China's Evolving Ties with Central Europe

November 12, 2014 11:30 AM

When Miloš Zeman, president of the Czech Republic, visited China in late October, he said he hoped that a “full cancelation” of any visa requirements for Chinese citizens would be achieved in his lifetime (he is 70 years old). Zeman also invited Xi Jinping to visit Prague, and expressed his respect for China, saying it is now a “modern and prosperous land.”[1] This unusual language shows a changing attitude toward China, at least in the Czech Republic – but does China really have a new friend in the European Union?

Too small to count?

Superficially, the data suggests that China’s economic ties with the heart of Europe will continue to develop at a modest rate at best. The number of M&A deals by Chinese investors in central European countries has barely exceeded the single digits since 2008. On the other hand, published estimates suggest that investors from China, including Hong Kong, have taken over hundreds of enterprises[2] in large European economies in recent years.

But consider some of the outcomes of Zeman’s recent trip. A patented photocatalytic paint will be piloted in China and a clean water project was included in a signed memorandum. (According to early tests, photocatalytic paint may be effective at abatement of nitrogen oxides.)  Czech daily Hospodářské Noviny reported that this environmental protection deal, in addition to two other projects, could be worth 400 million euros in the next five years.

Czech representatives said that a new consulate will be opened in Chengdu,[3] and a Czech brewery signed a licensing agreement with a Tianjin catering company. A Czech consumer finance company (established four years ago and now providing credit services to households in 150 Chinese cities) announced its plants to expand. The Bank of China plans to open a branch in the Czech Republic soon, and several Czech sources reported that a direct route would probably connect Shanghai with Prague next year.

Stable governments wanted

In many ways, the recent developments are surprising. In an interview with the Peterson Institute, Rudolf Furst, a sinologist and researcher at the Institute of International Relations in Prague said that the Czech Republic “made the biggest U-turn in political relations with Beijing” of all 16 central and east European countries.

According to Furst, “the defeat of the liberal-conservative parties opened the way for pro-Chinese policy consensus in the middle of 2013, which is now being conducted by the new Social democratic government led by Prime Minister Bohuslav Sobotka and President Miloš Zeman.” But Furst warns that “the Czech-Chinese political relations fluctuate according the character of currently ruling coalition.” (Note: the “liberal” parties in the region have been pro-market and pro-western, but the conventional labels tend not to be informative.)

Wang Yiwei of Remin University said that the Czech Republic’s moves will encourage Hungary, Poland and Slovakia to develop closer ties with China, but that hopeful scenario will only play out as long as cooperation with China does not carry large political costs at home. Judging from the reactions to Zeman’s visit to Beijing by the Czech press, these costs may be considerable.

An unforgiving discourse

The Czech media is generally critical of what Furst describes as a “pragmatic style of the new government.” According to Furst, some of the domestic media coverage was “aggressive.”

Furst’s description is accurate: for example, several Czech media outlets were appalled when Zeman suggested that Czechs can learn something about economic growth from the Chinese.

In the United States, it is not heretical to admit that economic growth in China has been impressive, but many Europeans, especially those who lived in single-party states just 25 years ago, continue to view any praise of China with suspicion. Some journalists expressed their frustration that Václav Havel, who represented peaceful dissent against Communism, is no longer “the symbol” of the Czech Republic. One commentator wrote that Zeman “speaks like Husák” (Czechoslovakia’s last communist president).

Former Czech deputy minister of foreign affairs Jiří Schneider also criticized the notion that public servants should engage in economic diplomacy, although he conceded that diplomats can build connections between local and foreign firms, universities and NGOs. Many media outlets in central Europe will probably continue to be skeptical of efforts to boost cooperation with China. This tendency means that the voices who oppose closer ties with China will continue to have a platform.

China in the EU

Everyone can pick their favorite indicator to gauge China’s engagement with Europe. True, there are now more than 100 Confucius Institutes in 26 EU countries, and the EU-China bilateral trade value will rise by 25% within the next six years, according to a Deutsche Bank research note from this summer. (This estimate was calculated before the Czech U-turn became easily visible.) Yet these patterns alone do not guarantee future mutual affinity.

As many researchers have shown (including several PIIE experts in this report) China has tended to focus on securing access to natural resources abroad. Therefore it will be interesting to observe what kind of relationship China will develop with post-crisis Europe.

The Czech example suggests that analysts should pay attention to the actions of individual member countries of the European Union, given that the EU will not have a uniform approach to foreign policy, as far as one can see.[4] China’s moves in those member states which are not in the spotlight can give observers some clues about its evolving foreign policy.

Footnotes:

[1] “You export advanced technologies, modern equipment, computers, and more. Thank God, you do not export beer, and Czech beer will be exported to China, not the other way around. Regarding the structure of your export, it has good features of a modern and prosperous land.” (Vyvážíte vyspělé technologie, moderní vybavení, počítače atd. Díky bohu ne pivo, české pivo bude vyváženo do Číny, ne naopak. Pokud jde o strukturu vašeho exportu, jde o dobrý charakteristický rys moderní a prosperující země.")

[2] According to one analysis, 10,000 employees in Italy saw their employer acquired by a Chinese investor in 2012 alone.

[3] At least seven memoranda and treaties were signed by Czech and Chinese representatives, according to press reports.

[4] A recent set of recommendations to Federica Mogherini, Europe’s new foreign policy chief, illustrates that many scholars in Europe are uneasy about China’s power (“It is not in Europe’s interest that China dominate the Asia-Pacific region more than it does today.”). This memo also argues that the EU should "develop stronger partnerships with countries across all continents—especially like-minded democracies [emphasis added]—and prod them to confront global challenges and develop sustainable rules-based regimes."

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