Bilateral agreements aim to pave business boom between Czech Republic and China

Foto: Škoda Auto

Business is the overwhelming theme of the Chinese president’s trip the Czech Republic. For supporters of the warmer relations between Prague and Beijing, the payoff will be Chinese investment, industrial, research, educational cooperation and jobs. For the doubters, the price in curbing criticism of China is high and they are skeptical about the returns.

Foto: Škoda Auto
Czech President Miloš Zeman announced Tuesday that Chinese investment in the Czech Republic this year should reach 95 billion crowns. But he added that business is going both ways and gave the example of the Czech Republic’s biggest local car maker which already manufactures in China.

“The company Škoda Auto, which is our most successful company, will during the next five years invest 60 billion crowns to expand its manufacturing facilities in the Peoples’ Republic of China. I also value the investments of our aviation industry there and I could go on and on.”

Zeman was speaking after the signing of a host of bilateral agreements covering investment, financial regulation, the health sector, industrial zones, and aviation. The main agreement makes the Czech Republic a strategic partner for China. Other business deals should be inked on Wednesday.

Figures out Tuesday showed that the value of Chinese investments in Czech companies more than doubled in 2015 compared with a year earlier. But even that so-called first wave of investment still puts the Chinese way down in 21st place among foreign investors in the country.

Miloš Zeman,  Chinese president Xi Jinping,  photo: CTK
China is already the Czech Republic’s biggest trading partner outside of Europe. But the 11 billion dollar two-way relationship is overwhelmingly one way – Chinese goods heading towards Czech purchasers. Nobody believes that trend will be reversed soon although in a recent survey of Small and Medium Sized Czech businesses almost one in five said they were looking to launch exports to China.

Minister of Finance and ANO leader Andrej Babiš was part of the delegation welcoming the Chinese president to Prague Castle on Tuesday. But earlier he has played down the benefits that Chinese investment might bring to the state finances.

“It is mostly private companies that are buying firms. They are buying real estate and the good thing to come from that is that there is some income from taxes on change of ownership but this is pretty much small change.”

Czech media on Tuesday highlighted how neighbouring countries such as Poland and Slovakia also experienced the short-lived Chinese euphoria during presidential visits to their countries over the previous five years. They too received strategic partner status.

Andrej Babiš,  photo: Filip Jandourek
But Slovakia has seen thin results from the 2009 visit is the succeeding years. Poland’s incoming Chinese investment stands at just over 4 billion crowns since becoming a strategic partner in 2011. A highly publicized project for Chinese companies to build a 50 kilometer stretch of motorway between Warsaw and Berlin had to be cancelled after it ran into troubles. That, the reports suggest, could be a warning not to get too carried away.