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Jan Kohout: China and CEE 16 Have a Lot in Common

Volume 4, 2017

President of the New Silk Road Institute, Prague and Adviser to the President of the Czech Republic as well as former Minister of Foreign Affairs and Vice Prime Minister of the Czech Republic

~ Warsaw, September 15

“Like the 16+1 cooperation, the Belt and Road Initiative is another source of inspiration and there’s a need to reflect on what it means for Central Europe and for Central European countries.

I would like to focus first on what links China and the CEE countries. [The underlying] link is our common history. China and Europe jointly promote dialogue between people so that we can learn from each other while creating future features of openness and inclusiveness. And economic change is an inseparable part of this dialogue between us.

Furthermore, the China CEE dialogue has more in common than it appears. For example, let’s have a look at the economic transformation from centrally planned economies toward market economies. [These were done] under different circumstances, led by different incentives, and resulted in different solutions; but similar in many ways.

Deng Xiaoping as well as the post-Soviet leaders of CEE countries faced problems caused by decades of inefficient administration and state regulation. After more than a quarter of a century, China is now the biggest economy in the world and the development of CEE countries is less definite. However, we can find indisputable examples of the success of marketisation.

As former Minister of Foreign Affairs and Vice Prime Minister of the Czech Republic, of course I will speak about the Czech Republic. I would like to point out that the Czech Republic emerged from an obsolete economy to become one of the best-performing economies in the region, with one of the lowest unemployment rates, and has had success in reducing public debt. Privatisation, foreign capital inflows, coordination instead of tight regulation, and other steps helped in this turnaround.

While the development of China has been much faster and more extensive, there is still a common path for the destiny of our countries. For this reason, this kind of dialogue [we are having today], people-to-people exchanges, and best practices sharing, is especially important and beneficial for both sides of a partnership.

The fact that we are here, that we gather on a regular basis, that there are still topics to discuss, shows that China and the 16 countries of Central and Eastern Europe have a lot in common. Furthermore, most of the CEE countries have seen the arrival of Chinese investment over the last few years, and there is a growing portfolio of Chinese infrastructure and development projects, equity investments and acquisition in the region. Trade is rising and numerous initiatives in research, education, business-to-business, and other areas are operational or underway.

Altogether the number of regular and institutionalised mechanisms under the initiative – a pre-requisite, in my view, for long term and sustainable development of the platform – is growing by the year, ensuring a solid foundation for the future.

Nevertheless, there is one more issue [I want to mention, one that] I have mentioned at similar occasions many times before. Around the ancient Silk Road, caravans loaded with rare commodities travelled in both directions. In order to fulfil the resolution of the New Silk Road initiative, it is important to make sure that there is bi-directionality, even in today's conditions. The second requirement is that the nature of investment and trade exchange should be based on a mutually beneficial partnership and be oriented to high value-added sectors with clear interest and evident value for the economy.

We all need to focus on this in the Czech Republic once again. In the Czech environment we have seen several projects and capital inflows in areas with low added value or marginal importance for the economy. In this context, there are doubts about whether the economy will actually experience any real benefits from incoming investments, or whether they are only property transfers with no impact on job creation, support of SMEs, support for scientific research and innovation, and other activities which contribute to increasing the economic and technological level of the country.

Recently the Czech media [has reported] that the rate of growth of Chinese investment in our country has been falling. So there has been a factual decline, compared to the year in which President Xi Jinping visited the Czech Republic, which was [2016]. I am not so sceptical about [these reports]. On the contrary, I consider the gradual pace to be possible evidence of a paradigm shift or rational and strategic approach to investment in the sector, through focus as well as entry level.

However, it is primarily up to us to act in favour [of] and to promote projects with high added value, to create suitable conditions for them and, above all, to remain united to clarify our position, to behave predictably and to be a trustworthy partner.

We are the ones who should influence and lobby political representatives and political parties in order to promote sustainable projects. Projects with high added value and potential bring benefits to the people of our countries.

To give just one successful example, I will mention the cooperation in the aviation sector between the Czech Republic and China, which would not be possible without support and coordination of national governments, non-governmental organisations, universities, research organisations, development and design studios, aircraft and power manufacturers, maintenance, repair providers or air traffic control. The success of aviation cooperation can be seen in the opening of three direct flight connections and another which will open very soon.

This sector provides a good example of Goliath giving up fighting with David and entering into a partnership which is based on mutual needs as well as economic characteristics, which is also beneficial for all parties, especially the people of the participating countries.”