Compass World: China’s Vibe Czech
China warned Czechia of possible retaliation over Czech President of the Senate Milos Vystrcil’s visit to Taiwan in late August. During this visit, Vystrcil declared, “I am Taiwanese,” in an address to Taiwan’s parliament. His bold statement parallels John F. Kennedy’s infamous 1963 speech in West Berlin—in a gesture of solidarity against communism, Kennedy had announced in German, “I am a Berliner.”
"Please allow me to use the same method to express support for Taiwan's people. Allow me to be so humble but also resolute in saying to your country's parliament that I am Taiwanese," Vystrcil said in his address.
Milos Vystrcil posing with Taiwan’s President Tsai Ing-wen (AFP).
Rising Sino-Czech Tensions
As expected, Chinese diplomats responded with outrage.
Hua Chunying, China’s Foreign Ministry spokesperson, claimed that Vystrcil’s visit was a show of “open support for ‘Taiwan independence’ separatist forces”’ and that it “breached the one-China principle.” In response, China shall “take necessary actions to safeguard its legitimate interests.”
Chinese State Councilor Wang Yi further stated that Vystricil will “pay a heavy price for his short-sighted behaviour and political opportunism,” and that Vystricil’s visit was an “open provocation.”
Despite the hostile response, Vystrcil proceeded with a second meeting with Taiwanese President Tsai Ing-wen on September 3, disregarding the Chinese warnings.
Translation (Google Translate): “I didn’t want to wait until I returned from Slovinska, so the Chinese ambassador was summoned by Deputy Tlapa. Minister Wang’s statement has crossed the line, such strong words don’t belong in relations between two sovereign countries.”
Zeman to the Rescue
However, Czech President Milos Zeman's reaction diverges from Vystrcil’s defiance. In a desperate attempt to defuse the situation, he condemned the visit as a “boyish provocation.” Vystrcil will also be excluded from future meetings of Czechia’s top foreign policy officials.
The president’s placating words allude to the growing ties between Czech Republic and China since the beginning of his term in 2013. Along with multiple diplomatic visits between top Czech and Chinese diplomats to discuss economic cooperation and trade, the two countries have collaborated on science and healthcare in the 2013-2016 Action Plan on Cooperation.
Zeman’s interest in maintaining economic ties was shared by Czech Prime Minister Andres Babis, who pledged to prevent losses for Czech firms.
Unfortunately, many of China’s investment plans in the European country—a dominant focus being the plans of CEFC China Energy—have fallen through. In January this year, Zeman expressed his disappointment over China’s lack of investments.
“I don’t think the Chinese side has done what it promised. I’m talking about investments,” Zeman said, according to Czech newspaper Blesk.
Can China Retaliate?
Cui Hongjian, director of EU studies at the China Institute of International Studies, predicts that retaliation to Vystrcil’s visit would involve China’s economic role in Czechia and the broader Central and Eastern European region. The 17+1 initiative with Central and Eastern European Countries (CEEC) and the Belt and Road Initiative are potential leverage points.
Despite China’s stern tone, some Czech analysts question the viability of these threats. Matej Simalcik and Richard Turcsanyi from the Executive Director of the Central European Institute of Asian Studies (CEIAS) argue that the Czech-China dilemma is likely a Boy Who Cried Wolf situation, citing Czechia’s low economic dependence on China. Instead, China may pursue—and indeed has already begun—symbolic punishment. The Chinese Ministry of Culture and Tourism recently warned Chinese citizens against traveling to Czechia because of a resurgence of COVID-19 cases.
Why is there a disconnect between Chinese and Czech analysts? Can China follow through on its threats?
On the graphs above, Czech exports to China are shown on the left, while Czech imports from China are shown on the right.
Misleading Statistics
A major determinant of China’s ability to retaliate economically is the extent of Czechia’s economic ties with and dependence on China. The Global Times cites growing bilateral trade and China’s status as Czechia’s second largest trading partner as evidence of China’s influence in Czechia. Meanwhile, Czech analysts note that Chinese foreign direct investment (FDI) counts for less than one percent of inward FDI and the percentage of exports going to China is relatively low—only 1.35 percent.
In 2019, exports to China amounted to $2.47 billion, and Chinese imports totaled $28.25 billion, creating a deficit of $25.78 billion.
In this scenario, the Czech analysis makes more sense for two reasons. First, a hefty dollar sum only conveys the numerical value of economic ties between the two countries. On the other hand, percentages highlight relative value, or Czech’s dependence on China. Second, the function of the statistic matters. Technically, China is Czechia’s second largest trading partner when adding up both exports and imports. However, The Global Times fails to bring up Czechia’s massive trade deficit vis-a-vis China.
There are two primary methods China can use to manipulate bilateral trade: reducing Czech imports and limiting its own exports. Most countries cannot impose export quotas because the World Trade Organizations prohibits them, but China is an exception. Export quotas are usually imposed to safeguard domestic resources. While China could legally pursue export duties, the duties would harm domestic producers and raise prices of goods sold. Export duties are also inconsistent with China’s pursuit of a more active role in the CEEC region. In fact, China has urged other countries to stop restricting their exports.
While some Czech analysts harbor anti-China views, this time their analysis is objectively more convincing than the Chinese side of the story. Aside from travel warnings and a Chinese piano trader canceling an expensive order from Czechia, China is going to have a difficult time manipulating bilateral trade and FDI without hurting its own trade.
Czech exports to China alone, as well as FDI, are better indicators of China’s economic leverage in Czechia. Since Czech exports to China and Chinese FDI are so low, China cutting off Czech imports or curbing FDI would hardly affect the overall Czech economy.
To make matters worse, Czech Foreign Minister Tomáš Petříček criticized Wang Yi’s statements in a tweet: “Minister Wang’s statement has crossed the line, such strong words don’t belong in relations between two sovereign countries.”