After the Zelensky-Xi Jinping telephone conference and the promise of a high-level delegation from China to visit the Ukraine to promote “peace”, the implications for the outcome of this meeting have centred on the impact of these discussions on the geopolitical side of the equation and China’s rising to a world power status on the international stage. What is missing from the discussion and prognostications of the results of this meeting is the deep involvement of China in the Ukrainian economy. China has an important stake in the ending of conflict in the Ukraine. It has already suffered severe blows to its involvement and continued struggle will only deepen the impact.
China is currently a key trade partner for Ukraine, providing 14.4 percent of its imports and a destination for 15.3 percent of its exports. China mainly exported machinery, equipment and vehicles, fuel and energy products, and chemical products to Ukraine. It imported food products, metals, metal products, and some machinery, equipment, and vehicles. Ukraine joined China’s Belt and Road Initiative in 2014, and a BRI trade and investment centre opened in Kiev in 2018. China became Ukraine's biggest trading partner in 2019. Two-way trade between China and the Ukraine reaches $10 billion and $20 billion annually. Chinese investments in Ukraine total about $150 million.
A Chinese consortium agreed in 2017 to build a fourth line for the Kyiv metro system where Huawei also started to install 4G. These have been delayed by the Russian bombing.
China's Noble Agri, wholly owned by COFCO (China National Cereals, Oils and Foodstuffs Corporation), has two major investments in the Ukraine. The first is located in Mariupol. It is a sunflower seed processing complex with a daily crushing capacity of 1,500 metric tons and storage capacity of 180,000 metric tons. The second facility is a newly built Mykolaiv grain port terminal, which boasts a transhipment capacity of 2.5 million tons per year and storage capacity of 125,000 ton. It was more than ironic that Putin recently travelled to the remains of the destroyed facilities in Mariupol to make his speech amid the wreckage of the Chinese investments; as well as visiting the southern Ukrainian port city of Mykolaiv, where heavy Russian bombing killed the owner of one of the country’s largest grain-producing and exporting companies in which the Chinese had an interest. News reports show that ”roughly 90 percent of residential buildings in Mariupol have been damaged, of which 40 percent were destroyed. Ninety percent of the city’s hospital capacity has been damaged, with three of the city’s seven hospitals destroyed. One maternity hospital, three institutes of higher education, and 51 schools and kindergartens have been destroyed. Factories have been damaged and, ominously for the investments being made by China, the city’s port has sustained damage.”
The Ukraine has been a key supplier of military equipment to Russia; a trade which has stopped as a result of the invasion. Ukraine’s part of the Soviet Union’s military weapons regime was not only to produce new weapons, but to support existing systems and to design new technology. That meant that Ukraine had everything that China needed to maintain and modernize its large arsenal of Russian weapons systems. The Chinese have tried to become the major beneficiary of the Ukrainian defence sector and has purchased many replacement components for its own industry and attempted to buy Ukrainian market leaders like Motor Sich, which the Kyiv authorities interdicted.
It is not only the Belt and Road transport links and its new railroad, the military supplies industry, the construction jobs, the Huawei 4G installation and analogous businesses of great importance to the Chinese; even the Chinese semi-conductors supply is threatened. “Approximately half of the neon that is used in the production of semiconductor chips worldwide is supplied by just two companies in Ukraine. Both of those companies, Ingas in Mariupol, and Cryoin, further westward along the Black Sea coast in Odessa, have ceased operations since the Russian invasion began. Neon, which is also used in laser eye surgery, is fundamental to the mass production of semiconductors for the process of lithography, which uses light to print tiny patterns on silicon. Neon’s wavelength is so short it can create patterns in the wafer chip down to 193 nanometers. This supply blockage impacts Chinese semi-conductor production.”
So, when Xi Jinping’s trusted colleague visits Kyiv to meet with Zelensky on some purported 12-Point Peace Plan, he will not only be talking about the geopolitical stresses and strains of the war, but he will also have a very practical topic of protecting and expanding China’s large financial stake in the Ukrainian economy.
1. Nathan Hodge and Julia Presniakova, “Mariupol evacuation corridors ‘in the hands of the occupiers’ as mayor tells everyone to leave”, CNN, 28/3/22
2. Chris Devonshire-Ellis, "China Retains Position As Ukraine’s Top Trade & Potential Investment Partner", China Briefing, 17/3/23
