Delegation of regional governors starts trip to China to boost business relations

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On Monday a delegation of nine Czech regional governors started a one-week trip to China. The aim is to foster bilateral relations in the areas of tourism and business and to lure Chinese investors - mainly in the fields of IT and electronics - to the Czech Republic. The delegation was invited by Beijing and is scheduled to visit the ministries of foreign affairs, trade, and tourism as well as Shanghai and the province of Yunnan.

Trade with China currently represents only a fraction of the Czech Republic's trade with, for example, neighbouring Slovakia but that doesn't mean there isn't plenty of potential. Dita Asiedu spoke to economic analyst Petr Zahradnik, asking him to assess the Czech Republic's business relations with China:

"We cannot forget that China represents a market with 1.3 billion people and, along with India, this is a one-time business opportunity. Both countries are in the upswing trend of their economic development and developed countries and their businessmen are trying to use this opportunity in their favour."

Could you start off with a brief introduction to Czech-Chinese business relations?

"As far as Czech imports are concerned, the most dominant items are textiles, shoes, and those kinds of products. The second most important group of commodities are represented by different kinds of electronic products and software. Unfortunately, though, they sometimes are not in line with copyright regulations and legislation. Other imports include semi-finished products for the manufacturing industry and so on."

What exactly do we export and what could we benefit from?

"Czech exports to China are mainly traditional manufacturing products. For example, equipment for breweries, power stations, and so on. But it is necessary to say that the balance of trade between the Czech Republic and China is heavily in deficit from the Czech point of view, which means that the size of exports from the Czech Republic to China is roughly nine or ten times lower than the amount of imported goods from China to the Czech Republic."

So, in what way would you say could these relations be improved to benefit the Czech Republic a little more?

"First of all, I would say that it depends on the purchasing power of the population. When it is relatively low, on average, the population logically prefers or tends to consume rather low-priced products that are imported from China. Here, I mean shoes, textiles, and possibly also no-brand electronics and software. But with the growing wealth in the Czech Republic, I would expect that the trend to prefer those kinds of products will reduce. The second thing is to accepts the rules, as I mentioned, regarding copyright rules and intellectual property.

"On the other hand, in some economically sensitive regions the Czech Republic can be a safe haven for some Chinese investors. So far, we can mention only one big Chinese investment project in Nymburk that produces equipment for TV sets."

As far as Czech investments in China are concerned, in what areas should businesses invest?

"In the Czech Republic, big companies are a part of big, usually multi-national, alliances or big business groups and the investments of big companies in China like Skoda, for example, are mostly managed and provided by the Volkswagen headquarters. So, I'm sure that there is much more appropriate space for specialised, strong, experienced but medium-sized companies.

"For example, a very traditional branch of the Czech manufacturing industry is the production of bicycles. A big portion of the volume of produced bicycles is produced in China. Another example is the production of office equipment, which is represented by Kohinoor - a very traditional company on the Czech market. I would also mention the Czech kitchen equipment company which is also a case where a medium-sized company has successfully expanded onto the Chinese market."