Czech Republic seals raft of deals during Chinese president's visit

Czech Republic seals raft of deals during Chinese president's visit
Xi was the first ever Chinese president to visit the Czech Republic
By Brian Kenety in Prague March 30, 2016

Czech and Chinese entities announced 30 deals on March 30 at an economic forum in Prague attended by the countries’ presidents. Among the biggest agreements were investments involving carmaker Skoda Auto, utility CEZ, and the owner of Prague’s main airport.

Czech President Milos Zeman had welcomed Chinese President Xi Jinping to Prague Castle on March 29 with a 21-gun salute – a tribute which no visiting foreign leader has been honoured with in over a half century. The pair then signed a Strategic Partnership aimed at "renewing and energising" bilateral ties.

Many have criticised Czech foreign policy for allegedly abandoning concerns over democracy and human rights. However, Prague will point to the raft of deals and its leap into the lead of a Central and Eastern European race to secure Chinese investment as justification.

In addition to that strategic partnership, aimed at furthering China’s One Belt and One Road (OBOR) initiative, 10 other memorandums or partnerships were signed on March 29, most significantly between the respective governments and central banks relating to investment and financial regulation, as well on industrial zones and in the health and aviation sectors.

Among the commercial deals signed on March 30 is one between China's SAIC Motor Corporation and Volkswagen Group, towards expanding an existing joint venture building cars for the Chinese market. VW subsidiary Skoda Auto, the Czech Republic’s largest exporter, will commit CZK54bn (€2bn) in investment over five years, as it aims to expand sales in the world's biggest auto market. The Czech marque sold over 280,000 units in China last year, which accounted for around 25% of production.

Many deals,  often leaked ahead of Xi’s visit, involved China Energy Company Limited (CEFC) and companies controlled by Czech billionaire Petr Kellner’s PPF Group or the closely-held Slovak/Czech J&T Finance Group (JTFG). CEFC has a 9.9% stake in J&T and wants to increase that to 50%. That intention was sealed in a new strategic cooperation agreement that, among other things, also finalised contracts to buy and renovate a Prague football stadium.

CEFC also sealed the acquisition of Czech engineering company ZDAS, which makes equipment mainly for the automotive sector, from Slovakia's Zeleziarne Podbrezova Group. A CZK30bn fund founded jointly by CEFC and Hengfeng Bank will take the company over.

CEFC also this month bought a stake in online travel agency Invia just weeks after the Central European online travel agency was acquired by Rockaway Capital, a technology fund backed by Kellner and JTFG.

Meanwhile, Prague-listed CEZ got in on the action. The state-controlled power group signed a memorandum on cooperation with China General Nuclear Power Corporation (CGN). CEZ is expected to launch a tender to add two new nuclear reactors to existing power plants in the course of the next couple of years. CEZ’s Skoda Praha, which builds and modernises power plants and systems, also signed a cooperative agreement with China’s Pinggao grid company.

In the same sector, Czech renewably energy investor SWH Group signed off with China Longyuan Power Group on an agreement focusing on technological and economic cooperation.

Travel and aviation was another busy sector. China Eastern Airlines, which plans to launch flights between Prague and Shanghai, concluded a framework agreement with Czech Aeroholding, the state holding company for Prague Airport. Meanwhile, Czech aircraft manufacturer Aircraft Industries signed a memorandum with China Aviation Supplies Holding Company.

In health, former Czech prime minister Petr Necas has brokered an agreement on cooperation between the Delta medical holding and Tongrentang (TRT), China's largest state medical facility, which has opened a private clinic of traditional Chinese medicine in Prague and plans to add more. Chinese company SinoHydro Corporation signed an agreement with Dow Europe, which plans to build a logistics centre in the Czech Republic.

In the public sector, the Czech Export Bank (CEB) signed a memorandum with the China Development Bank which it said would help shift the lopsided trade balance between the two countries. Chinese imports to the Czech Republic exceeded CZK450bn last year, while Czech companies exported only CZK 46bn worth of goods to China, plus another CZK10bn indirectly.

Agreements on facilitating Czech food and pharma exports were also signed on March 30. Many others are said to be in the works, but were not finalised during Xi's visit, the first by a Chinese president to the Czech capital since the former Czechoslovakia established diplomatic ties 67 years ago. Xi flew from Prague on March 30 to the United States where he – and Czech Prime Minister Bohuslav Sobotka – will attend a two-day Nuclear Security Summit starting on March 31.