China will be big loser in Russian invasion of Ukraine

February 28, 2022 09:59
Photo: Reuters

China will be one of the biggest losers in President Vladimir Putin’s invasion of Ukraine. It is the country’s largest trading partner and its companies invested a record US$6.64 billion there in 2021.

In the 31 years since Ukraine became an independent state, China has moved rapidly to establish with it a wide range of economic relations, including purchase of military hardware and hiring Ukranian specialists.

According to Chinese figures, in the first 11 months of 2021, bilateral trade in goods was US$17.36 billion, up 31.7 per cent year on year. In September last year, a freight train began a direct service from Ukraine to China. In 2020, 57 container trains came in the other direction. COSCO Shipping delivers containers every week to Ukraine on two sea routes.

In 2013, Ukraine started to sell corn to China. By 2019, it had become the country’s largest supplier, providing over 80 per cent of China’s corn imports.

In 2018, China opened a Belt and Road Trade and Investment Centre in Kyiv. COFCO invested US$50 million to triple the agricultural trans-shipment capacity of Mariupol port. Russian forces have shelled the city and its residents fear a ground attack.

Chinese companies have also been involved in projects to dredge the ports of Yuzhny and Chernomorsk, both close to Odessa, a major port on the Black Sea. Russian forces have attacked Odessa, which, with Mariupol, is one of the major bases of the Ukrainian navy.

On June 30 last year, China and Ukraine signed an agreement to promote co-operation in infrastructure development. In January this year Fan Xianrong, China’s ambassador in Kyiv, said that Chinese firms wanted to invest in processing farm production, construction of land ports, automobile assembly and producing vaccine.

One of the biggest Chinese losers will be the paramilitary Xinjiang Production & Construction Corp (新疆兵團). In 2013, it signed a 50-year lease with KSG Agro, Ukraine’s largest agricultural company, to lease 100,000 hectares of land to grow crops and raise pigs. The contract started on June 1 2013 and called for initial investment of US$600 million and, over the long term, cultivation of three million hectares.

The site is in the Dnipropetrovsk region in the east-centre of the country, close to the contested Donbass area in eastern Ukraine.

Following the break-up of the Soviet Union in 1991, the Ukraine had much to offer a rising economic power like China. After Russia, it is by land area the biggest country in Europe, with 42 million hectares of farmland. It offers a well-developed industrial base, highly trained labour and good education system. It is also a major arms producer.

Since then, Ukraine has supplied a variety of military equipment to China, including turbofan engines for aircraft, diesel engines for tanks and gas turbines for air-to-air missiles. The most spectacular deal was the purchase, for US$20 million, of a Varyag aircraft carrier.

After its arrival in China, it was renamed the Liaoning, refurbished and became the country’s first aircraft carrier.

In addition, Beijing hired Ukrainian military specialists to work in China. Many lost their employment after the break-up of the Soviet Union.

The Russian invasion has put all this trade and investment at risk. Putin wants to overthrow the democratically elected government of Ukraine and install a puppet leader obedient to him. The vast majority of the population of 45 million fervently oppose Putin, raising the possibility of a long and bloody guerrilla war against Russian occupation and destruction of cities and industrial sites.

How can Chinese, and other foreign, companies, operate in such an environment? If the Russian military destroys the ports of Odessa and Mariupol, how will COSCO ship goods to and from the country?

Beijing’s response to the invasion has been ambiguous. Putin was the only major world leader to attend the Winter Olympics earlier this month – President Xi is said to have asked him to delay the attack on Ukraine until the Games were over.

In a statement, the two men called on NATO to rule out expansion in eastern Europe and denounced the formation of security blocs in the Asia Pacific region.
So, unlike the majority of countries in the world, China has not condemned the attack nor used the word “invasion”. The headline in the official China Daily last Friday read “Putin aims to demilitarise Ukraine.”

Last Wednesday the Washington Post published an instruction from Ming Jinwei, a senior editor of Xinhua, posted on the Weibo page of Horizon News, which is owned by Beijing News. The post said that any content painting Russia unfavourably would not be published.

“In the future, China will also need Russia’s understanding and support when wrestling with America to solve the Taiwan issue once and for all,” wrote Ming.

This means that, when and if China attacks Taiwan, it will need the support of Russia and the absence of American and other foreign forces – just as the West has refused to help Ukraine with military means. The success or failure of China’s attack will largely depend on whether the U.S. is willing to defend Taiwan.

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A Hong Kong-based writer, teacher and speaker.