China’s rich panda challenges the poor Russian bear’s Turf

by Roman Kupchinsky

The Chinese financial and trade behemoth has begun to slowly make its might felt in the states of the former Soviet Union, a territory proclaimed by the Kremlin to be its scared sphere of influence.

These inroads are not only being made in countries close to China such as Turkmenistan where Beijing has signed important gas pipeline and purchase deals, but are now proceeding further Westward.

Belarus recently announced that it would pay China in Yuan for goods purchased from the People’s Republic. On July 29 the Chinese Central Bank transferred $3 billion worth of Yuan to the Belarus Central Bank in a currency swap.

In terms of local currencies, the Chinese swapped 20 billion Yuan for 8 trillion non-convertible Belarus Rubles. The Yuan will be used to pay China for imports such as potash fertilizers, spare parts, microchips and chip assemblies, chemical products and machine tools.

In 2008 Belarus-Chinese trade reached $2 billion.

One week before the parliamentary elections in Moldova, China, according to the Financial Times on July 28, signed an agreement to loan the “cash strapped, resource strapped country” $1 billion dollars.

The Financial Times noted “The money will be funneled through Covec, China’s largest construction company. It will ostensibly be put towards infrastructure and projects such as energy modernization, water systems, treatment plants, the industrialization of agriculture and the creation of high-tech industries, which Moldova sorely needs.”

Ukraine, meanwhile has avoided approaching China for a loan, but is looking to Asia for investments and on July 16 Prime Minister Yulia Tymoshenko arrived in Seoul, Korea, seeking to encourage Korean investments in Ukraine’s energy sector.

Tymoshenko promised that the Ukrainian government would form a special group of assistance to South Korean investors, which will be headed by Vice Premier Hryhoriy Nemyria.

"We will create special mechanisms of cooperation. A special group will be operating under Ukraine's government, which will be promoting your investments into the fields of cooperation with Ukraine," she said.

Nonetheless, Tymoshenko has also stated that Ukraine hopes to step up its trade and economic cooperation with China.

"We hope that our mutual relations will continue developing actively as well, but apart from that, we hope to step up cooperation concerning potential investment in Ukraine's economy by Chinese businessmen," she said at a meeting with Chinese delegates in Kyiv on June 26.

Chairman of the China Council for the Promotion of International Trade Wan Jifei, in turn stated that 2008 had been one of the best periods in the development of trade and economic relations between Ukraine and China.

Jifei said that representatives of 50 Chinese companies, representing such areas as engineering, the energy sector, electronics, and light industry, had arrived in Ukraine to attend various business forums and exhibitions.

"We consider today's meeting as one of the most large-scale events in recent years, and we hope to deepen our cooperation," he said.

How the Kremlin will react to Chinese trade and financial initiatives in the former USSR is unpredictable, but the possibility exists that it will be viewed with suspicion by a highly aggressive Kremlin looking to consolidate its regional power.