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INTERVIEW-Czechs expect expansion of Chinese investment beyond M&A
December 13, 2016 / 5:12 PM / in 7 months

INTERVIEW-Czechs expect expansion of Chinese investment beyond M&A

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PRAGUE, Dec 13 (Reuters) - The Czech Republic expects Chinese investment to gather pace as firms that have been buying up existing companies seek to expand their operations in the central European country, said the head of the state agency overseeing foreign investment.

Czech and Chinese firms signed deals potentially worth billions of dollars in March when Chinese President Xi Jinping visited Prague. Czech President Milos Zeman said his country should be a gateway for Chinese investments into Europe.

But economists say the deals so far have added little to the Czech economy as they have mostly been acquisitions of existing firms such as a brewery group or soccer club.

Karel Kucera, chief executive of CzechInvest, said his agency was laying the groundwork for future expansion.

"Chinese investments are increasing. When strengthening ties in the beginning, capital investments are always bigger. It is easier to buy an existing company, especially when you know it is sound. And then you are going to expand," Kucera said.

"So definitely acquisitions will lead in one or two years to expansion," he said in an interview conducted late on Friday.

Kucera said the stock of Chinese investments his agency has mediated has grown to 5 billion crowns ($196.91 million), though this is dwarved by Japanese investments worth more than 100 billion crowns.

But year-on-year growth next year could reach 3 billion crowns, he said. In all, Chinese firms are looking at investment projects worth over 20 billion crowns, he said, though adding that not all would go through.

CzechInvest expects to broker 34 billion crowns worth of overall foreign investment this year, coming from more than 80 projects, Kucera said.

The largest investment announced this year has been a 1.85 billion crown production facility from Yanfeng Automotive Interiors, which is the global joint venture of Yanfeng Automotive Trim Systems Co and Johnson Controls.

That plant will come online by 2018 and create 588 jobs.

The Czech Republic is aiming to continue increasing the share of higher-end, value-added investments, which made up 30 percent of projects in the first half, to help boost Czech wages, which are below the European Union average.

Kucera said GE Aviation's plans announced this year to invest into a new turboprop development, test and engine production headquarters has prompted other firms to look at higher-end investment, like R&D, in the Czech Republic. ($1 = 25.3920 Czech crowns)

Editing by Gareth Jones

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