Business relationship

between Ukraine and

China 2014-2017
Author
 The relevance of research

 The world economy is a complex globalizing system with traditional

and the modern structures and relations between them. The current
stage of development of the global economy is characterized by the
refinement of theoretical concepts, increasing contradictions, the
emergence of new global problems, increasing interdependence of
all participants in the world economic system. This is facilitated by
key processes as the globalization of the world economy, the
internationalization of economic life and activities of enterprises,
the growth of the number of integration associations, the emergence
of new types of international division of labor in the new structure of
the world. Currently, there is an interest in a deeper understanding
the trade cooperation of Ukraine and China.
Subject: Object:
the trade cooperation of the analysis of the trade
Ukraine and China cooperation of Ukraine
and China during the
period of 2014-2017.
 The research aim is to analyze the
development of trade cooperation of Ukraine
and China during the period of 2014-2017.
 The objectives of the study are:
 to learn the general characteristic of economic situation of Ukraine and
China;
 to analyze the features of trade cooperation of Ukraine and China
during the period of 2014-2017;
 to highlight the ways of development the trade cooperation of Ukraine
and China.
The general characteristic of economic
situation of Ukraine
 Modern Ukraine – is a state with a developed scientific and industrial base, is a major
producer of electricity, the economy is characterized by a high technological level of
development. The national economic complex of the country includes engineering, ferrous
and non-ferrous metallurgy, shipbuilding, oil and gas and chemical industry, production of
buses, cars and trucks, tractors and other agricultural machinery, locomotives, machines,
turbines, aircraft engines and aircraft, equipment for power plants.
 Ukraine has established the production of launch vehicles, satellites and equipment for
space exploration. Ukraine is also a manufacturer of military equipment – tanks, military
transport aircraft, anti-aircraft missile systems, optical equipment. Antonov design Bureau
aircraft, lighters, walking excavators, precision machines, electric welding devices are
manufactured using the latest technology and meet the highest international standards.
 The general characteristic of economic
situation of Ukraine

Since 2016, the Ukrainian economy is showing signs of

stabilisation, after years of political and economic tensions.
According to the IMF, in 2018 the country recorded a 3.5%
GDP growth, driven by domestic demand as household
consumption represents almost 70% of GDP. Estimates for
2019 and 2020 forecast respectively 2.7% and 3% growth
rates. The economy is expected to slow, as tight monetary
policy environment will limit economic activity growth while
upcoming significant public debt repayments will constrain
public spending.
The general characteristic of economic
situation of Ukraine
Estimated Data
Main Indicators 2016 2017 2018 2019 2020
GDP (billions USD) 93.35 112.13 126.39 132.93 141.82

GDP (Constant Prices, Annual % 2.4 2.5 3.5 2.7 3.0

Change)

GDP per Capita (USD) 2,201 2,656 2,964 3,133 3,361

General Government Balance (in % of -1.9 -2.0 -2.6 -2.5 -2.3

GDP)

General Government Gross Debt (in 81.2 71.0 70.5 68.8 64.4

% of GDP)

Inflation Rate (%) 13.9 14.4 10.9 7.3 6.0

Unemployment Rate (% of the 9.3 9.2e 9.4 9.2 8.9
Labour Force)

Current Account (billions USD) -1.39 -2.09 -3.92 -5.17 -4.97

Current Account (in % of GDP) -1.5 -1.9e -3.1 -3.9 -3.5

 The general characteristic of economic
situation of Ukraine
The range of the service sector in GDP the period of 2005-2018

60

52.8
51.5 50.7 50.9
50 49.2 48.9
47.9
46.6 46.9
46.4 46.9
44.8

40

30

20

10

0
The general characteristic of economic
situation of Ukraine

 The most indicative are such types of services as: trade; repair of cars,
household goods and personal items; transport; financial activity. Studying
the role of the service sector in the functioning of the domestic economy, it is
necessary to analyze the ratio of the number of employees and, accordingly,
the cost of their labor.
 The manufacture sector plays a key role in the economy of Ukraine, it is a key
factor in socio-economic development. Thus, a deep understanding of the
structure and trends of the manufacture sector is important for policy
makers, as this sector has an extraordinary impact on the overall stability of
the Ukrainian economy, including its export potential.
The general characteristic of economic
situation of China
 China is the second largest beer market after the United
States, growing demand for it could be useful for
Ukraine. Second, scarce component of Chinese imports is
the production of technology industry – engineering,
space industry, aviation, shipbuilding, energy. An
important area of cooperation between Ukraine and
China is the cooperation in the defense sector, namely in
the field of military education and military-technical
sphere.
The general characteristic of economic
situation of China
 China’s economic growth has declined steadily since the
outbreak of the 2008 global financial crisis. While the stimulus
measures introduced at the end of that year temporarily
boosted growth back to double digits in 2010, the Chinese
economy decelerated for the next six years. This slowdown has
caused some multinational companies to question China’s
momentum and potential for continued growth, and some have
even developed a bearish outlook on the Chinese economy in
general. To some extent, this has had a negative effect on FDI
into China. From 2009 to 2016, average annual growth in FDI fell
to a relatively low level of around 5%, even experiencing
negative growth in 2012.
The general characteristic of economic
situation of China

 China’s growth slowed steadily for nearly six years, deepening concerns about
the prospects of China’s economy, both at home and abroad. In Q4 2016,
however, China’s GDP posted a slight uptick in quarterly growth. This trend
continued into 2017, and resulted in an annual growth rate of 6.9% – well
above the government’s official target of ‘around 6.5%’3 and the GDP growth
rate of 6.7% in 2016. These developments have led some domestic and
international observers to say that the Chinese economy may have bottomed
out and is preparing to rebound. Foreign companies have also started paying
attention to China’s economic recovery, and in 2018, we expect more foreign
companies to start re-examining their scepticism and ‘wait-and-see’ stance
towards investing in China.
 The general characteristic of economic
situation of China
 In 2016, China started promoting corporate consolidation and restructuring,
as well as direct financing and debt-for-equity swaps based on market and
legal principles. Debt-to-asset ratios among industrial companies decreased
correspondingly, while local government debt swaps21 grew in scale,
reducing interest payments by roughly RMB 400 billion (USD 60.2 billion).22
In 2017, the Chinese Government continued encouraging companies to put
their idle assets to use; promoting the securitisation of corporate assets;
supporting market- and law-based debt-to-equity swaps; expanding equity
financing; and, placing tighter restrictions on companies, especially SOEs, in
terms of leveraging. Furthermore, there were more local government debt
swaps, which helped further reduce the debt burden at the local level.
 The general characteristic of economic
situation of China
 As a result of these deleveraging efforts, the annual YOY growth in the
leverage ratio of China’s nonfinancial sector has decreased from an
average of 8.3% in the period 2009-2015 to 4.9% in 2016. Moreover, in the
first half of 2017, the YOY growth in the leverage ratio slowed to 1.6% .
Going forward, China’s industrial firms may find it difficult to maintain the
high levels of profit growth that they experienced in early 2017 – i.e. over
20% each month.
 The role of China in world markets is constantly growing, and the share of
world trade has increased from 0.75% in 1948 to 12% in 2015, and now it’s
about 4 trillion US dollars (The World Bank).
 For China, as a state with more than a billion people (1.379 billion people –
2016), the most pressing is food problem. In the ranking of World health
organization, China ranks second place in the world after India in the
number of people suffering from malnutrition (about 130 million people).
The general characteristic of economic
situation of China

 The increase food and agricultural products trade is the

real breakthrough for Ukraine in realization of domestic
natural resource potential, providing the sustainable
development of agricultural sector. However, the increase
in agricultural products exports can cause fallout. Thus, in
2015, the main exports of agricultural products to China
were maize (542,596 million US dollars or of 22.61% of
exports to China) and sunflower oil (438 million US dollars
or 18.27% of export volumes) (International trade center).
The features of trade cooperation of Ukraine
and China during the period of 2014-2017
Dynamics of business relations indicators between Ukraine and
China, billion US dollars
  2009 2010 2011 2012 2013 2014 2015 2016 2017

Exports 1,43 1,32 2,18 2, 1,78 2,73 2,67 2,40 2,42 2,45

Imports 2,73 4,7 6,27 7,9 7,90 5,41 3,77 3,82 3,88

ET 4,17 6,02 8,45 9,68 10,63 8,08 6,17 6,19 6,21

Balance -1,3 -3,4 -4,1 -6,1 -5,2 -2,7 -1,4 -1,4 -1,5

REI 0,52 0,28 0,35 0,22 0,35 00,49 0,64 0.68 0.69
The features of trade cooperation of Ukraine
and China during the period of 2014-2017
 In accordance with the available data the share of production in total exports is
now 1.58% (37.77 million US dollars); intermediate goods – 97.76% (2338,23
million US dollars), consumer goods – 0.66% (15.79% million US dollars). The
technological and innovative component of the Ukrainian-Chinese trade remains
at a very low level. This means that Ukraine is China’s mainly raw materials
exporter with low added value and the importer of finished products with
relatively high added value, mainly commodities
 The keen interest of China to Ukrainian sunflower oil import creates threats
related to excessive expansion of sunflower cultivation that will ultimately lead
to the soils depletion, and will cause irreparable harm to Ukrainian agriculture
for a long period. It is should be noted that China remains one of the main
business partners of Ukraine in the military-industrial products market. In 1992
Ukraine and China signed about 200 contracts in the military sector. During
1992-2008 the volume of arms imports to China amounted about 624 million US
dollars.
 The features of trade cooperation of Ukraine
and China during the period of 2014-2017
 First of all it’s aircraft and air defense systems. The main group of domestic goods exported to
China, was weapons which other exporters ignored mostly for political reasons. Ukrainian military-
technical production is very attractive for China because of its high adaptability and low price in
comparison with competitors. However, the Chinese government pursues active policy of all around
support of domestic military industry development. Thus, the competitive advantages of the
Ukrainian military-technical production become unstable and gradually are leveled off. In view of
this there is only one solution – collaboration in the projects and technologies development which
are inaccessible for the military-industrial complex enterprises of the PRC. The structure of import
from China to Ukraine in 2015 is more balanced, the production means amounted to 26,14% (982,22
million US dollars) total imports; intermediate goods – 48.13% (1808,28 million US dollars, consumer
goods – of 25.73% – 966,75 million US dollars). The increase in the share of mineral raw materials is
characterized by the simultaneous decrease of partners’ interest from China in finished and
intermediate industrial products of domestic producers, especially concerning the trade in iron and
steel. In 2001, this product group was dominated in the nomenclature of the Ukrainian-Chinese
export trade (378.26 million US dollars or 78% of total domestic imports). In 2015, this figure
decreased to 20.1 thousand US dollars, which accounted less than 1% of total exports to China
The features of trade cooperation of Ukraine
and China during the period of 2014-2017

 In 2015, the volume of Ukrainian-Chinese trade turnover made up 8.08 billion US dollars or
28.5% of Ukrainian volumes of foreign trade relations with the Asian region countries (17.26%
of Ukraine's exports to Asia; 48.84% of imports from Asia to Ukraine) it’s 21.24% higher than
total trade turnover with the Republic of Turkey (4.86 billion US dollars), which ranks the
second place among Asian countries-partners of Ukraine in 2015 (International trade center).
 However, the dynamics of trade relations development of Ukraine and China is not the only
positive aspect in bilateral relations totally and in economic security in particular. This is
confirmed by the figures of goods exports and imports and trade balance, the coverage of
goods imports by exports, that is indicating the instability situation on the basis of imports
over exports prevalence. In fact, the coverage ratio of imports by exports is less than one
since 2005 (in 2015: 0.64) and balance of external trade turnover is negative (in 2015: -1, 37
billion US dollars) that does not correspond to the boundary values of the state external
economic safety (International trade center). To search and identify the main vectors of
Ukrainian-Chinese trade the predominant groups of goods, the ratio of raw materials and
finished products in the exports and imports structure, the technological level of the goods
turnover, the general trends of trade development should be established.
 The features of trade cooperation of Ukraine
and China during the period of 2014-2017

 There is a mutual desire of the parties to increase the volume of bilateral trade, diversification of its
structure, the development of long-term forms of economic cooperation, deepening of investment
cooperation between Ukraine and China. Relations between the two countries are still developing:
for the 6 months of 2016 the total trade turnover has increased by 0.8% compared to 2015 and has
reached 4.3 billion US dollars. However, the amount of Chinese direct investment in the Ukrainian
economy is far from desirable and there are objective reasons for it. The business pools of our
countries can gain plenty by collaborating and working together. Progressive advance of developing
contacts between economic entities and the continued deployment of joint production bases is
important for both sides. Such branches as transportation, agriculture, infrastructure creation,
aviation, space, innovation, scientific-technical and other fields are strategic for mutually beneficial
cooperation development.
 Future-oriented strategic direction of economic cooperation with China is the direct involvement of
Ukraine in the implementation of the development the Silk Road economic belt initiated by the
President of China. Ukraine intends to participate actively in the concept implementation "One zone,
one way", and to become a part of New "Silk Road". Ukraine intends to use the Chinese initiative
"One zone, one way" to strengthen the cooperation with China in transportation and communication
so as in infrastructure branches.
The features of trade cooperation of Ukraine
and China during the period of 2014-2017

 Common interests and goals between Ukraine and China:

 Ukraine for China is:
 “bridge” to a spacious solvent European market;
 market for cheap goods;
 partner in the supply of goods of the metallurgical complex, chemical industry,
products of the agro-industrial complex, etc.;
 partner in the quality of training and internships;
 “window” in high-tech and capital and economy of the European Union;
 large market with significant consumer potential and consumer needs;
 territory for the creation of technology parks and high-tech development zones;
 transit chain between Western Europe and the APR.
The features of trade cooperation of Ukraine
and China during the period of 2014-2017

 China for Ukraine is:

 partner to attract investment;
 a reliable partner in supporting the national interests of Ukraine in the
international arena (accession to the WTO, UN peacekeeping operations, etc.)
 an advanced partner in the supply of the latest equipment and technologies that
can increase the competitiveness of Ukrainian products;
 partner in the development of entrepreneurial and investment projects in the oil
and gas and coal industries, civil engineering, consumer products, argo-industrial
complex, renewable energy technologies, financial and banking sector, etc.
 partner in optimizing the structure of exports and improving product quality.
The ways of development the trade cooperation of
Ukraine and China

 Analysis of the results of economic exhibitions and fairs, as well as scientific

publications, allows us to conclude that Chinese partners are interested in
implementing a number of economic initiatives in investment and innovation
spheres:
 development of a roadmap for the implementation of the Chinese initiative to
create an “economic belt of the Great Silk Road”;
 an increase in the volume of purchases of high-tech products, as well as the
development of high technologies;
 the involvement of Chinese partners in the joint implementation of projects in
the development and implementation of nanotechnology;
 Acceleration of the implementation of the high-tech contract concluded in
2008 by Ukrpexport DC
The ways of development the trade cooperation of
Ukraine and China

 At the same time, the Ukrainian side also has a number of interests, namely:
 large-scale attraction of Chinese direct investments for the implementation of
investment and innovation projects in Ukraine;
 the creation of joint ventures and production clusters for the production of high-tech
products in the aerospace industry, power engineering, automotive, further
implementation of projects in the space sector;
 the creation in the territory of the People's Republic of China of the Ukrainian-Chinese
innovation center or technopark;
 conducting presentations of the economic, investment and innovation potential of the
regions of Ukraine in the PRC;
 receiving free aid from the government of the People's Republic of China for the
implementation of social projects by purchasing and supplying innovative medical and
rescue equipment to Ukraine.
The ways of development the trade cooperation of
Ukraine and China

 It is possible to make such recommendations as:

 Ukraine has a high level of strategic partnership with China, which is not yet
implemented in practice. On the one hand, at the present stage, the
development of Ukrainian-Chinese relations is hampered by the fact that
China still considers Ukraine to be part of the post-Soviet space (despite its
own declarations on the Europeanness of Ukraine). Thus, the PRC allows
Russia to declare its «rights» in Ukraine. On the other hand, the Ukrainian-
Chinese strategic partnership has undergone a serious blow to Ukrainian
corruption and the short-sighted prejudice of Ukrainian politicians over
«communist» China. To release the Ukrainian-Chinese interaction from this
harmful layer is an urgent task of the current moment.
The ways of development the trade cooperation of
Ukraine and China

 Attempts by the Ukrainian side to obtain political decisions from China

regarding Russian aggression against Ukraine are false and demonstrate a lack
of understanding of the specifics of Chinese foreign policy based on Chinese
centrism, ethnocentrism and pragmatism. For the same reason, the solutions
to the «Ukrainian crisis» in the configuration of the US-Russia-China
geopolitical triangle will be ineffective. China seeks to maximize the current
situation to achieve its own goals, especially with regard to relations with
Russia. Therefore, one should not demand or expect statements from China
that directly condemn Russia for occupying the Crimea or supporting pro-
Russian separatists in the east of Ukraine.
The ways of development the trade cooperation of
Ukraine and China

 The development of relations between Ukraine and the PRC must be built on the
basis of primarily economic interests, corresponding to the concept of «soft
power» of China, and its new Eurasian integration project «One Belt, One Way».
Only if real and sustainable Ukrainian-Chinese trade and economic ties are
reached, it is possible to obtain political support. Since the potential of economic
cooperation between states is largely related to infrastructure projects, Ukraine
should take measures aimed at developing its own infrastructure capacity.
 The current state of interaction between Ukraine and China is inefficient, which is
largely due to the mutual lack of information about the processes that occur in
each country, and especially regarding the «Ukrainian crisis». In order to change
this situation, it is necessary to expand the forms of interaction in informing the
relevant state structures and top officials of the state, and it should include an
unofficial level, thus allowing to get out of the possible pressure from Russia in
case of official contacts and negotiations.
The ways of development the trade cooperation of
Ukraine and China

 It is advisable for Ukraine to take active measures to intensify the bilateral political
dialogue. It is necessary not only to declare Ukraine’s readiness for top-level
negotiations, but also to take effective «steps towards». It should be realized that the
format of the negotiations is not fundamental, but the substantive part is important:
maintaining the level of strategic partnership, Ukraine’s interest in Chinese
investments, personal patronage of the President of Ukraine over several strategic
Ukrainian-Chinese projects and military-technical cooperation.
 In Ukraine, finally, it is necessary to solve a number of problems existing in relations
with China, the most important of which is the implementation of already started
projects, which were agreed at the level of heads of state, governments and
departments. At the same time, it should be understood that China is not interested in
the numerous «causes» of non-fulfillment of obligations that the Ukrainian side refers
to. It is necessary to conduct a certain audit, frankly name corruption and punish those
responsible for it.
The ways of development the trade cooperation of
Ukraine and China

 It is advisable for Ukraine to strengthen the level of influence and control of the
President of Ukraine on the development of Ukrainian-Chinese cooperation. Introduce the
position of state authorized representative under the President of Ukraine on issues of
Ukrainian-Chinese cooperation. It is important that the issues of cooperation with China
are closed not in the Government (they are lost at the level of political conjuncture), but
in the President who implements the foreign policy of the state. In addition, it will
respond to Chinese approaches to the organization of power in the state: strategic
questions are the prerogative of the first person.
 Ukrainian-Chinese relations can successfully develop only if Ukraine is well aware that
China is implementing one of our few external reserves to rapidly increase export
opportunities through engineering products, rocket and space, shipbuilding, nuclear and
thermal energy, and the military-industrial complex. . The most promising are the types
of cooperation that allow Ukraine to combine sales of high-tech products and
technologies with the development of the corresponding production in China. Taking this
circumstance into account, it is possible, according to experts, to boldly predict
cooperation, which takes into account the imperatives of the 21st century.
The ways of development the trade cooperation of
Ukraine and China

 A common vector of development of Ukrainian-Chinese relations is the creation of

comfortable and attractive conditions for attracting Chinese capital and technology in
Ukraine through the creation of joint ventures, clusters, and free economic zones. These
conditions should be: reducing the tax burden, improving the conditions of the
infrastructure of each region and region of Ukraine, improving the conditions for doing
business, such as tax reporting, ownership, lack of constant checks.
 Criteria for the formation of high-quality strategic partnerships should be based on
common goals in key areas of international relations; complementarity (complementarity)
of the structure of economies; unity of civilization factors; equality in relationships; no
significant disagreement in the relationship. An equally important factor is the involvement
of those resources that are necessary for the maintenance of the life of society and the
development of the country. These include the provision of energy, food and other types of
strategic raw materials and natural resources, safe access to vital regions of the world, and
national security.
THANK YOU FOR ATTENTION!