September 4, 2017

China (中国) Today

Events Review (28.08–03.09.2017)


І. China and Ukraine in the Context of the 26th Anniversary of the Independence of the Ukrainian State

The development of ties between China and Ukraine testifies to the formation of an increasingly close strategic partnership between the two countries.

This fact was ascertained by President of the People's Republic of China Xi Jinping in the greetings to the President of Ukraine P. Poroshenko on the occasion of the 26th anniversary of Ukraine's Independence. According to the leader of China, in recent years, China-Ukraine strategic partnership relations have maintained stable development, and cooperation between the two countries has achieved concrete positive results.

At this, Xi Jinping pointed out the importance and efficiency of the meeting of the leaders of the PRC and Ukraine on the sidelines of the World Economic Forum in Davos on January 17–20, 2017, which gave additional impetus to strengthening bilateral relations. Referring to the results of the talks, the PRC's President expressed readiness to work for further strengthening of mutual political trust and traditional friendship for promoting cooperation in all spheres and achieving new results.


The parties' being interested in the implementation of joint projects in trade, agriculture, science and technology, energy engineering, transport infrastructure (modernization of seaports, development of river transport, construction of concrete roads), creates a favorable basis for the implementation of such plans.

Thus, today China is one of Ukraine's largest trade partners. In particular, in 2016–2017, imports of goods from China accounted for about 12 % of Ukraine's total exports. Within 6 months of this year, Ukraine imported about 700 thousand tons of Chinese goods for a total of more than 2 billion US dollars. At this, the volume of imports increased by weight by 19 % and by value by 25 %, as compared with 2016. In turn, within the first half of 2017, Ukraine exported to the PRC agricultural products alone worth 435 million US dollars.

The main Ukrainian exports to China are as follows: ore, slag and ash — 32.5 %; cereals — 29.9 %; fats and oils of animal or vegetable origin — 26 %; wood and wood products — 2.6 %; nuclear reactors, boilers, machinery — 2.5 %.

The main imports from China are: electric machinery — 22.5 %; power equipment — 17.1 %; plastics, polymeric materials — 6.1 %; ferrous metals — 4,4 %; organic chemicals — 3.7 %; footwear — 3,5 %; ferrous metals — 3 %.

At the same time, as of July 2017, the total amount of Chinese investments into Ukraine's agro-industrial complex, energy engineering and other industries had reached 7 billion US dollars. This money is directed to the development of: Ukraine's enterprises of agriculture, forestry and fisheries — 39.6 %; industry — 19.4 %; wholesale and retail trade — 14 %; repair of motor vehicles — 11.2 %; transport and postal activities — 11 %. The volume of Ukraine's investments into the economy of China is about 1.5 million US dollars, and the money is mainly sent to the industry and trade enterprises of the PRC.

The PRC's largest investment projects in Ukraine are the construction of solar power plants, construction of a transshipment complex of grain and oilseeds in the Mykolaiv Commercial Port with a capacity of 2.5 million tons, as well as the development of production facilities of the Ukrainian “Motor Sich” enterprise.

An important direction in the development of cooperation between China and Ukraine is the implementation of joint projects on the creation of technology parks in Ukraine. In particular, the question of creating such a park in Sumy with participation of the Nuclear Power Institute of China (NPIC) and the Ukrainian Institute of Applied Physics is being considered, and the park in question should become an effective platform for deepening the interaction of Ukrainian and Chinese scientists and production workers.

Besides, Ukraine is important for the PRC as one of the key transport hubs in Europe. Given this, China is deeply interested in Ukraine's joining China's “The Belt and Road” initiative, which provides for the creation of a single transport and energy corridor from Europe to the Asia-Pacific region. According to Chinese experts, the main advantages of Ukraine in cooperation with the PRC within the framework of “The Belt and Road” concept are our country's geographical position, its convenient transportation system (land, air and sea), the opportunities of the Ukrainian and Chinese economies to complement each other, as well as mutual cultural interest.


II. China's Strategic Initiative “The Belt and Road” in the Context of Chinese and Regional Interests

The leadership of the PRC continues activities to promote the strategic initiative “Belt and Road”. An international symposium “In Search for EU-China Synergies: 16+1 and Belt & Road Initiative” about the mechanisms of cooperation between the PRC and the countries of Central and Eastern Europe was held on 3rd September 2017 in Krakow (Poland). The symposium was organized by the Confucius Institute in Krakow, and more than 30 scientists from different countries, including China, CEE, UK, Belgium and Australia participated in its work. Participants of the event discussed ways to deepen cooperation within the framework of the “Belt and Road”.

At the same time, the 9th High-Level Forum on Northeast Asia Cooperation was held in Changchun, China. The forum pointed out the importance of Northeast Asia as one of the directions for the development of the “Belt and Road”, which contributes to the development of trade and economic cooperation in the region. In particular, one of such directions was the creation of the China-Mongolia-Russia economic corridor.

The PRC's successes in the implementation of the “Belt and Road” strategic initiative draw leading countries' greater attention to it. Thus, on 29th August 2017, during a briefing for the media, representatives of London's City expressed interest in participating in the projects of “The Belt and Road”. In this regard they first of all mentioned the financial sphere, in particular, internationalization of the Yuan. Favorable opportunities for realization of such plans are created in London by the vast majority of British and about 250 transnational banks.

Based on the growth of international attention to the “Belt and Road”, China is expanding the range of projects and programs which are being implemented within its framework. In particular, on the initiative of the PRC's National Tourism Administration, it is planned to develop sea and island tourism along the “Belt and Road”, including creation of a special sea route. Due to this, they are going to deepen the countries-participants' cooperation in the sphere of tourism, as well as to increase the scale of tourism.


III. Other Trends and Developments Influencing the Situation in and around China

3.1. Politics

The 19th Congress of the Communist Party of China (CPC), scheduled for October this year, will be of key importance to the PRC. The main issues of preparation for the Congress were discussed during the meeting of the Political Bureau of the Central Committee of the CPC with the participation of President of the PRC, Secretary General of the Central Committee of the Communist Party of China Xi Jinping, on 31st August, 2017. According to Xi Jinping, the Congress will be an exceptional event and will take place during the crucial period of comprehensive creation of the middle class in the country, as well as of the development of socialism with Chinese features.

The Congress will summarize the country's achievements over the past five years, analyze trends in the development of the international and domestic situation, as well as determine the program of the CPC's activity and the main directions of the country's course for the future. In this regard, the leadership of the CPC and the Chinese government's attention will be focused on ensuring a stable economic growth of the country and improving the living standards of the population, as well as improving China's security and stability in the region.


3.2. Economy. Some Aspects of the Economic Situation in China

Despite certain problems, the PRC's economy continues to show positive dynamics of development. Thus, in July of this year, China's exports grew by 11.2 %, and imports — by 14.7 %. Within the first seven months of 2017, China's foreign trade totaled 2.34 trillion US dollars (with the increase of 18.5 %). During that period, China's trade with the EU (the PRC's largest trading partner) increased by 17.1 % (to 353 billion US dollars), with the USA — by 20.6 %, with the ASEAN countries — by 20.9 %, with Japan — by 16.9 %.

At the same time, the volume of the PRC's gold and foreign exchange reserves is increasing. According to the Central Bank of China, at the end of July 2017 this figure was 3.081 trillion US dollars, which is 23.93 billion US dollars more than at the end of June this year. The reason for this trend is the stabilization of the situation with cross-border capital flows, namely, a decrease in the outflow of funds from China.

The stable growth of China's economy contributes to the country's competitive ability in the world market. According to the “World Competitiveness Ranking 2017” of the International Institute for Management Development (IMD, Lausanne, Switzerland), by this indicator, China ranks 18th among 63 world economies. Last year China was on the 25th place. The rating is determined by four main indicators, namely: the state of the economy, the efficiency of the government, the state of the business environment and the state of the infrastructure. China ranked second in terms of the economy and had leading positions on such criteria as employment and labor market.

Taking into account the above circumstances, the PRC continues measures to strengthen the country's competitiveness. According to the decision of the State Council of the People's Republic of China, it is planned to intensify the process of carrying out reforms to support innovations by removing barriers to innovative entrepreneurship. In particular, this plan provides for the use of experience in implementing a program for attracting foreign specialists to work in China (it was tested in eight provinces of the country).


3.3. Security and Law Enforcement Agencies

The situation in the APR is once again getting exacerbated because of North Korea's ongoing series of nuclear missile tests. Thus, on 26 August 2017, the Democratic People's Republic of Korea launched three short-range missiles which fell in the Sea of Japan. At least two of them flew 250 km. Besides, on 28th August 2017, a “Hwasong-12” medium-range ballistic missile was launched, which for the first time flew over the Japanese island of Hokkaido (at the altitude of about 550 km) and fell into the Pacific Ocean at the distance of 2.7 thousand kilometers from the launch site. At the same time, September 3, 2017, the DPRK carried out an underground explosion of a hydrogen bomb (according to other sources, of a more powerful nuclear one), which had the most powerful character since Pyongyang's creation of its nuclear weapons.

All this is accompanied by the leadership of North Korea's new threats against the US and its allies in the APR. According to the leader of the DPRK Kim Jong-un, the new missile launches are “…preparation for an attack on the American island of Guam”. At this, he has expressed Pyongyang's intention to continue nuclear missile tests, despite the external pressure, including by the United States and the UN, and he also has ordered to produce more rocket engines and warheads.

North Korea's actions caused the United States, Japan and South Korea (Republic of Korea, ROK)'s sharply negative reactions, and were also condemned by other countries of the world. Thus, commenting on this issue, US President D. Trump stressed the USA's readiness to apply “…all options that are on the table” for answering the missile threat from the DPRK. At the same time, D. Trump did not rule out the possibility of ending the US trade with all countries that maintain business relations with North Korea. The USA's position on the DPRK was fully supported by the European Union.

The Government of the Republic of Korea also expressed its intention to provide a firm answer to the DPRK. In particular, according to South Korean Defense Minister Son Young-moo, such a response could be the deployment of the US strategic defense component. This issue is discussed at the level of the USA and ROK's military departments.

Besides, the United States and its allies continue to demonstrate strength to North Korea. In particular, last week, during the US and South Korea's Navies and Air Forces' joint exercise at the training field near the border with the DPRK, eight Mark 84 bombs with the nominal weight of about 900 kg were dropped. In turn, Japan conducted field trainings on missile defense.


The Mark 84 bomb is the largest of the “Mark” series aerial bombs with laser and optoelectronic guidance systems capable of penetrating 380 mm of metal or 3.3 m of concrete.

In June 1981, operation “Opera” (also known as the Israeli Air Force's “Babylon” operation) was successfully used to destroy the French-made “Osirak” nuclear reactor in Iraq.


At the official level, Russia also condemned North Korea's missile tests. According to the Russian Foreign Ministry, “…another demonstrative disregard by the DPRK of the requirements of the UN Security Council resolutions and the norms of international law deserves the strongest condemnation and could have serious consequences for Pyongyang”.

At the same time, Russia continues military provocations in the APR. In particular, last week against the background of the United States and South Korea's exercise, two Russian long-range (strategic) Tu-95MS flew over the Japanese, Yellow and East China Seas with coming close to the Korean Peninsula. Aircraft fighters of Japan and South Korea were raised into the air to escort the Russian planes.

September 4, 2017, the situation around the DPRK was discussed during the emergency meeting of the UN Security Council. The members of the Security Council condemned the DPRK's nuclear tests and called upon Pyongyang to stop implementing its nuclear missile program.


In this situation, Beijing continues to call on all parties to maintain restraint and to jointly and peacefully resolve the Korean Peninsula's problem. At the same time, the PRC is stepping up pressure on North Korea over its nuclear missile program. Thus, the Ministry of Foreign Affairs of China has expressed a strong protest over the DPRK's new nuclear tests. In addition, the Chinese government has imposed a ban on the opening by Chinese entrepreneurs of any business projects with the DPRK.


3.4. Science and Technology

Proceeding from the rapid development of the scientific and technical potential of the PRC, the country's leadership is making efforts to enhance its role as a world innovation center for artificial intelligence (AI). So, the State Council of China promulgated “A Next Generation Artificial Intelligence Development Plan”. According to the document, by 2020 the development of technologies and the scale of the use of AI in the PRC is planned to be brought to the world level. At this, the volume of the AI industry will amount to about 22.3 billion US dollars, and of the related industries — to 148.7 billion US dollars.

In the future — by 2025 China is going to implement a qualitative breakthrough in the sphere of fundamental theories of developing artificial intelligence. AI will become the main driving force for industrial modernization and economic transformation. During this period, the volume of investments in this sphere will be about 60 billion US dollars, and by 2030 the PRC plans to become the world's leading innovative technology center for AI.

As part of the practical implementation of this plan, the State Council of the PRC has determined several priority spheres for further development of artificial intelligence, including: creation of an open and integrated scientific and technical AI system; building a high-quality and highly efficient “smart” economy; development of a “intelligent society” that is convenient for all and of effective “smart” services; integrated introduction of AI into civil and military spheres; creating a highly efficient “wise” infrastructure and accelerating the development of the Internet and related computing technologies.


At the same time, creation of new vehicles remains one of the priority activities of the leadership of the PRC in the scientific and technical sphere. Thus, China is completing the test of a new-generation magnetic levitation train. The train was developed by the Chinese company “CRRC Dalian” and the South-Western University “Jiaotong”, is designed for a maximum speed of 160 km/h and has high dynamic qualities. By 2020, China plans to open five medium- and low-speed magnetic levitation rail lines. Today, the corresponding infrastructure is being created in Beijing, Tianjin (North China) and Wuhan (Central China).