Heading for a fresh start

There is great potential for collaboration in Central/Eastern Europe

Central and Eastern Europe have a lot in common with China. Both have experienced the transition from a centrally planned to a market economy. Both have attracted large amounts of foreign investment in the past decades. And both are now eager to become knowledge economies based on innovation, research and development.

Trade and investment flow has been growing steadily in the past years but remains significantly lower compared to Western Europe. But that is likely to change in the near future when the economic exchange between Central and Eastern Europe and China intensifies.

Central European countries are today matured economies with high-tech companies popping up all over. However, the backbone of Central European economies remains similar to China - manufacturing. In the Czech Republic, for example, manufacturing represents 37 percent of GDP, which is the highest in the whole of Europe. Neighboring Slovakia produces the highest number of cars per capita in the world and together with Hungary, Poland and the Czech Republic form a strong Central European machinery and automotive cluster.

These similarities naturally make it easier to find the right way to work with their Chinese counterparts. Central Europe supplies the West with its products. China supplies the whole world. Companies deal with the same issues - maintaining a low-cost base, improving technology, expanding and finding new markets. It is the same mindset in two very different cultures. Rather than looking at each other as competitors, seeing each other as partners is gaining the upper hand. Success stories of Chinese giants such as Huawei and ZTE, which are the leading builders of telecommunication networks in Central Europe, are the most visible cases. So is the success of Skoda Auto. The Czech carmaker entered China only four years ago and today sells four times more cars in China than in its home market.

As with any partnership, there are also disappointments and obstacles to overcome. The latest one, the cancellation of highway construction by the China Overseas Engineering Group in Poland, is an especially significant example.

Premier Wen Jiabao's visit to Hungary this week clearly underlines the importance of the success stories and Chinese commitment to strengthen the trade development and investment flow between Central Europe and China. His visit is not a formal stopover during the Hungarian EU Presidency. The scale of the visit is much larger than during the Czech EU Presidency in 2009. Minister of Commerce Chen Deming and more than 120 top Chinese executives are accompanying the premier. Such trips to Europe are not new. But this is the first time the stress is put on the Central European region.

I don't think there will be a major breakthrough. But it is encouraging that China is ready and open to increase the scope of business cooperation with Central Europe. The presence of Central European investment in China or the other way round is much lower than that compared to Western Europe. That is good news for entrepreneurs and managers on both sides as there is a lot of unexploited potential.

There have been many failed investments, disappointments and misunderstandings in the relationship between Central European countries and China. The feeling among public and businesses continues to be mixed. But Central European companies now have the chance to grasp the opportunities and go for a fresh start as China continues to move ahead.

The author is the executive chairman of China Investment Forum in Prague.