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China Is the biggest Investor


31.03.2020 (№ LDaily #11)

China Is the biggest Investor

The history of China’s statehood formation and development achieves several millennia, its nation has made a significant contribution into both material and spiritual culture of humanity throughout the world. Having in possession huge territories, essential labor and material resources and potentially large internal commerce, The Heavenly Empire has nearly all suppositions for creating integral, well-rounded economy, which is able to meet the necessary goods’ needs of the country.

Currently, China enters the top ten leading countries in the world by GDP sizes and its economic potential. The growing role in the world’s economy of the Asia Pacific region even more enhances the economic potential of the PRC.

Main Characteristics of the Economy of China

All positive changes in the country’s economy can be written off to the qualified reform in 1970-1990. Herewith, they were carried out taking into consideration national peculiarities. Thus, when moving to the socialist regime, a course for eradicate poverty was held (unlike other communist states). This meant that during developed communism, the life level should not be lower than during capitalism. That is why all changes were made taking into account that they were useful for ordinary citizens first of all, and provided them with everything necessary for life. Besides that, economic reforms were conducted not in a rush but smoothly, so there were no sharp spikes, and transition to the market was gradual.

The state plays a great role in the economy: it is accounted for about 60%. Other 40% belong to private capital. Moreover, the country has developed fiscal control authorities, so budgetary replenishment at the expense of tax is carried out quite successfully.

Due to the large population, the domestic market is very developed, and because the welfare of the population is constantly growing, the purchasing power also improves. Export and import are also stably growing: China’s economy is actively interacting with economies of other countries, and is becoming integrated with them in many productive and research spheres, so rationally develops and constantly renovates. In addition, China has many free economic zones, which attract investments. Thanks to this, there is a quick development of science and technology in the country.

The state encourages and contributes to the spreading of the national currency, as well as prevents its exchanging for dollars. This reduces threat of influence of global financial crises in a particular way.

A characteristic feature of the economy of the PRC is that significant quantity of ethnic Chinese (and immigrants) live in various parts of the world. They create closed groups, which at the same time are economically and socially connected with the native land, and their capital does not go by it. Especially it relates to powerful businesspeople who are of China descent and who live in other countries.

Chinese investments in Ukraine

In 2016, in port logistic sector, Chinese corporation COFCO Agri launched a transshipping complex of grain and oilseed crops with annual capacity of 2.5 million tons in Mykolaiv Sea Commercial Port. The investment project costed $75 million. COFCO Agri in Ukraine also controls several elevators and oil extraction plant. Over the whole period of existence in the Ukrainian market, the company has invested over $200 million.

CNBM company is one of the largest investors in ecological energy of Ukraine and owns many powerful solar electro stations plants in the Odessa and Mykolaiv regions. Management of the company informs that there are investments of over $1 billion in total.

The Xinwei Group, which is one of the leading telecommunication companies of the PRC in the world, was opened in Kyiv in 2014. Ukrainian telecommunication operator Prosat creates the network of mobile broadband multimedia communication of 4th generation (national scale) on the basis of McWiLL® technologies from the Xinwei Group. 150 installed base stations covered the capital of Ukraine and significant territory from Kharkiv to Mariupol, the bandwidth coverage goes through four eastern regions of the country.

Beijing Skyrizon Aviation Industry Investment Co Ltd and Ukrainian company Motor Sich created a common venture based in China. Construction of the plant for aircraft engines production and maintenance was started in Chungking. The company announced the possibility of licensed manufacturing by common venture of D-136, MS-500V and TV3-117VMA-SBM1V helicopter engines, as well as engines for general airplanes AI-450C, turbojets D436-148FM and D-18T engines. The investments amount is not disclosed yet. However, taking into account that the Russian target market is now limited, a new and prospective market appeared to be convenient. Beijing Skyrizon finances manufacture launching, and Ukrainian side provides technologies. Herewith, Chinese have already invested $100 million in the modernization of the Motor Sich production capacities in Ukraine and the investment agreement in the amount of $150 million has been already signed into the center of advanced development and pilot production.

In addition to strong investments, there are several small capital outlays of Chinese investors into the economy of Ukraine. Thus, in 2017, Bohai Commodity Exchange Co. Ltd. (BOCE), the biggest spot commodity exchange of the PRC, purchased block of stock (99.9 %) of Ukrainian Bank for Reconstruction and Development from the State Property Fund of Ukraine, which has been in the state’s property, at a starting price of 82.8 million UAH.

The Chinese have also considerable interest in Ukrainian agro sector. Starting from 2013, an agricultural company Fanda is conducting its activities in Naumivka village, Chernihiv region, founder of which is the large Chinese Agricultural State Corporation HuanFan Qu.

Development prospects of bilateral relations

China’s interest in Ukraine is growing. This is proved by the strengthening of economic relations in recent years, the presence of large Chinese companies in Ukraine – COFCO, CNNC, CCEC, China Harbor Engineering Company, Huawei.

Commodity exchange between countries is also gradually increasing, for example, for January-November 2018, it grew on $1.1 billion compared to the whole 2017, and was $8.82 billion.

Chinese companies were not afraid to invest in Ukraine even in difficult social and political period for us. This instills confidence that together with stabilization of the situation in the country, investments flow will continue accelerating. The PRC notices a great potential of the Ukrainian market. Currently, due to the trade agreements between Ukraine and the EU, opportunities are only increasing. Proximity to the European market and the opportunity to expand its production sites on the Ukrainian territory attract the economic interest of The Heavenly Empire, what is working on Ukraine’s favor.

China’s initiative One Belt One Road predicts the development of trade relations between China and Europe. The ambassador of the People’s Republic of China to Ukraine Du Wei mentioned that this project is inconceivable without Ukraine. Projects in the frames of the Silk Road hereafter may help Ukraine avoid the transit restrictions of Russia to the countries of Central Asia.

Many experts assert that further cooperation development between Ukraine and China will contribute to decreasing of the Russian impact on the economy of Ukraine, and that attraction of the Chinese capital will reduce escalation risks of military actions by the Russian Federation and at the same time will increase the geostrategic value of Ukraine.

Please read: Doing business in Ukraine during the period of political instability: what to focus on

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