With its business interests expanding at every opportunity, China’s power now rivals that of the United States. In Eastern Europe, Beijing’s strategic engagement is currently focused on Ukraine, which is seen as an attractive partner in the so-called One Belt/One Road or New Silk Road plan to unite the West and East into an Eurasian market.The attraction is mutual.
Ukraine’s economy desperately needs foreign investment, but its democratic instability and highly volatile political situation represent insurmountable liabilities for many foreign investors.
Despite continuing economic crisis, corruption and war, Chinese investment in Ukraine over the past three years has been slow but rising. This is not an exceptional case.
Politically unstable countries always attract capital from countries with higher levels of political stability. But while China’s interest has put Ukraine in a position of economic advantage, it would be remiss of Ukrainian leaders not to consider the potential destabilizing effects that receiving investment from economically strong foreign authoritarian states such as China may have on Ukraine’s fragile democracy.
Recent Chinese investments driven by resource-seeking motives in Southern Africa (Zambia, Angola and Mozambique) and Latin America (Brazil and Venezuela) confirm concerns about just how beneficial Chinese investments are for receiving countries. For example, in Africa, more and more allegations are appearing concerning the quality of Chinese infrastructure,labor abuses and violations of human rights. Despite this, Africa partners (like many other states with similar circumstances)continue to tolerate lower levels of democratic development- equality, human rights and political freedoms – in exchange for economic progress.
China’s latest target in Ukraine’s European neighborhood is Greece. Torn by a long economic crisis, Athens sold its largest port to Chinese shipping group COSCO for €368.5 million in April. This major privatization gives China a significant stake over Greece’s economy, which relies heavily on shipping. The now Chinese port of Piraeus is a gateway to Asia, Eastern Europe and North Africa. Greece will not be the last country to trade its resources and strategically important industrial assets to China for economic survival.
There are only a handful of dissenting voices in Ukraine’s political leadership who worry about the country’s democratic future and would prefer to look for economic partners that have a less chequered record than China. These critics understand that successful businesses must align with their investors in terms of values and cultural choices. Here are the risks that Ukraine must consider before opening up for considerable Chinese investment.
China’s position on Ukraine/Russia conflict
China has never been Ukraine’s political ally, or of any other states that are aiming for democracy and that it brings with it (freedom of speech, free trade, political pluralism, fair elections and the protection of human rights).
Even in China’s closest relationship with Russia, elements of distrust and historical suspicion percolate beneath the surface of apparent harmony.
In the current conflict between Ukraine and Russia, China has not shown firm support for Ukraine. Diplomacy between Beijing and Moscow has always been primarily led by trade relations, energy resources and military weaponry.
Far from openly condemning Russian aggression in Ukraine, China has adopted a quiet and relaxed approach to the crisis, calling simply for restraint and a negotiated solution on the territorial integrity of Ukraine based on international law.
Still,regardless of this fence sitting, China has supported Ukraine’s weakened economy through investment and trade,playing a significant role in the revival of the state’s once strong agricultural sector. Since the annexation of Crimea in 2014, the volume of agricultural trade between Ukraine and China has increased by 56 percent.
Evidently,Beijing’s strategy in the post-Soviet region is spearheaded by pragmatism. Chinese leaders are aware of the benefits of balancing its trade relations with Russia and Ukraine. Further Ukrainian-Chinese economic cooperation loosens China’s long-standing economic dependence on Russia while also compensating for the West’s unwillingness to grant Ukraine any large-scale economic assistance.
Given these economic opportunities for cooperation, it is important not to overlook the serious political differences between Beijing and Kyiv.
As in other developing states, the economy is tightly intertwined with politics. Most of Ukraine’s political elites have vested interests in the path to development. This entanglement means that inconsistency in Ukrainian economy policy could result in unforeseen democratic challenges.
Discontent between economic needs, political dreams
In addition to the political disparities between struggling Ukraine and rising China discussed above, there are also considerations in the difference in political ideals that drive democracy-thirsty Ukraine and communist China.
Certainly, China’s communism has long departed from the Maoist-style authoritarian communism and China’s foreign cooperation with the West has proved that China adjusts and operates very well within the regulatory frameworks of World Bank and International Monetary Fund.
However, as an alternative to Western-style capitalist democracies, China’s politics and economy are much driven by such communist features as pragmatism, restrictions on information, a deficit of human rights, Soviet-style five-year state planning adopted by the Communist Party of China and a large and disciplined workforce. The last three years of political development in Ukraine clearly indicate a desire to move away from the communist political style towards a Western democratic approach.
In 2014, the Maidan Revolution declared the Ukrainian public’s desire to depart from post-communism authoritarian practices into democracy and the rule of law. The 2015 International Foundation for Electoral Systems public opinion survey in Ukraine found that the Maidan movement supported liberal sociopolitical values and expressed Ukraine’s decision shake off a Soviet legacy of paternalism and conformity. Committed to democratic ideals and the rule of law, Ukraine now looks towards the developed West for its cultural, economic and political trends.
In May 2015, Ukraine’s government adopted famous decommunization law initiatives involving the removal of communist monuments and the renaming of public places to erase communist themes. By December, the Communist Party of Ukraine, and Communist Party of Workers and Peasants were all banned.
This is an interesting and dangerous dance between Ukraine’s economic needs and political dreams that many China and Ukraine observers see gripping other states receiving Chinese investment today. There are a number of lessons that Ukraine can learn from Latin America, South Africa and countries in Europe that are now seeking better ways to conduct mutually beneficial relations with China.
Certainly, the vigor and dynamism of Chinese engagement with Ukraine means that, given proper strategic planning, there are many possibilities for the Ukrainian economy to advance.
However, there are also a number of challenges that Ukraine must tackle in order to protect its democracy. As the famous proverb goes, “enter the mill and you will come out floury,”
Before opening Ukraine’s doors, the government will do well to protect the country’s positive but still fledgling transformations from being taken advantage of by foreign authoritarian investors.
