23 March 2019
Most of Ukraine's exports go to states of the former Soviet Union
Most of Ukraine's exports go to states of the former Soviet Union

Ukraine crisis freezes Chinese projects

In December last year, a Beijing telecoms entrepreneur unveiled a US$10 billion project to build a deep water port, shipyard and other facilities in the Crimean port of Sevastopol. On a visit to China, Ukrainian President Viktor Yanukovich came in person to attend the announcement to lend his support.

Today Yanukovich is no longer president and Crimea no longer part of Ukraine. The grand plan of Wang Jing and his Beijing Interoceanic Canal Investment Management Co. will never be realized.

It is one of many Chinese projects in Ukraine that have been put on hold by the Russian invasion of Crimea and the political turmoil in the country.

“More than 20 projects have been halted,” said Wang Yuanquan, general manager in Ukraine of Shandong Kerui Oil Equipment Co. “The reasons are that capital in the country is very tight and firms in the Ukraine have close ties with Russia. Once relations with Russia deteriorate, companies there may not provide support and firms here have to stop production.”

Of Ukraine’s exports, 60 per cent go to countries that were part of the former Soviet Union, with Russia the most important.

A large portion of Ukraine’s mineral wealth and industrial production is concentrated in the south and east regions of the country; these are the areas with the highest proportion of Russian-speakers and the one which Vladimir Putin may choose to occupy.

Yanukovich and his government welcomed Wang’s project because it offered an enormous investment in infrastructure which would serve as a conduit for Chinese goods going to Europe. Wang proposed annual turnover of 150 million tonnes through the port. Its success depended on state funding of up to 50 per cent.

After Yanukovich’s visit, Beijing issued a statement of support for co-operation in big projects but gave no promise of specific loans.

But there was strong local resistance on environmental grounds. Creating the deep-water port would require intensive dredging which would affect the natural habitat; for the local Russian community, the most important industry for Crimea is tourism. This opposition and the change of status of Crimea will kill the project.

The political turmoil also throws into question China’s largest overseas agricultural deal, in the Dnipropetrovsk region in the southeast of Ukraine, close to ports on the Black Sea.

The Xinjiang Production and Construction Corps, known in Chinese as Bingtuan, has signed an agreement with KSG Agro, a private firm, to jointly develop three million hectares of high-quality land in the region to grow crops and raise pigs.

The area is the size of Belgium, Armenia or Massachusetts and represents 9 percent of Ukraine’s arable land. KSG says the agreement will begin with drip irrigation on one million hectares of farmland it leases from the state. Later, Chinese irrigation technologies will be used on a further two million hectares. The agreement includes a loan of US$3 billion from the China Import Export Bank.

But one Chinese project is safe from the turmoil – the Sedmoi (seven-kilometre) market which is seven km. north of the Black Sea port of Odessa. The largest market in the post-Soviet area, it covers an area of 170 hectares and employs 60,000. It sells almost everything, much of it counterfeit, including shoes, trainers, underwear, mobile phones, household appliances, toys, perfumes and books and attracts more than 100,000 shoppers a day.

The market opened in 1989, two years before the collapse of the Soviet Union. From 2002, Chinese traders began to arrive and now control its wholesale sector. Odessa, the largest international port in Ukraine, has an annual turnover of 30 million tons, half of it from China. Chinese products dominate the market; they are sold all over Ukraine and in neighbouring countries.

The vast majority of the 3,000 Chinese businessmen in the country work at Sedmoi. They are individual traders from Zhejiang, Fujian, Jiangsu and Guangdong and do wholesale and tourism business and run restaurants.

The market is divided into six districts, each with several thousand containers full of goods. The Chinese traders concentrate on garments, clothes, shoes, toys and electrical appliances. Business is conducted in cash, without papers, to avoid taxes and high customs duties. This requires the payment of bribes to customs and other officials. It makes the traders a prey to criminal gangs who attack them when they carry large sums of cash.

“We have managed to improve the Chinese economy,” said Alexandre Maline, vice governor of the region. “Now it is time to take care of our own. I am not against the presence of thousands of Chinese in Odessa but I want them to build factories and not just import merchandise.”

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Hong Kong-based writer, teacher and speaker

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