Unlocking Growth: China-Czech Republic Investment and Trade Opportunities

The economic and trade ties between China and the Czech Republic are both complementary and stable, with significant successes in the automotive, energy, and technology sectors. As the Czech Republic’s Eastward Opening policy increasingly aligns with China’s Belt and Road Initiative, the outlook for bilateral trade and investment remains very promising. This synergy is particularly evident in the emerging fields of green and digital transformation, where fresh opportunities continue to develop.

China and the Czech Republic share a long and storied diplomatic history, having established relations on October 6, 1949—making the Czech Republic one of the first countries to formally recognize China. Over the past 70 years, high-level visits and deepening political dialogues have forged a robust partnership between the two nations. Notably, in 2016, President Xi Jinping’s historic state visit to the Czech Republic elevated bilateral ties to a strategic partnership, marking a new era of cooperation.

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The economic and trade relationship between China and the Czech Republic is built on a solid foundation with vast potential for growth. China has become the Czech Republic’s second-largest trade partner globally, fostering extensive collaboration in sectors such as automotive, machinery, and chemicals. In Central and Eastern Europe, the Czech Republic stands as China’s second-largest trade partner, distinguished by its strengths in aerospace technology and high-end equipment manufacturing.

Bilateral trade has been on an upward trajectory, with 2024 witnessing a goods trade volume of US$23.23 billion—a year-on-year increase of eight percent, according to Chinese Customs statistics. Investments from China into the Czech market are expanding across diverse sectors, including automotive parts manufacturing, glass production, logistics, e-commerce, tourism, high technology, aerospace, and biotechnology. Meanwhile, Czech products such as automobiles, beer, and glassware have won favor among Chinese consumers.

Under the Belt and Road Initiative, cooperation between China and the Czech Republic has deepened, opening new avenues for cross-border investment and trade. Looking ahead, both nations are set to enhance economic collaboration further, innovate partnership models, and address trade frictions—thereby injecting fresh momentum into China-EU relations and unlocking significant growth opportunities for foreign investors.

Evolving China-Czech trade

The Czech Republic stands as one of China’s key economic partners in Central and Eastern Europe, with a trade relationship that dates back to 1950. Since joining the European Union in May 2004, the Czech Republic has pursued a proactive and pragmatic trade policy towards China, further strengthening bilateral ties.

According to Chinese customs data, the bilateral goods trade between China and the Czech Republic reached US$23.228 billion in 2024—an eight percent year-on-year increase that represents an additional US$1.715 billion compared to 2023. In the same period, China’s exports to the Czech Republic increased by 7.7 percent to US$17.54 billion, and its imports from the Czech Republic increased by 8.9 percent to US$5.69 billion. On a monthly basis, Chinese exports peaked in November 2024 at US$1.784 billion—up US$300 million from November 2023—while imports reached their highest in April 2024 at US$552 million, an increase of US$151 million from the previous year. This resulted in a trade surplus of US$11.852 billion in 2024, up from US$11.064 billion in 2023.

Source: General Administration of Customs of China

The structure of bilateral trade has also seen notable improvements. Electromechanical products, nuclear reactors, and machinery now account for 75 percent of the total trade between the two countries. Chinese exports to the Czech Republic primarily include electromechanical products; nuclear reactors, boilers, machinery, and mechanical appliances; transportation equipment; optical, clock, and medical devices; as well as furniture, toys, plastics, steel products, and various specialty items. Conversely, Chinese imports from the Czech Republic are mainly comprised of electromechanical products; nuclear reactors, boilers, machinery, and mechanical appliances; optical, clock, and medical devices; along with pulp, plastics, steel, rubber products, miscellaneous chemical products, and wood products.

This evolving trade relationship not only highlights the deep-rooted economic ties between China and the Czech Republic but also points to significant opportunities for future growth. As both countries continue to refine their trade structures and implement strategic investment initiatives, the bilateral partnership is well-positioned for sustained long-term development amid the dynamic global trade landscape.

China-Czech bilateral investment

According to the Ministry of Commerce of China, in 2022 China’s direct investment flow into the Czech Republic reached approximately US$13.02 million, while the cumulative investment stock at the end of that year was around US$320 million. Over the period from 2018 to 2022, investment figures have fluctuated, yet the overall trend reveals growing diversification and deepening strategic engagement.

Source: Ministry of Commerce of China

Chinese investments in the Czech market are characterized by several key trends. Greenfield investments have steadily increased as Chinese firms seek to establish new operations. Investment in high-tech sectors continues its steady ascent, reflecting a commitment to innovation and technology transfer. Additionally, the financial industry has emerged as a new hotspot for Chinese capital, and traditional sectors, particularly manufacturing, are witnessing a revitalization.

Currently, more than 50 Chinese enterprises operate in the Czech Republic, spanning a wide array of industries such as manufacturing, information technology, transportation and warehousing, finance, and real estate and entertainment. In manufacturing, leading companies such as Sichuan Changhong Electric, Qingdao Hisense Europe Holding, and Zhejiang Chint Electric have made significant inroads, particularly in electrical equipment and automotive sectors. Firms like Yapu Automotive Components, Ningbo Jifeng Automotive Parts, and Beijing Jingxi Heavy Industry underscore the importance of automotive manufacturing, while other enterprises in areas like machinery and plastics further diversify the industrial base.

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In the information and communication technology sector, companies like Huawei, ZTE, and TP-LINK have established a strong presence. Huawei, one of the earliest Chinese companies in the Czech market, has become a strategic partner for the country’s three major telecom operators. Having entered the Czech market in 2003, Huawei has not only built LTE networks but also actively contributed to smart city and safe city initiatives. Over the next five years, Huawei plans to invest around US$360 million, with the potential to create approximately 4,000 new jobs.

The financial sector has also attracted notable Chinese investment. Huaxin Group, for example, has made significant acquisitions, including a 50 percent stake in the Czech J&T Financial Group, marking it as the first Chinese private enterprise to control a European bank. Huaxin’s investments extend to high-end properties, cultural and sports industries, as well as key assets in travel and tourism.

In the aviation sector, Zhejiang-based Wan Feng Auto Holding Group has taken a substantial step by signing a strategic cooperation agreement with a Czech firm to establish an aircraft R&D center. This venture marks an important milestone for Chinese private enterprises in the field of aircraft manufacturing.

Beyond these prominent sectors, Chinese companies are expanding into general aviation, wholesale and retail, research, and other fields. These diverse investments not only strengthen bilateral trade ties between China and the Czech Republic but also provide Chinese firms with a robust platform for expanding their international presence in a dynamic European market.

Czech companies invest in China primarily in the fields of machinery manufacturing and environmental technology. For example, Škoda produces SUV models in China, and Czech glass manufacturer AGC has established a factory in Jiangsu.

Czech’s attractiveness as an investment hub

The Czech Republic offers a highly attractive environment for foreign investors, underpinned by its status as an EU member that advocates free trade and welcomes external capital. As part of the unified EU market, investors gain seamless access across Europe. Strategically located in Central Europe, the Czech Republic boasts excellent transportation networks—including rail, road, air, and water—complemented by robust infrastructure that supports effective market distribution.

Key advantages

Key advantages include a stable parliamentary system, a well-established market economy, and a transparent legal framework, all of which contribute to political stability and a reliable business environment. Additionally, the Czech workforce is well-educated, and labor costs remain competitive, further enhancing the country’s appeal. Socially, the homogeneous demographic and low incidence of ethnic or religious conflicts help maintain a secure and orderly society, creating ample opportunities amid a rapidly developing market.

Global competitiveness rankings

Recent global competitiveness rankings further highlight the Czech Republic’s potential. According to the 2024 World Competitiveness Ranking published by the Lausanne International Institute for Management Development (IMD), the country ranks 29th—albeit a drop of 11 positions from the previous year. The Global Innovation Index 2023 places the Czech Republic 31st out of 132 nations, while the UNCTAD Productive Capacities Index ranks it 29th among 194 countries.

However, there are areas for improvement. Digital public services in the Czech Republic lag behind many of its European peers, with e-government usage at only 52 percent and significant regional disparities in service quality. Despite this, the government has rolled out comprehensive support measures to boost innovation and digital transformation. These include policy frameworks such as the National Recovery Plan, the National Innovation Strategy (2019–2030), and the SME Support Strategy (2021–2027). Financial backing is provided through national budgets and various EU funds, including the Recovery and Resilience Facility, the European Regional Development Fund, the European Social Fund Plus, and the Just Transition Fund.

Targeted initiatives

Moreover, the Czech government actively supports innovation through targeted initiatives. Specific project support is available via programs like the Future National Program, which aids SMEs in implementing innovative projects, as well as TRIO and TREND projects designed to enhance international competitiveness in key technology areas such as photonics, microelectronics, nanotechnology, industrial biotechnology, advanced materials, and production technologies. Additional initiatives include startup incubation schemes, the establishment of an economic digitalization platform to facilitate the national recovery plan’s digital transformation goals, and the planned creation of five European Digital Innovation Centers to support SME growth. The EU’s Horizon Europe program, with a budget of 95.5 billion euros, further underscores the region’s commitment to research and innovation.

Together, these factors create a dynamic investment landscape in the Czech Republic, offering foreign investors a blend of stability, growth potential, and substantial government support that paves the way for long-term success in the European market.

China-Europe railway express

The China-Europe Railway Express is a freight train network connecting China with numerous European countries. The railway express offers significant benefits in terms of speed and cost efficiency. The strategic importance of the Czech Republic is underscored by the Pilsen hub, which acts as a key transshipment center in Central and Eastern Europe. This hub significantly reduces transit times for Chinese goods destined for European markets and is attracting investments from Chinese companies in logistics infrastructure, such as dedicated China-Europe Railway Express facilities. These developments are expected to boost cargo distribution efficiency, enhance supply chain integration, and further deepen China-Czech economic cooperation.

Treaties and agreements between China and the Czech Republic

As an EU member state, the Czech Republic fully adheres to the EU’s common trade policy, meaning that all free trade agreements and preferential trade arrangements negotiated by the EU with third countries also apply to the Czech market.

In terms of bilateral agreements, significant milestones have been achieved between China and the Czech Republic. In December 2005, the two governments signed the “Agreement on the Promotion and Protection of Investments,” which replaced the earlier 1991 agreement with Czechoslovakia. This landmark accord has provided a robust framework for safeguarding and encouraging mutual investments.

On the tax front, the two nations have worked to eliminate fiscal barriers through an Avoidance of Double Taxation Agreement. Initially signed in June 1987 between China and Czechoslovakia, this agreement was updated in September 2009 to reflect evolving economic conditions and ensure fair taxation for cross-border transactions.

While China has not yet entered into a bilateral free trade agreement with the Czech Republic, cooperation has been significantly deepened under the Belt and Road Initiative. On November 5, 2016, the governments of China and the Czech Republic signed a comprehensive Bilateral Cooperation Plan under the Belt and Road framework. This plan outlines joint efforts across 19 sectors—including infrastructure, investment, industry and trade, energy resources, R&D, finance, transportation, healthcare, civil aviation, standards and certification, agriculture, culture, tourism, sports, education, environment, local cooperation, digital trade (“online Silk Road”), and think tank collaboration—laying the foundation for an even stronger strategic partnership in the years to come.

Prospects and challenges

The economic relationship between China and the Czech Republic is characterized by strong complementarities and significant potential for collaboration. China’s commitment to high-quality development and greater openness presents new opportunities for bilateral cooperation. Both nations can enhance their partnership by focusing on green transformation and upgrading high-end manufacturing, areas where their industrial policies align closely. However, challenges such as stricter European Union regulations and geopolitical fluctuations must be acknowledged. Despite these hurdles, the Czech Republic, recognized as one of the most open economies in Central and Eastern Europe, remains a pivotal point for China’s strategic positioning in Europe. To maximize the benefits of bilateral cooperation, it is essential to pursue policy coordination, foster technological innovation, and establish risk warning mechanisms.

Green economy and energy cooperation

The Czech Republic has outlined its 2030 Climate Action Plan, aiming to increase the share of renewable energy to 25 percent by 2030 and gradually phase out coal-fired power generation. China, as the world’s largest manufacturer of renewable energy equipment—including photovoltaics, wind power, and energy storage—can play a vital role in supporting the Czech Republic’s energy transition through technological exports and project collaborations. Notably, Chinese photovoltaic companies, such as JinkoSolar, have invested in photovoltaic power stations in the Czech Republic, and Huawei has partnered with Czech energy companies on smart grid projects. The European Union’s acceleration of mechanisms like the Carbon Border Adjustment Mechanism (CBAM) underscores the urgency for the Czech Republic to reduce reliance on traditional energy sources. China’s advantages in green electricity technology and cost-effectiveness can effectively address this need.

New energy vehicle (NEV) industry chain

The Czech Republic aims for electric vehicles to constitute 30 percent of total car sales by 2030, alongside the development of supporting charging infrastructure. China, as the largest producer of new energy vehicles globally, can leverage the Czech Republic’s established automotive manufacturing base to penetrate the European market. For instance, SAIC Motor’s acquisition of a stake in Škoda plans to produce electric vehicle models in the Czech Republic. Additionally, companies like CATL are considering establishing battery factories in the country. Progress in China-EU electric vehicle tariff negotiations, such as the temporary suspension of anti-subsidy duties by the EU, provides a window of opportunity for Chinese enterprises to enter the Czech market.

Digital technology and artificial intelligence

The Czech Republic’s Digital Czechia 2030 plan seeks to attract foreign investment in areas like 5G, data centers, and cybersecurity. Chinese companies, including Huawei and ZTE, have already deployed 5G base stations in the Czech Republic, and Tencent Cloud has collaborated with Czech enterprises on smart city initiatives. Potential areas for further cooperation include AI algorithms and industrial internet platforms, which can aid in the digital transformation of Czech small and medium-sized manufacturing enterprises. While the EU’s emphasis on data sovereignty may pose challenges, the Czech Republic’s position as a non-sensitive Central and Eastern European country offers a strategic entry point for Chinese companies navigating stringent EU regulations.

High-end manufacturing and precision processing

The Czech Republic boasts technical expertise in mechanical manufacturing, such as general aviation engines and machine tools, as well as medical equipment. China, aiming to strengthen its high-end manufacturing capabilities, can benefit from the Czech Republic’s provision of key components and process technologies. Examples include collaborations where Chinese pharmaceutical companies partner with Czech firms to produce pharmaceutical raw materials, and Chinese rail companies establish wind turbine blade maintenance centers in the Czech Republic. In light of US export restrictions on semiconductors to China, the Czech Republic could serve as a conduit for indirect technology transfer between China and Europe through third-party collaborations.

In summary, the future of China-Czech economic and trade cooperation hinges on leveraging mutual strengths in green energy, advanced manufacturing, and digital technologies, while proactively addressing geopolitical challenges to foster a resilient and prosperous partnership.

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