Czech Republic and China ink investment boosting memorandum

Bohuslav Sobotka, Chinese President Xi Jinping, photo: CTK

Czech prime minister Bohuslav Sobotka has signed a memorandum of understanding between the Czech and Chinese governments. The main theme of the memorandum is for the two countries to support China’s worldwide trade and investment initiative “One Belt, One Road.” But there are also hints that the Czech Republic could be given special treatment in key other areas.

Bohuslav Sobotka, Chinese President Xi Jinping, photo: CTK
“One Belt, One Road” is an ambitious Chinese project aimed at putting China back where is once was more than 2000 years ago during the era of the silk road as a worldwide transport hub. The project has separate land and maritime goals. For the former, the main push seems to be developing transport links from China through Central Asia, Iran, Turkey, and onwards towards Moscow before turning back west through Belarus, Poland, Germany, and onto the massive Dutch port of Rotterdam.

The land route skirts the north of the Czech Republic but does not go through it. But there seem to be hopes in Prague that Central European and more particularly Czech transport projects might get a boost by feeding into this massive plan.

Prime Minister Bohuslav Sobotka highlighted on his ongoing Chinese visit the possible boost that could be given to high speed rail connections, something the Czech Republic is currently patently lacking even between its two main cities, Prague and Brno. This is what he told Czech Television:

Photo: Robert Mikoláš
“Europe has to a large extent missed the boat when you look at the development of this type of transport in China. If you look at how high speed rail links function in Europe, the network has not been properly linked together.”

The Czech-Chinese memorandum signed on Thursday is wide ranging. It talks about increased possible cooperation not just in rail infrastructure but also over roads, nuclear energy, telecommunications, car manufacturing, aircraft production, and engineering. It also looks to boost cooperation in research and development with nanotechnology, laser technology, pharmaceuticals production, and biotechnology picked out for particular attention. These are areas where the Czech Republic has had some significant success.

The memorandum gives a nod to the Czech ambition to become a regional center for Chinese investment. Specific steps are highlighted to make this possible, such as finding a clearing mechanism for the Chinese currency, the Renminbi, in the Czech Republic.

But the Czech ambition to become a regional financial centre for the Chinese has some economists and analysts scratching their heads. One of those is Jan Bureš, the chief economist at Czech bank Poštovní Spořitelna.

Jan Bureš, photo: Tomáš Adamec
“Honesty I don’t understand very much how the Czech Republic could function as a financial centre for Chinese companies. Basically, the Czech financial market is pretty well developed and in the regional context pretty healthy, but it is not a major financial centre and I doubt the Chinese would choose one rather small market for most of its financial investments within Europe.

Jan Bureš though has no doubt that high earning Chinese companies and banks are seeking new investment opportunities outside their crowded domestic market.