SEPTEMBER 16TH 2015
CENTRAL EUROPEAN COUNTRIES LOOKING TO REDUCE TRADE IMBALANCE WITH CHINA
Diplomatic and trade relations of China and Central European countries (Czech Republic, Hungary, Poland and Slovakia; or the so called Visegrad Group) back back 65 years, when China’s choices of trade partners were very limited and Germany was far from being the most important EU trade partner of China. As these countries had close ties to the Soviet Union, their trade fell victim to the Sino-Soviet diplomatic breakup in 1960 and the first modern-time trade links came after the fall of the Iron Curtain.
In the post-1989 era, mutual trade relations were improved especially by China becoming part of the WTO in 2001, and these Central European counties joining the EU in 2004. As well as in the case of other EU countries, the trade between China and countries of the Visegrad group is characterized by massive trade imbalance where imports from China outweigh those going the opposite way. In 2012, China’s total value of exports to Visegrad Group countries accounted for 1.3% of the total value of their export in 2012, while the total value of imports from these countries was just 0.57% of the total imports to China.
This reality will is not going to change drastically anytime soon, but the policies and governmental plans implemented in the past few years indicate that Central Europe will get slice of the pie, too. Central and Eastern European countries are an important part of the Silk Road Economic Belt and One Belt One Road initiative, focusing on China’s westward economic and infrastructure expansion.
The recent military parade held in Beijing was boycotted by majority of senior EU politicians. The Czech Republic, however, was represented by president Miloš Zeman. As part of his trip, large investment initiatives by the Chinese were announced (over 415 million USD) and several promising Czech projects have been also introduced.
In general, not only the investment projects from the Czech Republic, but also from other countries from Central and Eastern Europe have been mostly in technological and manufacturing field (most notably cars, electronic component, machinery). On the other hand, the potential of service sector has been virtually untouched by the Visegrad Group countries. While large manufacturing projects may face difficulties on Chinese market (such as the Czech pencil manufacturer Koh-i-noor closing their China operations last month), there opportunities of small and medium enterprises (SME) for whom finding their competitive edge for China will be easier that massive projects.
In April 2013, president Xi Jinping estimated that over the next five years, China’s imports will reach 10 trillion USD. This will create opportunity for Central European entrepreneurs interested in serving the thriving middle class in China. Czech Republic has been preparing well for this and positioning itself on the market in China (which is considerably difficult for county of a population smaller than the city of Beijing). Last year, Chinese film was co-produced and filmed in Prague and later this month, direct flight linking Prague with Beijing will start operating. These may be important milestones helping Chinese consumers have a clearer idea of what to associate with this particular small country. In any case, accessing the Chinese market remains difficult for foreign entities and joint-ventures (JVs) of foreign and domestic entity are the most common and easiest way of entering the market and quality assurance of your Chinese partner (or supplier company) and lack of due diligence is something that can have devastating effect on your otherwise ambitious and promising project.
«Current trends and perspectives in development of China-V4 trade an investments,» http://fmv.euba.sk/files/China_V4.pdf
«Polish-Chinese trade looking up?» Polskie Radio http://www.thenews.pl/1/12/Artykul/177953,PolishChinese-trade-looking-up
«Top official hails trade performance,» China Daily
Jason Hovet, «China’s CEFC adds to Czech buying spree with airline, brewery deals,» Reuters
«China, CEE countries eye land-sea express passage to speed up delivery,» Cooperation between China and Central and Eastern European Countries
Annex Asia Publishing