Prague, May 19 (CTK) – The state is obliged to support Czech exports, but not even the vision of succeeding on the world’s market with the highest number of customers should cover the high risks involved in trading with China, Ludek Vainert writes in daily Hospodarske noviny (HN) today.
On Thursday, Czech President Milos Zeman returned from a one-week official visit to China, on which he was accompanied by a large business delegation.
Vainert says it is good that the state is looking for new markets on which Czech products could be sold. There is no bigger attraction than the world’s largest market that has been apparently flourishing for nearly four decades, he adds.
Since the Chinese economy is controlled by a small elite, one can hardly pretend that this is standard environment, and the economic diplomacy must adapt to the situation.
When central and regional governments markedly influence the business in the country, Czech state delegations are needed to try to open doors for Czech firms, and this is true especially in China that is fond of formal negotiations very much, Vainert writes.
President Zeman’s third trip to China is therefore a logical step. All heads of state act in this way. German Chancellor Angela Merkel visited China ten times during her 17 years in office, Vainert says.
However, Zeman’s visit should be assessed according to its real results, not based on whether one likes the controversial Zeman or not, or according to wishful thinking, he says.
It is too soon to estimate the results of the freshly completed mission. The declared investments of tens of billions of crowns are still imaginary and not even the promised projects from the last few years have been implemented so far, Vainert writes.
Chinese investments in form of purchases of Czech companies or their shares, which has been in fact the only result of the effort to flatter Beijing so far, do not help Czech economy very much. Purchases of real estate or trophy assets such as a Czech football club or a famous historical building may make happy their original owners, but they will have little impact on the development of the Czech economy and the living conditions in the country, mainly at the current period of capital surplus, Vainert writes.
Moreover, the entry of Chinese capital is double-edged. It may be beneficial if the company’s new Chinese owners open their market for the company. This is what the Pivovary Lobkowicz brewery has been hoping for, he says.
But in more technical fields it happens that one must adapt to the demands of the Chinese market, for example to prefer simpler products. Lower technological level certainly is not a path towards higher added value of the products and consequently to higher salaries, which is the biggest task of the Czech economic policy at present, Vainert writes.
By taking over a firm, the new owner obtains the complete know-how. Once the Chinese acquire the know-how, the Czech Republic need not be the production base anymore. The owners and employees of Czech firms of course realise this: it seems to be one of the reasons why they often are cautious, Vainert says.
He says the Czech truck maker Tatra would be devastated if its Chinese “partner” flooded promising foreign markets with copies of its heavy-duty off-road trucks that might be a bit worse than the Tatras but also cheaper.
One can hardly imagine two makers of the Czech L-410 small transport aircraft prospering simultaneously. If the cooperation failed, it is easy to guess whether the Chinese or the Czech plant would end, Vainert writes.
Such concerns are far from groundless, similar cases occurred many times, he says.
Beijing gives so strong preference to domestic producers that foreign investors are clearly discriminated, unless they offer something that China strongly wishes to have. German firms often have this advantage, while Czech entrepreneurs are rather supplicants who would be used. Even such an experienced businessman like the billionaire Andrej Babis is said to have lost 200 million crowns in China, Vainert writes.
The firm’s know-how is at stake because of simple copying. For this reason, the Liechtenstein firm Kaiser producing high-tech excavators and high-pressure pumps decided to give up the Chinese market to avoid the risk of losing the technological lead, he writes.
In many fields, the Chinese market is the key to enormous profits. But the risks are enormous as well. Copyright is respected more than it had been in China, yet the situation is far from standard. The conditions for capital outflow are far from standard, too. Political connections are necessary also because of this, and the Czech PPF Group has a lot of experience in this respect, Vainert writes.
It may be unwise to stake too much on the Chinese card and kowtow to Beijing, he concludes.
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