Political and regulatory environments have direct impacts on businesses and their opportunities. No matter how the relationship between the Czech Republic and China is reformulated, PRINCEPS is here to help you understand what exactly it means for your business and help you take the next best step.
After years of Czech-Chinese sympathies encapsulated by the former Czech President’s foreign politics, the Czech Ministry of Foreign Affairs has announced plans to recalibrate its relationship with China. The Czech position is likely to be more value-driven and assertive, leading to adjustments in the countries’ economic cooperation including the “16+1 Initiative”. So what can Czech businesses expect from the expected change?
The “16+1 Initiative” has often been presented as a key economic opportunity for the Czech Republic. However, evidence shows, that trade between China and the broader CEE region had grown prior to the Initiative’s establishment in 2012, whereas after, it increased at a much slower pace, with Chinese exports to CEECs expanding much quicker than CEEC exports to China. Claims about Chinese FDI may also be exaggerated. In 2021, Chinese capital in the Czech Republic reached the value of 43 billion CZK, according to the Czech National Bank. In the breakdown of 2021 FDI by country, however, China’s contribution is not large enough to be explicitly mentioned, instead falling under “Other”. Furthermore, China is often accused of conducting “economic diplomacy” rather than regular investment activities and promoting an agenda dangerous to Czech national interests.
Diverse foreign markets?
Currently, over 80% of Czech exports head to EU countries, and 90% to Europe overall. As a result, potential shocks in the European market strongly affect Czech foreign trade. China remains an important trade partner for Czech companies and potentially losing this opportunity would expose their vulnerabilities. The Czech government’s anticipated confidence and emphasis on national interests could result in tighter trade restrictions. Should the renegotiation proceed unfavourably, Czech companies may find themselves further limited to European markets.
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