Will Chinese investment sacrifice Ukraine's dreams of democracy to economic needs?

This article is part of the Democracy Futures series, a joint global initiative with the Sydney Democracy Network. The project aims to stimulate fresh thinking about the many challenges facing democracies in the 21st century.

After years of rapid economic growth, bold policymaking and shrewd business tactics, China has become a global player. With its business interests expanding at every opportunity, China’s power now rivals that of the US. In Eastern Europe, China’s strategic engagement is focused on Ukraine.

Beijing sees Kiev as an attractive partner in the so-called One Belt One Road, or New Silk Road, plan to unite West and East into a Eurasian market. The attraction is mutual. Ukraine’s economy desperately needs foreign investment, but many foreign investors see its highly volatile political situation as an insurmountable liability.

Despite continuing economic crisis, corruption and war in Ukraine, Chinese investment has been slowly rising over the past three years. While this has been to Ukraine’s economic advantage, it would be remiss of the nation’s leaders not to consider the potential destabilising effects of investment from authoritarian economic powers 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 such concerns. The investments in Africa have led to a stream of allegations concerning the quality of Chinese infrastructure, labour abuses and human rights violations.

African partners (like many other states in 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 Europe is Greece. Torn by a long economic crisis, Athens sold its largest port to Chinese shipping group COSCO for €368.5 million (about $A550 million) in April.

This privatisation gives China a significant stake in Greece’s economy, which relies heavily on shipping. The Chinese-owned 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.

Only a handful of dissenting voices in Ukraine’s political leadership worry about the country’s democratic future. They would prefer to look for economic partners with a less chequered record than China’s. These critics understand that successful businesses must align with their investors in terms of values and cultural choices.

Ukraine must consider carefully at least two concerns before opening up to more Chinese investment. How will China’s growing stake in Ukraine’s economy affect Kiev’s relations with Russia? And will there be a painful trade-off between the country’s desperate economic needs and its long-standing democratic dream?

Where does Russia fit in?

China has never been Ukraine’s political ally, nor of any other state that aims for democracy and all that comes 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 apparent harmony.

In the 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 condemning Russian aggression in Ukraine, China has called simply for restraint and a negotiated solution based on international law.

Still, regardless of this fence-sitting, China has supported Ukraine’s weakened economy through investment and trade. This has played a significant role in reviving the once strong agricultural sector. Since Russia annexed Crimea in 2014, the volume of agricultural trade between Ukraine and China has increased by 56%.

Evidently, Beijing’s strategy in the post-Soviet region is driven by pragmatism. Chinese leaders are aware of the benefits of balancing trade relations with Russia and Ukraine. Economic co-operation with Ukraine loosens China’s long-standing economic dependence on Russia while compensating for the West’s unwillingness to grant Ukraine large-scale economic assistance.

Given the economic opportunities for co-operation, it is important not to overlook the serious political differences between Beijing and Kiev. 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. Resulting inconsistencies in economic policy could lead to unforeseen democratic challenges.

A disconnect between economic needs and political dreams

We must also consider the different political ideals that drive democracy-thirsty Ukraine and communist China.

Certainly, China’s communism has long departed from Maoist-style authoritarianism. Co-operation with the West proves its ability to adjust and operate very well within the regulatory frameworks of the World Bank and the International Monetary Fund.

However, as an alternative to Western-style capitalist democracy, China’s politics and economy remain very much driven by communist features such as pragmatism, restrictions on information, a deficit of human rights, Soviet-style five-year state planning and a large and disciplined workforce.

On the other hand, the last three years of political development in Ukraine clearly indicate a desire to move towards a Western democratic approach. The International Foundation for Electoral Systems' 2015 public opinion survey in Ukraine found that the 2013-14 Maidan movement supported liberal sociopolitical values and Ukraine’s decision to shake off a Soviet legacy of paternalism and conformity.

Committed to democratic ideals and the rule of law, Ukraine now looks to the developed West for inspiration. In May 2015, decommunisation laws were passed to remove communist monuments and rename public places to erase communist themes. By December, the Communist Party of Ukraine, Communist Party of Ukraine (renewed) and Communist Party of Workers and Peasants were banned.

This is an interesting and dangerous dance between Ukraine’s economic needs and political dreams. Many observers see this also in other states receiving Chinese investment. Ukraine can draw lessons from Latin America, South Africa and countries in Europe that are seeking better ways to conduct mutually beneficial relations with China.

Certainly, the vigour and dynamism of Chinese engagement with Ukraine means that, given proper strategic planning, its economy has many possibilities to advance. However, to protect its democracy, Ukraine must also tackle a number of challenges. As the 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 transformation from being exploited by foreign authoritarian investors.