heads the Ukraine-China Business Council, construction of a new logistics center at Kyiv-Boryspil Airport could cut the shipping time for goods from one end of Eurasia to another by almost 30 days. “We want to create the so-called ‘Silk Route’ which would connect two of the biggest economies (in the region) – China and the European Union. Talks are ongoing with the Chinese side,” Konovaluk said.
Andriy Goncharuk, acting director of Ukraine-China Association For Cooperation, said that such a logistics center could “give Ukraine a realistic chance of capitalizing on its geopolitical position.”
| Chinese business etiquette tips 1. FRIENDSHIP: Before doing business, Chinese partners will try to learn more about you and your personality. Chinese prefer to deal not with a company but with some specific person of the company they know and trust. 2. RESPECT: This is key in doing business with the Chinese, especially when a foreign partner is on Chinese territory. 3. ETIQUETTE: Business cards should be written in both languages. When giving the card, hold it with both hands, smiling looking into the eyes of the partner, with a slight nod of the head. When receiving a card, skim through it immediately. 4. MODESTY: Don’t try to demonstrate you are smarter and better than your Chinese partner. 5. PATIENCE: Don’t expect to sign a contract with the Chinese immediately after negotiations. 6. EUPHEMISM: Chinese rarely say “no” directly. 7. REPUTATION: Being respectful, attentive, tactful and unemotional is important during the negotiations. 8. SUPERSTITIOUS: There are some golden rules which should be followed. For example, don’t buy presents and white flowers. The number 4 is considered to be unlucky, but the number 8 brings the luck. 9. BODY LANGUAGE: Be cautious with gestures. 10. RANKING: In Chinese culture, the first person who enters the room is generally the head of the group. Likewise, principal guests are seated directly opposite the principal host or head. Compiled by Elena Shevchenko, Ph.D. student in Chinese studies at Krymskyi Institute of Oriental Studies, National Academy of Sciences in Ukraine |
Will it happen?
With Ukraine’s state coffers running on empty and the Euro 2012 soccer championship approaching, Ukraine is in need of investment. China, brimming with cash, is seen as having more resources and desire than the United States and the European Union – both of whom ask pesky questions about democracy and human rights, issues that don’t seem to interest China’s leaders.
In 2009, China’s outbound foreign direct investment was $57 billion and the country plans to double that figure by 2013. Chinese investment seems to be everywhere, including the African continent. Ukraine is in more of a hurry than their Chinese counterparts.
“It’s essential for us to see results next year,” Konovaluk said. “Before that, Ukraine has to adopt a new tax code and secure foreign investments.”
Weili of the Chinese Embassy in Ukraine said Chinese investors look for state guarantees for big investments and, like everyone else except the beneficiaries, would like to see less corruption in Ukraine. “But we are glad to see political stability reinstated in Ukraine,” he said.
Goncharuk of the Ukraine-China Association For Cooperation said that inflows of Chinese investment “will depend on whether officialdom would transform from being a business exploiter to its server.”
Economics dominates politics
But there are limits to the relationship.
“Ukraine is not a direct sphere of influence of China and doesn’t play an important part in the foreign-policy interests of China,” Goncharuk said. That’s bad news for many in Ukraine who would like to see greater diversification of the economy.
A better relationship between Ukraine and China might also help in other areas. “Just as the EU welcomed a thaw in Russia-Ukraine relations, so they would approve of an economic partnership with China,” said Mykhailo Pashkov, director of international programs at Razumkov Center, a think tank.
What are risks?
Perhaps the Ukrainian fear of global competition will deter Chinese investors, as it has so many others.
“Big Chinese money could bring unnecessary competition to national producers, competition on the labor market and issues with migration,” said Andrey Bespyatov, research director at Dragon Capital.
But others think of the benefits of even a small influx of Chinese. Said Goncharuk: “Chinatowns exist in all major cities of the world and they are safe places for entertainment and cheap food.”
Kyiv Post staff writer Kateryna Grushenko can be reached at [email protected].
Read also ‘Chinese community in Ukraine small, insular – but many here to stay’ by the author.
