Skoda, which is headquartered in Mlada Boleslav, Czech Republic, has been regarded as a model of successful Czech-Chinese investment cooperation. [Photo / China Daily]

Czech carmaker Skoda touted as poster child for cooperation

PRAGUE, Czech Republic - Eastern Europe will become an attractive destination for China's overseas investment, despite challenges ahead, officials and researchers say.

Duncan Freeman, a senior research fellow at the Brussels Institute of Contemporary Chinese Studies at Vrije University in Brussels, said only 3 percent of investment from China went to Europe, with Western European countries, such as Germany, the United Kingdom and France, receiving most of it, meaning that investments in Central and Eastern European countries are insignificant.

He was speaking at the first China Investment Forum, held from Nov 8-11 in the capital of the Czech Republic, an event aimed at promoting investment between China and Eastern Europe.

Eastern European countries are proud of their geographic location.

While representatives from the Czech Republic, Slovakia and Hungary reiterated they are "at the heart of Europe", Bulgarian representatives said they are at the crossroads that link Europe and Asia.

Stable economies, a well-educated and skilled workforce, lower labor costs compared with Western Europe, well-developed road networks, as well as taxation rates below 19 percent, are advantages to attract Chinese investors to Bulgaria, the Czech Republic, Hungary and Slovakia.

In addition, countries such as Hungary and Slovakia offer further incentives for foreign investors, including tax breaks and government subsidies.

However, officials and experts said that Central and Eastern Europe have not received enough attention from Chinese investors.

China started a strategy to encourage Chinese investors to "go global" 10 years ago, with outbound investment amounting to $56 billion in 2009, more than 10 times the $5.5 billion in 2004.

Qu Zhi, the Europe chief of China Investment Promotion Agency of the Ministry of Commerce, conceded that investment cooperation between the two sides has been insufficient.

But he said that the ministry has made concrete steps toward solving the problem, including establishing a representative office in Budapest, Hungary, this year.

Event participants also noticed other bottlenecks in two-way investment cooperation, such as unfamiliarity with languages, cultures and regulatory systems, and a lack of communication between Chinese and foreign entities.

On the other hand, China can also be a good destination for Eastern European investors.

Petr Hyl, executive chairman of the China Investment Forum, said that during the financial crisis, fast-growing China proved to be a stabilizing element in the world, and its growth will "continue at a record pace without any sign of fatigue".

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Patrick Chovanec, associate professor at Tsinghua University's School of Economics and Management in Beijing, explained the recent 12th Five-Year Plan (2011-2015) proposal by the Communist Party of China, noting that China's transition from export-driven to consumption-driven growth will definitely offer more business opportunities for Central and Eastern European service and commodity providers.

After the event, the participants visited the Skoda headquarters in Mlada Boleslav, Czech Republic, and the Chinese business community in Budapest, as demonstrations of successful investment cooperation.

Czech carmaker Skoda, now wholly owned by Volkswagen, has been regarded as exemplary of successful Czech-Chinese investment cooperation. Skoda produces its Superb, Octavia and Fabia models in China in a joint venture with Shanghai Automotive Industry Corp.

Entering China less than four years ago, Skoda's sales are expected to surpass 200,000 cars this year in China.

It delivered about 569,000 cars globally in the first three quarters of 2010, company officials said.