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China connects Russian and Ukrainian economies

Author : Oleksandr Okhrymenko

15:17, 15 January 2016
China connects Russian and Ukrainian economies

Author : Oleksandr Okhrymenko

It is essential for Ukraine to export more goods, mainly raw materials, to China - expert

15:17, 15 January 2016

justus.com.ua

At a time when the Ukrainian export falls extremely rapidly, China offered Ukraine a small miracle. In the first ten months of 2015, Ukraine's exports to China has increased. Only for 0.5%, but still! This is a real miracle against the backdrop of the 32%-fall of Ukraine's exports. In many ways, the growth was due to the growth of export of corn to China in 2015. Fantasy of Khrushchev, who brought the idea of growing corn, gave Ukraine a chance to survive this crisis. And now it seems that, finally the means to save the export of Ukraine and the Ukrainian economy are found. In the structure of Ukrainian exports, China now takes nearly 7%, and only Russia and Turkey are ahead. In general, the foreign trade turnover of China is Ukraine's second partner after Russia.

Related: Ukraine to replace loss of Russian market with those of Asian and African countries

By the way, China is even more important for Russia than for Ukraine. China took 8.1% in the structure of Russian exports in the past year. China was first in terms of foreign trade turnover in Russia in general. It might seem strange, China indirectly connects the economy of Ukraine and Russia. What is important for Ukraine is that China bough more products. The connection with other countries is rather weak: Ukraine's exports to the EU is falling and will likely fall further, and Russia all want to break off all trade relations with Ukraine. China is the only hope for Ukraine.

Related: Ukrainian producers to export foods to Moldova, - Pavlenko

Nevertheless, China's economy is not the Ukraine's main trading partner. The share of Ukrainian products in China's imports is only 0.2%, and in the supply of Chinese goods on the export of Ukraine's share is only 0.4%. Russia is not a major trading partner of China too, although the share of Russian goods is about 2% of China's imports and exports of Chinese goods to Russia. Therefore, it is obvious that the Ukraine and Russia need the Chinese market, and not vice versa.

With regard to the import of Chinese goods to Ukraine and Russia, they all of them are typical. These are home appliances, electronics, and clothing. However, export is different. Ukraine has sold a lot of grain to China in 2015, but still a major commodity that Ukraine sells to China is iron ore, accounting for 40% of total Ukrainian exports to China. Russia mainly supplies raw materials to China, as a rule, they are oil and gas, which is about 65% of Russia's exports to China. Although China is considered to be a developing country, 43% of its exports is machinery. At the same time, various raw materials take almost 25% of its imports. China really needs raw materials in order to produce the technique. The decline in oil and iron ore prices is very profitable for China. It can afford buying raw materials without fear of devaluating the national currency, as the overall devaluation is still less than the drop in prices of oil and iron ore. Therefore, there is a chance that China will continue to buy raw materials in Ukraine and Russia.

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The main buyers of Chinese products are the U.S. and the EU. Mostly, they buy equipment from China. Recently they have reduced the purchases of Chinese goods because China has a trade surplus with them. In the context of global economic slowdown, it is extremely unprofitable. Therefore, China's exports in 2015 fell by almost 7% compared to 2014 year. This makes China restrict its imports, because it has started to lose the gold reserves. During 2015, China has lost about 110 bln USD; although it has huge foreign exchange reserves, but obviously, it does not want just to spend them on funding other countries.

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Now the world is in the process of national isolationism and selfishness. Each country is trying to buy less and sell more to others. China is no exception. Therefore, it is not necessary to hope that China will buy Ukrainian iron ore and grain, just because it likes Ukraine. Ukraine will have to work hard to stay on the market. China buys iron ore from Australia in much larger quantities than from Ukraine, therefore, Australia is a more important trading partner for China. As a result of the devaluation of the hryvnia to 32%, the imports from China to Ukraine has fallen. Although China has replaced Ukrainian goods and services easily, but the fact of reducing the share of Chinese goods in the Ukrainian market is not beneficial for Ukraine.

Ukraine, or rather, the Ukrainian government should not extol themselves and fantasize that other countries should fund Ukraine, provide some special economic conditions for it. In fact, Ukraine’s share in the total world exports is 0.29%, and its share in world imports is about 0.31%. These are the realities of Ukraine’s life.

Related: Russia Unexplainable: now it decided to burn school uniforms from China

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