More than just Czech mates

China sends large delegation to Prague to keep building ties with Central and Eastern European countries

Advanced technology and talent, relatively low costs, plentiful natural resources and easy access to the rest of Europe have put the 16 Central and Eastern European countries on the map for an expanding China, which sent a large delegation to Prague at the end of last month for two sets of meetings with regional leaders.

China and Central and Eastern European countries are well placed for mutual benefits from trade, investment and infrastructure building, Chinese Vice-Premier Zhang Gaoli said in the Czech Republic on Aug 28.

Czech Prime Minister Bohuslav Sobotka and Chinese Vice-Premier Zhang Gaoli during the China Investment Forum in Prague on Aug 28. Bilateral trade was worth $9.45 billion last year. AFP

Zhang led a delegation of about 700 Chinese government representatives and entrepreneurs to the fifth China Investment Forum and the second China-Central and Eastern Europe leaders' meeting.

The two forums were organized by the Czech China Chamber of Collaboration and attended by more than 1,000 professionals and executives from China and Europe.

Zhang stressed ties between China and CEE countries were a spearhead for China's overall business in Europe.

"Like China, the CEE countries have had remarkable results in infrastructure development and are becoming one of the most dynamic and promising regions in Europe. In recent years, we have repeatedly raised the economic focus for the Czech Republic, Hungary and some other CEE countries."

The foundation for the recent rapid growth of China-CEE ties was laid in April 2012, when China's then prime minister Wen Jiabao visited Poland for a meeting with prime ministers from the 16 CEE countries.

The meeting became the springboard for "16+1", an initiative Wen proposed that includes a wide range of China-CEE cooperation, including a Chinese credit line of $10 billion (7.6 billion euros) to CEE countries for infrastructure.

The credit line is for financing more than 15 to 20 years for projects in areas such as high technology, renewable energy, production, raw material exploitation, roads, railways, airports, and public utilities and power plants.

As a result, China and Romania have decided to set up working groups on major infrastructure projects. China, Hungary and Serbia also announced they have agreed to jointly build a railway between the two European countries.

Last November, Chinese Premier Li Keqiang attended a meeting of Chinese and CEE leaders in Romania's capital, Bucharest, where he announced 12 proposals to further advance China-CEE ties in areas such as the economy, culture, education and tourism.

Zhang says building infrastructure in CEE countries is one promising area for cooperation, highlighting railways, highways, ports and energy as key areas.

"The 16 CEE countries are committed to economic restructuring. They have great demand for investment in infrastructure building, and they have high hopes for more exports and more foreign investment. China, for its part, has huge potential in its domestic market, and has had fast increases in its overseas investment," Zhang said.

CEE countries are also great destinations for Chinese companies' assets because they have a favorable investment environment and can act as a springboard for Chinese investment in the European Union and beyond, he said.

"We may connect Chinese companies' aims to go global with CEE countries' ties with the European Union."

In the case of the Czech Republic, the country's longstanding industrial strength has attracted a number of Chinese companies to build factories there, including white goods manufacturer Sichuan Changhong Electric Co Ltd, canned food producer Shanghai Maling Aquarius Co Ltd and Yuncheng Plate-making Co Ltd.

And in Bulgaria, China's Great Wall Motors has established a factory to manufacture cars for the European market in partnership with local company Litex Motors.

Lian Yongping, general manager of Changhong Europe Electric, says the Czech Republic is a good entry point for Chinese manufacturers because it is centrally located, and as a member of the European Union its products are exported tax-free to other EU countries.

The Czech Republic also has a highly skilled workforce but relatively low costs of production compared with Western European countries, Lian says.

"Expanding production into Europe is a crucial step for a Chinese company to become internationally competitive, and I believe that the Czech Republic and other CEE countries are a good springboard for this process."

Zhang also welcomed companies from CEE countries to invest in China, and in the process bring with them advanced technologies and expertise.

He says CEE companies are especially encouraged to invest in northeastern and western parts of China, where economic growth is slower and industrial upgrades are much needed.

"China has development imbalances between eastern, central and western regions. This is a big problem for us, so we need to revitalize the industrial base in the Northeast and to develop western China.

"And now we are also stressing the development of Beijing, Tianjin and Hebei province and also the Silk Road economic belt and the Maritime Silk Road development initiatives. We welcome companies from CEE countries to visit China more to find the best opportunities."

The Silk Road initiatives are concepts proposed by Chinese leaders to encourage China-Europe cooperation. The land-based Silk Road economic belt begins in Xi'an and runs through Central Asia to Europe. The Maritime Silk Road goes from Quanzhou to the Malacca Strait and up the Red Sea to Europe.

China's massive consumer market can also create a big market for CEE exports, Zhang said. China's economic growth is on target and the government is committed to the country's reform and further opening-up of its markets, creating an equal playing field for foreign companies, he said.

In the next five years, he said, China will import over $10 trillion in goods, and invest $500 billion overseas investment, and more than 500 million Chinese tourists will make overseas visits, all of which will create opportunities for CEE businesses.

Czech President Milos Zeman echoed Zhang's optimism, adding that his country has strengths complementary to China's, making the Czech Republic a good first stop for Chinese companies.

"There are many examples of a win-win strategy," Zeman said, naming heavy industry, consumer products, energy and public infrastructure as examples of promising sectors for China-Czech business.

The possible addition of a direct flight between Prague and a Chinese city would be a key breakthrough, he said.

Zeman also said he hopes Chinese banks can make use of the Czech Republic's strong financial sector.

Cheng Yongru, counselor for the economic and commercial section of the Chinese embassy in Prague, agrees that Chinese banks could benefit from investing in the country as a way of advancing Chinese investments in CEE countries.

Chinese banks including the Bank of China, Export-Import Bank of China and China Development Bank have all sent representatives to research the Czech Republic financial sector's investment environment, Cheng says.

Trade between China and the Czech Republic was worth $9.45 billion last year. The Czech Republic is now China's second-largest trading partner, after Poland, in Central and Eastern Europe.

However, the relationship goes beyond business. To commemorate the 65th anniversary of diplomatic relations with China, Prague Castle is displaying the "Treasures of Ancient China", including Terracotta Warriors from Xi'an in Shaanxi province.

cecily.liu@chinadaily.com.cn