一帶一路對Visegrad聯盟之影響 - 政大學術集成

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(1)國立政治大學商學院國際經營管理英語碩士學位學程 International MBA Program College of Commerce National Chengchi University. 碩士論文政治. 大. 立Master’s Thesis. ‧. ‧ 國. 學 sit. y. Nat. 一帶一路對Visegrad聯盟之影響 n. al. er. io. Impact of Belt and Road Initiative on Visegrad Group. Ch. engchi. i n U. v. Student: Alena Geppert, Ing Advisor: Professor Tse-Kang Leng. 中華民國 106 年 6 月 June 2017.

(2) 一帶一路對Visegrad聯盟之影響 Impact of Belt and Road Initiative on Visegrad Group. 研究生：蓋蓮娜. Student: Alena Geppert, Ing. 指導教授：冷則剛. 政治大國立政治大學. 學. ‧ 國. 立. Advisor: Prof. Tse-Kang Leng. ‧. 商學院國際經營管理英語碩士學位學程碩士論文. er. io. sit. y. Nat. A Thesis. n. a to International MBA Program Submitted iv l C n U NationalhChengchi University engchi. in partial fulfilment of the Requirements for the degree of Master in Business Administration. 中華民國106年6月 June 2017.

(3) Abstract Impact of Belt and Road Initiative on Visegrad Group by Alena Geppert, Ing. This qualitative study provides conclusions on Impact of Belt and Road Initiative for Visegrad countries – the Czech Republic, Hungary, Poland and Slovakia. It analyses trade indicators and foreign direct investments between Visegrad countries and China for years 2012-2016. It. 政治大 geopolitical and political level. In the end, this study provides suggestions for Visegrad 立 countries to be more attractive for Chinese investors or to benefit more from cooperation.. compares results and status of relations based on Belt and Road Initiative on economical,. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. i n U. v. Keywords: Belt and Road Initiative, Visegrad, Central Europe, China, current affairs, infrastructure, global project. i.

(4) TABLE OF CONTENTS Introduction .......................................................................................................................... 1 1.. Introduction to Belt and Road Initiative ....................................................................... 3 Economic Motivators for Belt and Road Initiative ...................................................... 6 Geopolitical Motivators for Belt and Road Initiative .................................................. 9 Political Reasons ........................................................................................................ 13 Host Countries Stance ................................................................................................ 14. 治政 The Visegrad Group and Their Relations with China 大 ................................................ 20 立 The Czech Republic ................................................................................................... 24 China´s Outgoing Challenges .................................................................................... 15. 2.. 學. ‧ 國. 2.1. 2.2 Hungary ...................................................................................................................... 31 2.3 Poland ......................................................................................................................... 35. ‧. 2.4 Slovakia ...................................................................................................................... 40. y. Nat. 4.. Suggestions for the V4 countries................................................................................ 54. 5.. Conclusion .................................................................................................................. 57. n. al. er. sit. Analytical Part ............................................................................................................ 45. io. 3.. Ch. engchi. i n U. v. Bibliography ....................................................................................................................... 60. ii.

(5) LIST OF TABLES, GRAPHS AND PICTURES. Table 1 Economies Along the Belt and Road............................................................................. 5 Table 2 Chinese FDI in the Czech Republic. ........................................................................... 28 Table 3 FDI in Hungary.. ......................................................................................................... 34 Table 4 Chinese FDI in Poland................................................................................................. 38 Table 5 Chinese FDI in Slovakia. ............................................................................................. 42 Table 6 Attractiveness of China for V4 Countries. .................................................................. 45. 政治大. Table 7 Attractiveness of V4 Countries for China. .................................................................. 46 Table 8 Investment Attractiveness of 16+1 Platform. .............................................................. 47. 立. Table 9 Trade Indicators of Analysed Countries. . ................................................................... 48. ‧ 國. 學. Table 10 Trade Indicators of Analysed Countries.. .................................................................. 49 Table 11 FDI into V4 2012-2016. ............................................................................................ 51. ‧. Graph 1 V4 Imports from China.. ............................................................................................ 48. y. Nat. n. al. er. io. sit. Graph 2 V4 Exports to China. .................................................................................................. 49. i n U. v. Picture 1 Chinese FDI in Europe 2000-2016............................................................................ 42. Ch. engchi. iii.

(6) Introduction Current development and growth in China leads to unavoidable changes of the whole China economy. There is an urgent need to search for new export opportunities for China´s overproduction. Overproduction is tightly connected with having thousands workers laid off and with growing unemployment rate, together with emergence of new social problems. China’s government plays a significant role in influencing the whole country’s economy, realizing the responsibility and need for changes. So far, China is unfairly subsidizing industries to be more competitive with those of their trading partners and China also stands. 政治大 is recognised within World Trade Organization (WTO) as a non-market economy, whilst 立 accused of outright theft of intellectual property from some U.S. companies. Therefore China. constructing prices for import according to the prices or constructed value in a market. ‧ 國. 學. economy of a third country. However, China seeks to be recognised as a market economy since becoming WTO member in 2001. That would allow China to enjoy the same market. ‧. status as the U.S. and European Union, setting export prices and margins according to the. y. Nat. exporter’s domestic costs and prices of his export to the third country. Legal basis for China´s. sit. non-market economy status originates from its Protocol of Accession to WTO in 2001. China. er. io. committed to adhere to the rules and obligations of the WTO system, especially. al. n. v i n C hand non-discrimination. WTO’s policies of pro-competition e n g c h i U The legal basis declares that nonmarket economy status expires after 15 years after the country´s acceptance to WTO, valid for in constructing home prices according to General Agreement for Tariffs and Trade, and to the. China as of 11th December 2016. However, China´s largest trading partners EU and U.S. still do not recognize China as a market economy. This fact might influence especially foreign direct investments or impact on the general atmosphere of commercial relation. China seeks gateway to Europe aiming at raise of its influence in Europe and Europe attempts to advance commercial relations with China to shape Europe’s competitiveness in the next decade. Europe is China´s largest trading partner, however, Europe is still cautiously considering Free Trade Agreement with China, or accepting market economy status of China. So far, China-EU relations are mainly based on trade and economics, only slowly moving to the issues of defence and security cooperation or any further cooperation. Current Chinese. 1.

(7) President Xi Jinping strives for expansion of cooperation mainly on trade, finance, infrastructure, and energy. Those aims are encompassed in Belt and Road Initiative. Belt and Road Initiative is an economic and diplomatic program that could reshape the trade in global scale, with massive Chinese investments not only into hosting countries infrastructure. China is using investment-hungry countries that are generally more open toward China to gain a foothold in Europe. To boost China’s influence in Europe, from 2013 Chinese President Xi Jinping has been signing constantly different kinds of treaties of friendship and cooperation with chosen countries along the defined belt, or with countries of special interest.. 治政大 and its impact for Visegrad In my thesis I am going to focus on Belt and Road Initiative 立 Group (V4) countries, Central European countries within the European Union. My research ‧ 國. 學. will be a qualitative research rather than a quantitative one due to a lack of statistics on the BRI initiative. Firstly, I will describe this initiative and the current development of this. ‧. initiative, including its aims and obstacles from the perspective of China. I will try to define main actors and state their attitude towards it, defining their own interests and expectations,. y. Nat. sit. including interests of host countries. Secondly, I will provide deep case study on current level. al. er. io. of international relations of V4 countries with China and their cooperation with China. I will. n. focus mainly on infrastructure and business growth in recent years, based on influence of Belt. Ch. i n U. v. and Road Initiative. I will compare national attitudes within V4 countries and suggest common strategy for the region.. engchi. The aim of this paper is to: assess the contribution of Belt and Road Initiative for Visegrad Group countries and determine the final impact of the Belt and Road Initiative on Visegrad countries. Moreover, I will try to predict the future development of cooperation among those two regions and suggest common attitude or strategy towards China, eliminating the risks for V4 countries arising from China behaviour and gaining profit from mutual cooperation with China.. 2.

(8) 1. Introduction to Belt and Road Initiative Belt and Road Initiative (BRI) is a complex project of China that is based on way of the historical Silk Road. The project was unveiled in September 2013 in Kazakhstan by current president of China Xi Jinping and includes up to 65 countries. It’s a wide-ranging endeavour that stands to create a significant economic boost to more than 65 countries that represent 70 % of the global population, more than half of global GDP and 24 % of global trade.1 The project aims to build a New Silk Road, also known as Silk Road 2.0 and to create two new ways – land route known as Silk Road Economic Belt and south maritime route called 21st Century Maritime Silk Road. The name of the project is also significant: The belt symbolises. 政治大 route via the western Pacific and Indian Ocean. Emphasis on infrastructure highlights the 立 importance of linking projects of maritime ports with land routes to Central and Western the land trade route linking central Asia, Russia and Europe, the road refers to a maritime. ‧ 國. 學. Europe. Countries located along the belt are listed in the Table 1. BRI includes several projects along different corridors, namely high-speed rail connections, trans-national. ‧. highways and pipelines. According to the EU-Asia Economic Governance Forum, all central. Nat. io. sit. anniversary of the foundation of the People's Republic of China.. y. sub-projects relating to the Silk Road could be completed by 2049 2 , right on the 100th. n. al. er. “The Belt and Road Initiative is a systematic project, which should be jointly built through. i n U. v. consultation to meet the interests of all, and efforts should be made to integrate the. Ch. engchi. development strategies of the countries along the Belt and Road.”3 It´s not limited to areas outside of the ancient Silk Road but it´s open to all countries, international and regional organizations for engagement. BRI promotes peace and cooperation, openness and inclusiveness, mutual learning and mutual benefit. BRI respects the purposes and principles of the Five Principles of Peaceful Coexistence of UN Charter. At first, it grants mutual respect for each other's sovereignty and territorial integrity. It supports mutual non-aggression and tolerance among civilizations. It respects international norms and promotes mutual noninterference in each other's internal affairs. Lastly, it guarantees quality and mutual benefit for. 1. (Lehmacher, et al., 2017) (Bessler, 2015) 3 (National Development and Reform Commission, 2015) 2. 3.

(9) all countries involved, seeking complementary advantages of benefit sharing and achievement of common development. It accommodates the interests and concerns of all parties involved. According to the Vision and Actions on Jointly Building Silk Road Economic Belt and 21stCentury Maritime Silk Road4, the BRI is open for cooperation, promotes practical cooperation in all fields, and works to build a community of shared interests, destiny and responsibility featuring mutual political trust, economic integration and cultural inclusiveness. It focuses on five main cooperation priorities, including coordination, facilities connectivity, unimpeded trade, financial integration and people to people bond, described as a determinant social factor for public support necessary for the successful implementation of the initiative. Policy. 政治大 exchange of intergovernmental 立 macro policies. However, all communication should be based coordination is the cornerstone of this initiative, especially intergovernmental cooperation,. ‧ 國. 學. on mutual political trust and involved parties should strive for reaching shared interest on the regional or on the global scale.. ‧. Facility connectivity has the highest priority for this initiative. Later on, the initiative is seen as an attempt to enhance trade and political relations amongst China, Europe and Asia, as well. y. Nat. sit. as allowing China to boost its growth by exporting its capital, technology and capacity. al. er. io. globally.5 Bridging trade flows between Asia and the EU with rail network is a huge trade. n. opportunity for both China and European countries. It will remove investment barriers. Ch. i n U. v. between regions. It will lead to boom in tourism with possibility of simplifying visa. engchi. procedures and raise the interest of people from both regions in intercultural exchanges. Later on, it might enhance projects for student exchanges between regions or even create shared resource and development centres among universities. China describes this initiative as win-win arrangements — connecting the world, helping other developing countries grow their economy and improving China’s access to resources and markets abroad. China would have quicker access to European market and European companies would have more effective route for export, as well as for import of their own China-based production. However, it must be also considered as China’s plan to build its. 4 5. (National Development and Reform Commission, 2015) (BDO SINGAPORE, 2015). 4.

(10) sphere of influence in Asia and beyond, threatening the dominance of the United States in world politics. BRI is aimed at promoting a whole range of Chinese interests. These aims can be divided into three categories: economic, political and geopolitical, represented mainly in the construction of infrastructure. I am going to deeply focus on these motivators in following three chapters. Map plate. Economies along the Belt and Road. Central Asia. Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan. 政治大. Mongolia and. Mongolia, Russian Federation. Russian. 立. Federation. ‧ 國. 學. Vietnam, Laos, Kampuchea, Thailand, Malaysia, Singapore,. Southeast Asia. Timor. European. sit. er. Poland, the Czech Republic, Slovakia, Hungary, Slovenia,. al. v i n C hBulgaria, Serbia, Montenegro, Romania, Macedonia, Bosnia and engchi U Herzegovina, Albania, Estonia, Lithuania, Latvia, Ukraine, Croatia,. n. and. Lanka, Maldives. io. East. y. India, Pakistan, Bangladesh, Afghanistan, Nepal, Bhutan, Sri. Nat. Middle. ‧. South Asia. Indonesia, Brunei, Darussalam, Philippines, Myanmar, East. Belarus, Moldova West Asia and. Turkey, Iran, Syria, Iraq, the United Arab Emirates, Saudi Arabia,. the Middle East. Qatar, Bahrain, Kuwait, Lebanon, Oman, Yemen, Jordan, Israel, Armenia, Georgia, Azerbaijan, Egypt. Table 1 Economies Along the Belt and Road. 5.

(11) Economic Motivators for Belt and Road Initiative China wants to sell through BRI the excessive capacity in its construction, power generation, mining and building material industries. However, there is no official list of BRI projects available, only a public list of economic corridors. Projects are negotiated and decided jointly by China and involved countries. Many BRI projects will adopt the Public Private Partnership model, having host country government collaborating with the Chinese enterprise, with China’s stated owned enterprises (SOE) investing or carrying out investment and construction simultaneously in the host country. After the agreement on terms of the project with a host country, funds from Chinese bank institutions are transferred directly into the Beijing-based. 政治大. bank accounts of China’s state-owned enterprises.. 立. Whilst allocating their resources worldwide, China realizes the need to be competitive in the. ‧ 國. 學. global economy and to improve operational efficiency of national enterprises. Most of China´s SOEs are still in the early stage of overseas market development; it means they are. ‧. just starting the process of internationalization. According to the top-level government policy paper entitled “Guidelines to Deepen Reforms of SOEs” China’s SOEs should begin their. sit. y. Nat. internationalization to achieve a socialist market economy that combines dominance of state owned enterprises with open market economy. SOEs need to learn how to grow in scope and. io. n. al. er. size and be competitive in international environment but they mainly need to concentrate on delivering better management.. Ch. engchi. i n U. v. SOEs is given an opportunity to grow, improve their operations management, enhance their global competitiveness etc. because although BRI is a national strategy, companies are choosing projects in which they want to participate and government is providing necessary support services to them. For example, SOEs benefit from inexpensive lines of credit 6 supplied by the Chinese state banks, followed by Chinese private companies that act as subcontractors, especially in the energy and mining sectors. To demonstrate surplus of industrial capacity and help to promote BRI abroad, Beijing launched a dramatic wave of mergers among central SOEs in 2015 as a part of SOEs reform. Having larger merged and. 6. (Sanderson, 2012). 6.

(12) complex companies might though negatively impact efficiency, competition, and the quality of goods and services. SOEs play important role in the whole initiative: the ability of SOEs to screen out positive net present value projects, evaluate and face all risks connected with international business and to run those projects with profitability will ultimately decide the success of BRI initiatives. The greatest difficulties come with unfamiliarity with tax system in the host country and strict regulation for Chinese enterprises. According to the Deloitte research7, SOEs prefer mergers and acquisitions as the method of internationalization; followed by overseas construction contracts and establishing overseas branches to advertise and promote domestic business. 政治大 followed by Central and Eastern 立 Europe.. products. The most favourable regions for Chinese SOEs are Southeast Asia and South Asia;. ‧ 國. 學. There are eight big enterprises active along BRI8: world’s fourth largest container fleet China COSCO Holdings Co Ltd, largest public port operator in China named China Merchants Port. ‧. Holdings, constructers China Railway Group (CREC) and China Railway Construction Corporation (CRCC), port operator DP World, German DHL using fully the advantage of all. y. Nat. sit. outstanding corridors to perform their business, American company HP operating cargo trains,. er. io. and energy provider General Electric.. al. n. v i n deepening financial cooperation,C underpinning U stability system, investment and h e n g ctheir h icurrency. Financial integration plays an important role in the support of the initiative. China seeks. financing system. The second reason from the economic point of view is the reason that China aims to expand the international use of their currency renminbi: BRI should trigger a regional infrastructure boom by linking China with Asia, East Asia, Europe and Africa by land and sea and boost internationalisation of renminbi by encouraging its use in both trade and financial transactions. Internationalization of renminbi will raise prestige and influence, resulting in reduced currency risk and trading costs for China and countries involved in the same production network.. 7 8. (Sze, et al., 2016) (Shepard, 2017). 7.

(13) Together with internationalization, more and more foreign companies have already begun using Chinese currency and China believes that many countries along the belt will accept the renminbi as a trading currency in the future. The scale of BRI will increasingly push the Chinese currency to serve as a vehicle to raise capital in overseas financial centres to fund various infrastructure projects. 9 The International Monetary Fund added renminbi to the basket of currencies that determine the value of the Special Drawing Right and renminbi formally became a reserve currency in September 2016.10 Because of their currency internationalization, China faces the volatility of the renminbi. However, currency stability remains their policy priority. The main reasons that influence. 政治大 return on investment outside 立of China and redirection of excess savings.. managing the currency internationalization are fear from lower economic growth, higher 11. To fight the. ‧ 國. 學. volatility and keep the economy from slowing down at the same time, The People's Bank of China uses often following instruments: foreign-exchange intervention, interest rates and capital controls.. ‧. To support BRI development, three financial institutions have been set up - Silk Road. y. Nat. sit. Infrastructure Fund (launched 02/2014), Asian Infra Investment Bank (founded 10/2014) and. al. er. io. New Development Bank (founded 10/2014). Up to that, in September 2016 Hongkong. n. Dagong Global Credit Rating Group and International Capital Market Association presented. Ch. i n U. v. plan about bond issuance for countries along the belt, called Silk Road Bonds. The initiative. engchi. also cooperates with financial partners such as the Shanghai Cooperation Organization (SCO) and strengthens China-ASEAN cooperation because they both have the same interest in building the infrastructure in South East Asia region. In addition, financially capable private actors are being invited and encouraged to join the initiative and take part in the key projects. Creation of Asian Infra Investment Bank (AIIB) is often understood as an attempt to challenge global governance norms and become a new international organization, using. 9. (Moon, 2016) (Mitchell, 2016) 11 (Islam, 2016) 10. 8.

(14) renminbi as the main currency. AIIB membership consists of 70 countries from the whole world. China holds 26 percent of voting shares12 in the institution, keeping the de facto veto level since AIIB requires a three-quarters majority for certain decisions. However, this enormous Chinese project is very costly and even China´s deep pockets have limits. The estimation of Asia Development Bank formerly stated that Asia needs US$ 8tn13 to fund infrastructure construction in period of 2010-2020. To fund infrastructure construction in foreign countries, China is loaning hundreds of billions of dollars even during an economic slowdown at home. If China fails to stimulate their economy, it might be a huge problem.. 治政大the construction of approximately developing countries via its banks’ policy to underwrite 立 900 infrastructure projects. This might be very risky because it is based on the assumption Beijing has already set aside nearly 1 trillion USD14 to make concessionary loans to about 60. ‧ 國. 學. that poor countries will pay China back. Many developing countries are just enjoying cheap Chinese loans now and leave the pay back to future leaders and citizens but China cannot. ‧. write off bad loans ad infinitum. The risk is high especially at loans to countries with speculative ratings (BB+ and lower).. er. io. sit. y. Nat. Geopolitical Motivators for Belt and Road Initiative a. n. iv l C n hengchi U connectivity in all regions in Asia and step by step on bridging Asia, Europe as well as Africa. BRI emphasizes infrastructure improvement along the Belt. It focuses on building the. It´s described as an overland connection extending towards the West. Chinese BRI strategically aims to get to Europe. Infrastructure constitutes a central component of the BRI initiative – projects include mainly railways, ports, pipelines, telecommunications and IT infrastructure. It focuses on the key passageways, junctions and projects. It prioritizes linking up unconnected road sections, removing transport bottlenecks or advancing road safety facilities and traffic management. 12. (Panda, 2017) (ADB, 2016) 14 (Eisenman, et al., 2017) 13. 9.

(15) facilities and equipment. In addition, it aims to improve international cooperation and easer postal services, unite customs and quality inspection. Later that connectivity might lead to the development of modern service trade facilities and create boom in cross-border e-commerce. Infrastructure investments themselves account for large shares of China’s foreign direct investments and aid programs. “The power and potential of the Belt and Road lies in its versatility. This emerging network of revitalized transportation routes and new trading hubs, which stretch between China and Europe, finds efficiency, security and healthy competition in the fact that it is not a single route but a network of multiple, interconnected trans-Eurasian corridors.“ 15 It is one of the most ambitious undertakings in the economic history of the world.. 學. ‧ 國. 立. 政治大. Land route infrastructure. ‧. Land route infrastructure spans from Xian in Central China via the mainland into Central Asia to Samarkand, Tehran, Istanbul, Moscow, through Eastern Europe to Duisburg and finally to. Nat. sit. y. Rotterdam. There are three operational rail corridors connecting China and Europe: currently. io. er. booming northern and central corridor, both linking three large customs zones. The southern corridor is under establishment. Along each corridor the transport time is roughly 10,5 to 16. n. al. Ch. i n U. v. days. The northern corridor goes mainly through Russia, and for the most part follows the. engchi. route of the Trans-Siberian Express. It goes through Poland to Germany and further to the west. One of the interesting projects on this corridor is Moscow-Kazan high-speed railway. The central route goes all the way across Kazakhstan before linking into the northern route in the west of Russia. Southern corridor route goes through Kazakhstan to Aktau and is linked with ferry to cross the Caspian Sea or goes around to Iran, Azerbaijan, Georgia, and Turkey before connecting into European rail network; with project to build the high-speed rail corridor through Belgrade to Budapest.. 15. (Shepard, 2017). 10.

(16) Concerning the most current launches, on December 30, 2016 Chinese government launched a rail freight service between China and London as the first direct rail link between China and Great Britain.16 The 18-day journey of 7456 miles of railways crosses Kazakhstan, Russia, Belarus, Poland, Germany, Belgium, France and the UK.. Maritime infrastructure The maritime route focuses on sea routes, with substantial investment in port facilities in various locations. Maritime infrastructure is linking South East Asia with the Middle East,. 政治大 southwards to Hanoi, Jakarta 立and Kuala Lumpur, and through the Strait of Malacca into the. East Africa and Europe. It starts in Chinese Fuzhou and goes along the Chinese coast. ‧ 國. 學. Indian Ocean. It goes through the Horn of Africa over the Red Sea and the Mediterranean via Athens, with the strategic port of Piraeus, and continues to Venice. Greek Piraeus is meant as terminus of the China-Europe land-sea express route and is under operation of China.. ‧. China is also planning investments in port facilities and shipyards, for example in Bangladesh,. y. sit. io. er. management).. Nat. Sri Lanka, the Maldives and Pakistan (strategic port of Gwadar is already under Chinese. There are many further projects under discussion or under construction, connecting land and. n. al. Ch. i n U. v. maritime route. China-Pakistan Economic Corridor encompasses highways, pipelines, coal-. engchi. based electricity generation, and the Chinese-operated Gwadar port. A lot of investments for road and port development go also to Sri Lanka due to its geographical middle location in the Indian Ocean. In the Eastern Europe, new strategic project of the Riga Freeport, connected to the Trans-Siberian railway, has the potential to make a connection through Latvia to Poland. Another new project in the beginning phase of implementation is an extension of the Lithuanian port of Klaipeda and building connections to the industrial park being built by Chinese investors in Minsk (Belarus). In 2018, China plans to start building a standard gauge railway to connect ice-free Russian port of Zarubino to Jilin Province and the Chinese railroad network.. 16. (Webb, 2017). 11.

(17) Gas and oil pipelines Energy security is one of the next geopolitical reasons for BRI initiative. China built three lines of Central Asia-China gas pipeline (A-C) from Turkmenistan/Uzbekistan border to Jingbian in China. The last projected line D is currently delayed, even though China signed agreements with Uzbekistan, Tajikistan and Kyrgyzstan in 2013. Line D is expected to raise Turkmenistan’s gas export capacity to China of 30bn17 cu m per year.. Telecommunications and IT. 治政 New opportunities for BRI arise from digitalization 大 and investments into IT sector. BRI 立fibre optic cable connections from China to Europe since most envisions the construction of ‧ 國. 學. of the telecommunications rely on undersea connection. It will also provide safer internet routings. A digital revolution and sharing economy inspired by big data might level the. ‧. playing field for small and medium enterprises in the future. 18 On-demand manufacturing and warehouse management platforms could connect makers with factories aiming at dynamics of. Nat. sit. y. production plans responding quickly to supply and demand. Secondly, real time. io. er. advertisement of the space available in the container cars travelling across countries along the belt could attract new potential shippers looking for a low-cost way to send their wares.. n. al. Ch. i n U. v. Countries along the belt could also leverage such advances as 3D printing to develop their. engchi. manufacturing industries by selling intellectual property (than from shipping end products to customers). China´s BRI can change the geopolitical history. Infrastructure is for many countries of Eurasia the most important public goods as well as cornerstone for the economy development. This geopolitical change will lead to the expansion of communication and information exchange between all countries, fasten trade routes and facilitate business. Apart from that, China believes that BRI might also support Chinese underdeveloped provinces situated along the projected corridors, mainly in the western part of the country since there is a huge divide. 17 18. (Farchy, 2016) (Gottfredson, et al., 2017). 12.

(18) between the well-established coastal regions which are becoming richer and the underdeveloped provinces. China plans to fully leverage the comparative advantages of its various regions, with strengthening of the interaction and cooperation among all regions in China. Cooperation between regions might help to improve the openness of the Chinese economy. However, to exploit all the potential of investments requires the active participation and cooperation of all countries involved, especially concerning the security reasons. China must continue to promote the initiative and provide stronger policy support for the initiative to increase mutual understanding, reaching consensus and deepening cooperation.. 政治大. 立. ‧ 國. 學. Political Reasons. „BRI has the potential to grow into a model for an alternative rule-maker of international politics and could serve as a vehicle for creating a new global economic and political order.“19. ‧. China does not only want to build corridors to Europe but they aim to broaden bilateral. sit. y. Nat. agenda and negotiate free-trade agreements (FTAs) with 65 countries along the route of BRI. China has already implemented 14 FTAs; there are 9 FTAs under negotiation, for example. io. n. al. er. China-Japan-Korea FTA, China-Sri Lanka FTA, China-Pakistan FTA etc. China strives for. i n U. v. customs cooperation, including information exchange or mutual recognition of regulations,. Ch. engchi. and mutual assistance in law enforcement. Further, there is a need to improve bilateral and multilateral cooperation in the fields of inspection and quarantine, certification and accreditation, standard measurement, and statistical information. China though wants to gain political influence from economic exchange to reach its own strategic ends. China also buys political goodwill from chosen countries and brings some goodwill from those countries along the belt, for example China enjoyed Kabul´s support for Beijing´s stance on South China Sea. The growing political influence of China has other side effects in the foreign policy of countries involved in various forms of business cooperation. There is quite a strong tendency to overlook certain aspects of Chinese authoritative system like violations of human or labour. 19. (Zhang, 2016). 13.

(19) rights for economic interests. Another point, which is more or less active support for One China Policy, is also often stated in many mutual declarations – even those of clearly economic character – and thus geopolitical games are going hand in hand with Chinese investments. As the political point of view, it´s obvious that China needs to diminish vulnerability of Chinese trade in case of confrontation with United States. China wants to threaten the dominance of the United States and diminish the use of dollar in exchange to renminbi. Together with maritime route China aims to have own permanent and growing naval presence in the Indian Ocean and to become also maritime power.. 治政 In addition, China will expand its military bases along大 the BRI route. It might also stabilise 立 China´s less developed western provinces, or the neighbouring trouble spots, like some areas ‧ 國. 學. in Pakistan or Afghanistan.. ‧. Host Countries Stance. y. Nat. sit. China lacks sensitivity and knowledge of business practises in various host countries, they are. al. er. io. overlooking culture, religion, environment and ethnicity. Effective cooperation might be also. n. threatened because of China’s authoritarian approach when dealing with democratic countries;. Ch. i n U. v. same as problematic culture collision in meeting of collectivistic mentality with individualistic culture.. engchi. Developing countries are hungry for Chinese investments but China’s business practices are already facing local pushback in several countries. These countries are complaining about China´s state owned enterprises practises, for example because of ignoring of safety and quality standards, using second-hand or low-quality materials and equipment, and building environmentally destructive projects, such as hydroelectric dams or coal-fired power plants. Complaints have come from Laos, Vietnam, Cambodia, Indonesia, and Myanmar, especially. 14.

(20) due to causing the environmental damage because of hydropower projects or because of clearcutting forests. 20 Usually, the majority of population of the country is not very happy with Chinese investments. When the agreement is made with central government, there might be still strong infighting domestic political opposition. For example, in Pakistan Pakistani Taliban and other anti-state militant groups pose an immense threat to construction crews - workers on Chinese mining and construction projects have been attacked by Baloch rebels. In the East Turkestan Islamic Movement is also hindering Chinese efforts. In India, there is a strong opposition against BRI, mainly because of the sovereignty reason and economic influence of China. India is risking. 政治大 with probability of raising 立 rivalry between the neighbourhood countries that might make or. being isolated from this initiative. India stance might be viewed as geopolitical competition,. ‧ 國. 學. break regional stability.. The countries registering evident (not only promised) investments include in particular. ‧. Pakistan and other countries in Central Asia. In Europe investments go mainly to countries in less developed Balkan region like Serbia, and Bosnia and Herzegovina. However, Chinese. y. Nat. sit. investments in the Balkans often focus on the construction of thermal power plants with. al. er. io. emissions that burden the environment, but at the same time some Chinese companies are able. n. to supply higher technological level in order to gain certification for the common European. Ch. i n U. v. market. Apart from investments along the belt, there are also raising amounts of investment. engchi. into partner countries. For example, a notable increase in Chinese investment activity was seen in the Czech Republic, where the reported influx of acquisitions and investments in 2016 was heading into the financial sector, aviation, engineering, aerospace, media, food industry and health care.. China´s Outgoing Challenges China’s going out policy is driven and shaped by complex domestic and international factors.21 China describes their strategy as win-win arrangements for the all countries along. 20. (Eisenman, et al., 2017). 15.

(21) the belt and the scale demonstrates huge Chinese ambition. Connecting the world and helping other developing countries to grow their economy seem as a promising and very positive idea for all countries involved. Improving China’s access to resources and markets abroad, build its sphere of influence in Asia and beyond and threaten the dominance of the United States. However, both of these perspectives are challenging for China’s going out policy and opening to the world for all the main players in this initiative: China´s government, The People's Bank of China, state owned enterprises and host countries. China´s government is certainly doing the international politics. China´s government has to continuously work on the project promotion and balance the outcomes for the whole economy.. 政治大 cooperation and mutual understanding among all countries involved. Up to that, they have 立 They have to retain positive atmosphere when dealing with host countries and support. ‧ 國. 學. to deal with unfulfilled promises of third countries when jointly building the infrastructure, it means for example searching for solution when the partner country has not finished building of the last part of the bridge. Government is also setting the political and economic. ‧. environment for their state owned enterprises and other players on the market with the power. y. Nat. to change the rules of the game. To support their enterprises in internationalization, they have. io. sit. to provide new updated government policies. In addition, Chinese government put its capital. n. al. er. contributions through the created financial institutions so that they expect positive return and pay back at some point in future.. Ch. engchi. i n U. v. The People's Bank of China faces difficulties in retaining the constant growth of the economy, whilst lowering the volatility of renminbi. They have to ensure the economic stability of the currency so that companies involved in the initiative can calculate with exact returns, even in case of using other financial instruments. State owned enterprises need to transform to international companies and they might also need to change their common practices. They need to learn how to interact in international environment whilst using adjusted business practices within the particular culture. They need. 21. (Wang, 2016). 16.

(22) to manage all outstanding issues on the day-to-day basis and become flexible with their management. China is not always welcomed in host countries. Chinese investment may result in environmental damages and the economic benefits are often questionable or none. Host countries must identify the opportunities and threats of letting China pay for the construction in their country. This influence might change the local politics since friendship with China might not always bring that much positive effect. Some countries are wary to make deal with China because of political reasons, too. Other countries are trying to find a balance between economic and strategic calculations in dealing with China. Furthermore, the project is not. 政治大 problems arise with international 立 conflicts. For example, EU is levelling reactionary embargo institutionalized so that some counterparts have difficulties whom to address. Additionally,. ‧ 國. 學. by Russia against many EU products, meaning not only the prohibition of export of certain products into Russia but these products are not even allowed to be transported to third party countries across Russian terrain.. ‧. There are plenty of further hurdles with BRI. At first, not all the projects are profitable and. y. Nat. sit. will not make enough revenue to pay back the investment in the future, for example roads. al. er. io. going through poor rural areas, or water treatment plants. However, to reach the global. n. connectivity, the infrastructure must go through all areas and later will eventually lead to the. Ch. i n U. v. development of these areas. On the other hand, some projects such as telecommunication. engchi. networks and ports in strategic locations will be very profitable for sure. In the last year (2016), there were many successes in BRI initiative. The first projects of the China-led AIIB were initiated and financed in partnership with other international investment banks. Chinese firms signed 242 deals of outbound M&A investment worth 171 billion USD outside of Asia. The EU-China Connectivity Platform commenced and the China-Pakistan Economic Corridor saw its first action. The CEE-China 16+1 fund was announced. The Chinese shipping company COSCO acquired a majority stake in Greece’s Piraeus Port. The Colombo Financial City mega-project got started again. In 2016 Xi Jinping visited many key host countries, including Serbia, Poland, Cambodia, and Bangladesh, and signed billions of dollars’ worth of trade pacts and strived for enhanced future cooperation.. 17.

(23) In May 14 to 15, 2017, Forum for International Cooperation took place in Beijing, having participates of twenty-nine foreign heads of state and government or delegates from other 130 countries. The only participating head of member state of European Union was the Czech President Zeman. This conference was fully organised by China. With this forum, China promotes this initiative and invites all interested countries to participate in it and join efforts for improvement of trans-regional connectivity. During the forum, President Xi spread his vision and confirmed aims of BRI initiative: fostering the vision of common, comprehensive, cooperative and sustainable security, and creating a security environment built and shared by all. He also pointed out secondary aims of this initiative, especially the building of more. 治政 also expressed his vision of civilization surpass of 大 this initiative. Apart from financial 立 promises, he promised new projects improving people´s well-being in developing cooperative platforms in education, culture, sports and healthcare. In his keynote speech he. ‧ 國. 學. or investments into joint innovation.22. Formalizing and taking ownership of the pre-existing Silk Road project and creating modern. ‧. New Silk Road led to an activity boom along the entire network. Thanks to promises. y. Nat. of trillions dollars of founding, countries like Kazakhstan, Azerbaijan, Georgia, Belarus, and. er. io. sit. Poland began delving into large-scale infrastructure development.. Throughout the chapter, three areas to understand China’s motivations behind the BRI. n. al. Ch. i n U. v. initiative were discussed - economic, political and geopolitical. From the liberal point of view,. engchi. China attempts to establish a positive sum game for all countries involved that can mutually benefit through stronger infrastructure connectivity, enhanced trade, and new financial institutions. One the other hand, realists argue that China’ BRI is aiming at gaining not only the regional dominance, whilst creating opportunities to convert harbours into overseas military bases along the Indian Ocean. So far, there are recent clues that China is doing various strategic decisions. Later on, I discussed successes, challenge and obstacles that all main players in the initiative need to overcome to reach clear benefits.. 22. (He, 2017). 18.

(24) From my research it is clear that China is carrying out a very ambitious project, with many outstanding implications on the regional as well as on the global scale. However, China must continue leveraging all outstanding effects and find the way how to secure and prevent the success of projects in the future.. 立. 政治大. ‧. ‧ 國. 學. n. er. io. sit. y. Nat. al. Ch. engchi. 19. i n U. v.

(25) 2. The Visegrad Group and Their Relations with China The Visegrad Group (V4) reflects the efforts of the countries of the Central European region to works together in a number of fields of common interest within the all-European integration.. It comprises of the Czech Republic, Hungary, Poland and Slovakia. These. countries have always been part of a single civilization sharing cultural and intellectual values, their languages belong to Slavic language family (except of Hungary) and these countries have regional similarities in particular patterns. The Visegrad Group was formed on 15th February 1991 in Visegrad (Hungary) at a meeting. 政治大. of the President of the Czechoslovak Republic, Václav Havel, the President of the Republic of Poland, Lech Wałęsa, and the Prime Minister of the Republic of Hungary, József Antall – all. 立. former dissidents and good friends meeting at a symbolic place for Central European history,. ‧ 國. 學. castle of Visegrad at Danube river. The formation of the Visegrad Group was motivated by the desire to eliminate the remnants of the communist bloc in Central Europe and to overcome. ‧. historic animosities between Central European countries. Secondly, joint efforts of group of countries might be easier to achieve the set goals and the signal of “integration maturity”. sit. y. Nat. of these nations for the European Community. All the V4 countries become together members of the European Union in May 2004 and this group helps to these relatively small countries. io. er. to have regional bargaining power.. al. n. v i n The most important historical C basis of the relationship between the People’s Republic hengchi U of China and East-Central Europe is the shared socialist past. All countries were close diplomatic allies of People´s China since 1940´s. The common history of mutual contacts is alive in many aspects like brand or even cartoon characters awareness. After the regimes in Central Europe changed in 1989, attitude of the region towards China temporary changed, too. International relations of V4 region with China can be divided into three periods. Until 1998, there is the first period symbolised by separating the regions from each other. At that time, transformed V4 countries were growing economically. V4 countries attempted to unite with Western countries and weakened all connection with Eastern countries like Russia or China. V4 countries aimed at joining the NATO and the EU with the highest priority. On the other hand, despite of weakened interstate relations, many small Chinese companies found this region as an important market outlet for their cheap products.. 20.

(26) In the second period from 1999 to 2008, the position of both China and the V4 region consolidated in the international system. China thanks to its dynamic growth gradually became a major power with a global sphere of influence. V4 countries renewed their contacts with China through newly accessed international organizations that started to identify China as a very important trade partner. However, the contacts with China were very cautious and did not flourish that much. Starting from 2009, there is period of converged relations between both regions, realizing the outstanding opportunities, not only in the trade. It led to increase in trade and significant investments of Chinese companies in V4 countries. These investments went often into finance,. 政治大 for China has grown, too.立 This region is considered as the pilot market for companies. telecommunications, green energy, and the chemical industry. Importance of the V4 region. ‧ 國. 學. intending to invest in Western Europe. Market of V4 region is closer for Chinese investors and easier to enter thanks to competition of small states to attract foreign investments. These countries are offering various investment incentives, for example tax allowances, facilitating. ‧. foreign companies to settle on the market easier.. y. Nat. sit. To support international cooperation and trade growth, China and the East-Central European. er. io. countries established a political platform named “16 + 1 Cooperation” in Warsaw in 2012. In Warsaw, the document promoting the cooperation between regions called China’s Twelve. n. al. Ch. i n U. v. Measures for Promoting Friendly Cooperation with Central and Eastern European Countries. engchi. was presented. Platform 16+1 aims at intensifying and expanding cooperation with EastCentral European countries in the fields of investments, transport, finance, science, education, and culture. These countries include Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Macedonia, Montenegro, Poland, Romania, Serbia, Slovakia and Slovenia. Three priority areas corresponding to aims of BRI were defined, such infrastructure, high technologies, and green technologies. China represents itself as the leader or patron of the entire platform. Together with constitution of this platform, China created Secretariat for Cooperation between China and Central and Eastern European Countries.. 21.

(27) The Summits of the Prime Ministers of 16+1 are held annually: in November 2013 the meeting was held in Belgrade, it was hosted by Bucharest in December 2014, by Suzhou in China in 2015 and by Riga in November 2016. The next summit is going to be held in Hungary. During the meetings countries sign more documents deepening the cooperation, for example The Belgrade Guidelines for Cooperation between China and Central and Eastern European Countries, The Suzhou Guidelines for Cooperation between China and Central and Eastern European Countries, or The Riga Guidelines for Cooperation between China and Central and Eastern European Countries. All these documents originate from the Chinese side. In addition, those summits are an opportunity for meetings of representatives who should. 治政大 the reality is a little bit different. be a regional association for common interests of the region, 立 The most of the partners seek for bilateral agreements with China and instead of regional. express the unite attitude of the region towards China. However, despite this platform tends to. ‧ 國. 學. cooperation. There is a rivalry and every single country intends to gain the biggest part of Chinese investments.. ‧. Chinese companies have already invested more than 5 billion euro in Central and Eastern. y. Nat. Europe. In 2016, China announced the launching of the SINO-CEE Fund. This Fund is a 10. io. sit. billion EUR Fund to finance projects in Central and Eastern Europe, especially in the field of. n. al. er. infrastructure development, high-tech manufacturing, mass consumer goods, or will serve for mergers and acquisitions in that region.. Ch. engchi. i n U. v. Nowadays, there are no major differences between the Visegrad members’ policies towards China. China is a very important partner for the Visegrad countries. This is reflected by the trade volumes of the group and intensified political dialogue. Regardless ideological differences and criticism of China’s human rights during 1990s, relations became more pragmatic now, driven mainly by an economic agenda. The main risk for the V4 countries is their competing economic interests, especially with regards to attracting Chinese investment and increasing exports to the Chinese market. The main economic issues of V4 countries towards China include a large negative trade balance, from as high as 1:9 for Poland to 1:3 for Slovakia. Secondly, all V4 countries (except Slovakia) perceive and present themselves as part of the BRI, aiming to become regional hub. 22.

(28) and gateways to the European Union. In fact, only Poland was such a strategic partner and founding member of the China-led Asian Infrastructure Investment Bank (AIIB). Sino-Polish relations turned from friendly cooperation into a strategic partnership in 2011 but recent evaluation of such relation shows signs of non-fulfilment of expectations. The Czech Republic is the most preferred destination for Chinese tourists and a country that is fast catching up with China after two decades of strained relations, signing a partnership with China in 2016. Hungary has a specific strategy towards China and the largest Chinese diaspora among V4 countries. In the past 10–15 years, Hungary has been the most active partner of China among the Visegrad members. By now, Hungary is presenting itself as. 治政大 among V4 members. In recent relations with China, although it has the best trade balance 立 foreign trade documents, Slovakia is focusing on traditional Europe Atlantic partnership and. gateway or hub for China to the whole of Europe. Slovakia seems to be the least active in. ‧ 國. 學. China is not mentioned there. All the economic relations with China are dealt with consideration of the potential security risk.. ‧. Chinese investments in V4 can be characterized by integrity. V4 is regarded as a centre to. y. Nat. upgrade, sell and distribute products. Chinese companies are using these markets as test. io. sit. markets for their products for they further localization on European market. Chinese. er. companies use different capital investments when entering V4 market - green field. al. n. v i n C h countries and build the whole industrial chain into the V4 e n g c h i U it into a product upgrading centre or. investments, mergers and acquisitions, or joint ventures. Chinese enterprises prefer to move. a sales centre. However, China usually manages to invest into poor performing enterprises and tries to transform them into high-profitable ones but all V4 countries, except Poland, have limited capacities or limited demand. In addition, it is very difficult for Chinese enterprises to get higher knowledge about these markets or business culture there. In the following subchapters I am going to write about history of relations between every single V4 country, economic, geopolitical and political implications resulting from BRI initiative. I will also include current business development.. 23.

(29) 2.1 The Czech Republic Relations with China are desirable because they represent huge potential for Czech companies, or the Czech Republic itself. China is one of the priority countries for business cooperation and tourism. On the other hand, no long-term strategy towards China exists so far and the Czech Republic is struggling how to gain China´s attention and benefit from cooperation with such a powerful partner (similarly as other small countries in Europe). China with BRI set the large infrastructure projects to be built, but the Czech Republic is largely absent since it is not located on the main economic corridor from Asia to Europe.. 政治大 (since 2006). For the Czech Republic, China is the 18th largest export market. Czech exports 立 to China have long-term upward trend. Under the presidency of Miloš Zeman (since 2013) China is the fourth biggest trading partner of Czech Republic and second largest importer. ‧ 國. 學. together with Prime Minister Bohuslav Sobotka (previously Jiří Rusnok´s government) more positive environment for China to invest in the Czech Republic was created. The Czech. ‧. Republic is open to almost any political or economic contact with China, capturing any positive inflow from this market.. sit. y. Nat. It is more than obvious that current long-term strategy of the Czech Republic is deeply. io. n. al. er. influenced by pre-1989 communist Czechoslovakia investments and export activities with the. i n U. v. People’s China, currently followed again by the left-wing government. However, Czechs do. Ch. engchi. not have united voice when speaking about China, especially in human rights issues. Many Czech people keep in mind strong personality pattern of the first Czech President Václav Havel (1989 – 2003), representing the end of communism in Eastern Europe and calling for democracy all over the world. President Havel officially invited the Dalai Lama to visit Prague and his visits to Prague became regular then. Right wing majority of the population still support Tibet and Taiwan do not fully agree with one-China policy. This is causing protests at every visit of China´s officials in Prague. During the Xi´s visit in 2016, 500 people waving flags of Tibet or Taiwan gathered in a downtown park and marched towards the Prague Castle, but cordoned off by police. For Czech society, red Chinese flags hung along the streets triggered depressive memories of Soviet-style red flags that had decorated celebrations of state anniversaries and military parades during the communist era.. 24.

(30) The medial picture of China in the Czech Republic is not very positive, moreover, the tendency of negative discourse further strengthens in reaction to the controversial statements of president Zeman for Chinese media. He made many promises to China, not fully in cooperation with the present government or even popular discourse. He is heavily criticized by Czech human rights organizations, Czech right-wing parties and civil society. Thanks to Strategic Partnership with China, a growing number of students studying in the other country is facilitated by the Czech government's welcoming policy for Chinese visa applicants. The Czech Republic is also working to ease the way for Chinese tourism and highlight the country’s top tourist attractions - with Prague presented as a must-see. 政治大 been establishing partnerships 立(dozens of pair-cities are visible).. destination. Last but not least, more and more Czech regions and Chinese provinces have. ‧. ‧ 國. 學. Political. 23. Czech bilateral relations with China have reached their strongest level in terms of political. Nat. io. er. development is supported by frequent meetings of officials.. sit. y. agenda. Projects by Chinese companies in the Czech Republic are rapidly increasing. This. al. n. v i n President to Prague in 2016 and C thehdeclaration of theU e n g c h i strategic partnership. President Zeman. The first relevant investment flows were confirmed during the inaugural visit of the Chinese named his own China expert, called a “special advisor for economic diplomacy and investment”, Chinese businessman Ye Jianming, who is also Chairman of the Board of Directors of China Energy Company Ltd. (CEFC) and one of the richest entrepreneurs in China. The Chinese media reported on Ye Jianming’s position in Zeman’s office immediately after the nomination ceremony in Shanghai in April 2014. This close relation between Chinese businessman and Czech top-politician can represent real political and security risk.24. 23 24. (Du Bois, a další, 2016) This was mentioned in annual report of Security Information Service in 2014. (BIS,2014). 25.

(31) In October 2014, Czech president Zeman met his Chinese counterpart in Beijing and Xi expressed his desire for a new start in bilateral relations. Czech Ministry of Industry and Trade signed two important interdepartmental agreement - Memorandum of Understanding between Czech Ministry of Industry and National and National Energy Bureau China and Memorandum of Understanding between Czech Ministry of Industry and Export—Import Bank of China. Both should influence economic cooperation between these two countries. Czech support for BRI was formalized in a Joint Memorandum of Understanding in November 2015, in line with the upswing of high-level political exchanges. Chinese diplomats and other actors continuously promote the theme of BRI by inviting Czech. 政治大 or businesses in China. Joint 立 Czech-China Chamber of Commerce and New Silk Road. delegations for conferences and investment forums, and meetings with think-tanks. ‧ 國. 學. Institute in Prague were established.. In 2016, Memorandum of Understanding between Czech Ministry of Industry and Trade and. ‧. China Council for promotion of international trade was signed to strengthen cooperation and relations of these countries. To confirm all the cooperation and step up business ties and. y. Nat. sit. investments, Chinese President Xi and Czech counterpart Zeman signed an agreement on. er. io. a strategic partnership meeting in March 2016. A huge package of new deals was announced, promising fairy-tale investments for 2016–2020 in amount of 231 billion CZK.25. al. n. v i n C h contacts with China. There are also controversial political e n g c h i U Zeman as the only Western leader. attended a military parade in Beijing marking the end of World War Two in 2016 and he was the only president from European Union to visit New Silk Road Forum in May 2017.. Economic Chinese companies are interested in the Czech Republic, especially because of its convenient central location in the Central Europe and the cheaper, skilled and well-educated labour force in comparison to Western Europe. The Czech Republic is not among members of the AIIB. 25. (Správa Pražského hradu, 2016). 26.

(32) which puts interest of China aside, especially to the founding partners Poland or Austria. The Czech application to join the AIIB is currently under consideration. The Czechs are hoping to become a financial and air travel hub in central Europe for China. In 2015, Czech Ministry of Industry and Trade stated further areas of cooperation26: 1. cooperation in the aerospace industry and aviation. a. direct flight connection between Prague and Shanghai or Chengdu, later to include capitals of provinces Shaanxi a Zhejiang – Xian and Hangzhou; b. Czech „A-Z solution“ for General Aviation for China;. 治政大 economic and technological zones in the Czech Republic; 立 cooperation on the regional level and support of different kinds of economic and trade. 2. broadening both side investment flows and exploring the possibility of developing. 學. ‧ 國. 3.. cooperation between the provinces and regions of both countries.. ‧. The first Czech-Chinese Forum was held in October 2016, in connection with the. y. Nat. International Engineering Fair in Brno. Chinese firms expressed their interest in taking part in. sit. the Czech project envisaging the construction of new nuclear reactors. However, the Czech. n. al. er. io. government is cautious about this, since this sector is seen as strategic.. Ch. i n U. v. Trade balance with China is negative and so far, exports to the Czech market are not. engchi. significant for Chinese economy. Although 13 % of total Czech import comes from Chinese market, Chinese export to the Czech Republic represents 0, 7 % of total Chinese export. Chinese companies are exporting to the Czech Republic mainly computers, broadcasting equipment, office machinery and telephones (similarly as to other V4 countries). 1,3 % of Czech exports go to China and include mainly machines and vehicle parts, models and stuffed animals, liquid pumps, non-optical microscopes or dissolving grades chemical wood pulp,. 26. (odbor 51600, 2015). 27.

(33) etc.27 In China, there are operating plenty of Czech companies, e.g. Škoda, PPF, Home Credit, KOH—I—NOOR, Green Gas International, Ravak, etc. Chinese companies are investing more and more in the Czech Republic. The Chinese investment flows are expected to raise the financial capital and political power of affiliated Czech financial groups. The most of the projects concerns sectors of automotive components or consumer electronics. Out of total business activities, manufacturing has generated the highest number of total jobs and greatest investment. Because of the character of business activity, most of projects are outside of Prague. The most of investments are new investments, not expansions. Chinese companies are interested in cooperation with the Czech counterparts also on production of light aircraft.. 立. 政治大. Between 2012 and 2016, there were 18 undergoing foreign direct investment projects.. ‧ 國. 學. Number of projects and number of jobs created peaked in 2016, in the year of signature of strategic partnership between the Czech Republic and China. There is no difference. ‧. between investments before and after announcement of BRI and these investments are mostly non-directly BRIR related.. al. n. No. of projects. Jobs created. er. io. sit. y. Nat Year. Capital investment (mil. EUR). i n U. v. 8. 2015. C 3 h. 1655. 2014. 2. e n g c h359i 267. 62,64. 2013. 1. 500. 10,94. 2012. 4. 685. 51,96. Total. 18. 3466. 388,51. 2016. 225,62 37,35. Table 2 Chinese FDI in the Czech Republic. Source: (fDi market, 2016). Author´s calculations.. Long-term investors in the Czech Republic include the Chinese company Changhong that built a TV factory in town of Nymburk, currently producing 1 million TV sets annually and employing over 300 employees. Changhong plans further investments in the white production. 27. (Simoes, 2016). 28.

(34) of electronics there. Huawei Company operates in the Czech Republic as a supplier of mobile, intelligent platforms, data and communications technologies and equipment since 2003 and employs more than 400 employees. The other Chinese companies on the Czech market include company ZTE, company NOARK Electric, company YAPP Czech Automotive Systems Co. producing plastic tank cars and supplying for Skoda Auto, and company Beijing Fight Company investing in the operation of crystal glass in Novy Bor. One of the newest Chinese investment in the Czech Republic concerns investment of the company Beijing West Industry (BWI Group) into the production of automotive parts (shock absorbers) in town Cheb. In 2015, Chinese engineering company Xian Shaangu Power bought. 政治大 planning to establish research 立and development centre in Brno.. 75 % share in company Ekol, a leading Czech producer of turbines. Both companies are 28. ‧ 國. 學. CEFC China Energy Company Limited (CEFC), the seventh biggest private company in China, has chosen Prague as the strategic centre of its European financial expansion. CEFC. ‧. already invested into J&T Finance Group, engineering company ŽĎAS, air carrier Travel Service, brewery companies Pivovary Lobkowicz Group, followed by investment to media. y. Nat. sit. company Médea Group and publishing house Empresa Media and TV Group Barrandov.. al. er. io. CEFC is a strategic partner in investment into internet travel agency Invia.cz. CEFC owns two. n. five stars hotels Mandarin Oriental Prague and Le Palais Art Hotel Prague, as well as. Ch. i n U. v. historical building in Prague city centre. CEFC became in November 2016 the only owner of. engchi. the oldest Czech football club SK Slavia Praha. In December 2016, CEFC acquired Prague Florentinum, the most prestige administrative complex in the Czech Republic.29 On the financial side, strategic co-operation between the Czech-Slovak financial group J&T and CEFC China Energy Company will lead to opening a branch of Bank of China in the Czech Republic. Moreover, there is interest in setting Czech branch of China Construction Bank, China Development Bank or ICBC China.30. 28. (Zastupitelský úřad ČR v Pekingu, 2016) (Bednář, 2016) 30 (Petříček, 2015) 29. 29.

(35) In 2013, Prenatal Diagnosis Centre started its operation, which is a joint project of the Association of Centres of Medical Genetics of the Czech Republic and the company BGI Health. The Chinese cultural and educational diplomacy is also active in the Czech Republic with the opening of the first traditional Chinese Medicine Clinic in Hradec Králové in June 2015. Central Bohemian Innovation Centre inked in the last quarter of 2016 a strategic cooperation agreement with a major start-up incubator based in China’s Sichuan province.. Geopolitical. 政治大 implies aviation. It focuses立 more on improving flight connection with China and it grows. As the Czech Republic is not located on the main corridor of BRI, geopolitical level of BRI. ‧ 國. 學. rapidly. Three direct flights between China and the Czech Republic opened within one year. Hainan Airlines operates since September 2015, connecting Prague with Beijing, China Eastern Airlines added flight to Shanghai since June 2016, and China’s Sichuan Airlines. ‧. started to operate flights to Chengdu in August 2016. Other lines are scheduled for 2018.. y. sit. Nat. These new air links confirm the spectacular boom of tourism.. io. er. Concerning further cooperation in the aircraft industry, Czech companies Jihlavan Skyleader and Direct Fly received certification for sale of ultralight planes. The company Shark Aero. n. al. Ch. i n U. v. CZ is also selling planes in China. FAIR school for training of commercial pilots received. engchi. certification and this school is training pilots for Sichuan Airlines.31 In addition, cooperation with Sichuan province is flourishing in last years. Technology transfer and production of Czech aircraft Skyleader 600 in Zigong is a flagship project of cooperation between the Czech Republic and China in the framework of the Belt and Road. At the same time, there is conducted development of aircraft D6, and soon will open a joint R&D centre in Sichuan. Apart from aeronaut industry, there is only one project directly related to BRI that attracted Chinese investors - plan to build a canal on Czech territory that would connect three rivers – the Danube, the Oder and the Elbe. This huge transcontinental project should connect the. 31. (Opatrný, 2016). 30.

(36) Black, Baltic and North Seas and their main river ports – Hamburg, Szczecin and Constanța. This project is very controversial and was strongly criticized by Czech experts in academia and environmental organizations. However, during the V4 summit in Prague in 2014, the project received an endorsement from the presidents of V4, plus Austria and Slovenia.. 2.2 Hungary Hungarian-Chinese cooperation is working on a complex multi-level system. Exchanges. 政治大 Hungary wants to become the gateway to Europe for China and Hungarian government is 立 cover a wide variety of areas, with continuously deepening cooperation in all of them.. putting big efforts to make it true. Hungary with its Prime Minister Viktor Orbán considers. ‧ 國. 學. relations with China of great importance. He keeps an absolute parliament majority and leads a single-party government which ease taking of the strategic decisions. All bilateral economic. ‧. and trade relations are becoming increasingly close, too. Thanks to the construction of high-. y. Nat. speed rail from Belgrade to Budapest, Hungary can become the main transit route of Chinese. er. io. sit. goods intended for the European market in the future.. China is the most important Asian market and the 10th most important global trade partner of. n. al. i n U. v. Hungary. The high level of Hungarian relations with China is proved by many “firsts”. 32. Ch. engchi. Hungary was the first European country that joined BRI in 2015 and signed an intergovernmental cooperation document on jointly advancing the "Belt and Road" construction with China. Hungary was the first of European countries to set up the "Belt and Road" working group with China, holding the first joint-meeting on November 30, 2016 as the first meeting of this character held by China with a foreign partner. Hungary was the first of Central and Eastern European countries where China established a renminbi clearance bank or country that issued renminbi bonds. In addition, Hungary was the first of Central and Eastern European countries that set up an office of China National Tourism Administration as well as the first European country that established bilingual teaching of Hungarian and Chinese.. 32. (Wang, 2016). 31.

(37) Recently, Hungary also joined the AIIB. On May 13, 2017, Chinese President Xi Jinping met with Hungarian Prime Minister Viktor Orbán and announced the establishment of a comprehensive strategic partnership between these two countries (the Czech Republic and Poland already signed the strategic partnership with China). This strategic partnership will deepen contacts with China and confirm the cooperation between China and Hungary. It promises expanding of financial cooperation and increasing of cultural or educational exchanges, growth in tourism, etc.. 政治大 Hungarian leaders play an important 立 role in the development of bilateral relations with China. Political. ‧ 國. 學. Nowadays, the relations between Hungary and China are flourishing, based on the solid mutual trust and friendly public opinion foundation between the two nations.. ‧. The political relations are characterized by high-level meetings on a regular basis that started to be fluent since 2010, just after Prime Minister Viktor Orbán introduced his government's. Nat. sit. y. Eastern Opening policy. Eastern Opening policy was introduced in Hungary to diminish the. io. er. dependency of economics on the stagnant economies of the European Union. In the spirit of this policy, Prime Ministers of Hungary and China are having bilateral meetings annually. n. al. Ch. i n U. v. since 2012. In February 2014, Hungarian Prime Minister Viktor Orbán made an official visit. engchi. to China and also met President Xi Jinping. In October, 2014, Péter Szijjártó, Hungarian Minister of Foreign Affairs and Trade, visited China and met his Chinese counterpart Wang Yi, Foreign Minister of the People's Republic of China. After half a year, Wang Yi visited his Hungarian counterpart and also Premier Viktor Orbán and President János Á der. In September, 2015, Péter Szijjártó, visited Beijing on the occasion of the 70th anniversary of the victories in World War II. He met again Chinese foreign minister Wang. These meeting led to the signing of the governmental cooperation documents on the modernization of the Budapest-Belgrade railway line in November, 2015. Since 2016, there are regular HungarianChinese diplomatic consultations taking place. Up to that, there are bilateral talks during summit meetings of 16+1 countries.. 32.