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Speech in China: Notes for Wuzhen

English Pages, 13. 5. 2019

1) Many thanks for the invitation, for including me into this group. I haven’t been to China already for a long time. Here, in the Shanghai region, I was last time in the middle of the last decade. It was during my official state visit to China and I remember that I was taken also to another water town Zhu-Jia-Jiao. Once again, many thanks for giving me this opportunity.

As Prime Minister, I was the first Czech top politician who visited China in the early 1990s after the fall of communism in our part of Europe and who tried to restart our political and economic relations in a new era, in a new political setting. The Czech Republic, originally part of Czechoslovakia, used to have very strong relations with the People´s Republic of China in the previous four decades as well as relatively extensive economic exchanges. I would like to say quite clearly that it is in our interest to do much more in the future. That is one of the reasons for my coming here.

The Czech Republic is a small European country, since 2004 a member state of the European Union. Two weeks ago, we commemorated the 15^th anniversary of our membership. I quite deliberately use the term “commemorated”, because not everyone “celebrated” it.

I know it may be rather difficult for the Chinese people who live in a totally different geographical, political and cultural setting to understand the delicate aspects of the relations in current Europe but you should know that not everyone in our country (and elsewhere in Europe) is happy with the current version of the European integration process. We feel our national identity very strongly and don’t want to get rid of our nation state – this has, however, become the goal of the current European political leaders.

Our EU membership has – as everything else in human life and human society – its pluses and minuses, its costs and benefits, its advantages and disadvantages. Their size is highly debatable, but I see their score around fifty-fifty. The Czech Republic is undoubtedly much better off now than at the end of communism but it is difficult to differentiate the enormously positive effects of the overall post-communist liberalization – which has been done in my country with no connection with the EU – from the effects of our EU membership. Many people confuse these two things.

2) I have been following the Chinese developments for many years both as an economist and as a politician. The Chinese economic growth in the last decades is a unique phenomenon in the history of mankind. There has never been such a fundamental increase in living standards for so many people in such a short period of time. We have to congratulate you for it.

I have been regularly attending many international conferences in Europe and America in the last three decades, both political and economic. All of them are in one respect – as regards China – very similar. They acknowledge the very rapid economic growth in the past years but they warn against the existence of dangerous bottlenecks, disequilibria, pressures and tensions in today´s China. I disagree with this simplified approach – without saying anything about the quality of these new phenomena, such a statement has no analytical value.  

As a liberal economist and as the main architect of the Czech economic transformation I would be able to make critical remarks regarding the Chinese economy and its undeniable problems but as I see it the positive aspects dominate and it seems to me that the Chinese economy will grow rapidly in the future as well – for some of us surprisingly without fundamental political liberalization. Our experience was very different, we changed both the political and economic systems at the same moment.

I also witnessed many debates about the quality of the Chinese statistics. I   believe in the basic quality of the available statistical data and do not agree with the often repeated accusations that the Chinese economic growth has been statistically overstated. I very carefully studied these debates.  I see a crucial factor in the very fast growth of wages which is a much more reliable economic indicator than the GDP. It is much harder to make a mistake in nominal wages data than in GDP data. I also don’t believe in the idea that the Chinese government has been trying to keep its currency artificially weak and undervalued. We shouldn´t forget that the Chinese real exchange rate appreciated by 53 percent from 1995 to 2014.

As a politician who after the fall of communism introduced at home radical economic reforms, I could make a list of recommendations about what the Chinese economic system needs but I won’t. I fully respect that it is exclusively a Chinese decision – the role of foreign advisors in it is (and should be) rather limited.

3) I can assure you that my country, the Czech Republic, is interested in the expansion of our economic relations. Let me make, however, one thing clear. Whenever a Chinese delegation comes to my office in Prague, they want to speak about Chinese investments in the Czech Republic. I have no objections against Chinese investments in my country, but – as a highly industrialized economy, as a country with the highest share of employment in industry and with the highest share of exports on the GDP in the whole EU – the Czech Republic is much more interested in business, in foreign trade, in exports, in finding the markets abroad than in the promotion of foreign investments at home.

We have been traditionally   an export-oriented country as much as China, if not more. Our foreign trade turnover with China has been growing very rapidly in the last years – the Czech exports to China increased four times from 2007 to 2018 (from 14 billion Czech crowns to 56 billion). At the same time, the Chinese exports increased more than three times (from 186 billion to 568 billion). But the trade deficit is huge.

As an economist I know that it is not necessary to dramatize the problem of the trade deficit with one single country, but the Chinese exports to the Czech Republic are ten times bigger than the Czech exports to China. What is more important is the fact that the trade deficit has been growing very rapidly as well. The Czech Republic is a trade surplus country (and our real exchange rate is undergoing an appreciation) but we have to ask for the greater opening of the Chinese economy and for the simplification of trade procedures. As far as I know this is a complaint raised not only by the Czech businesses.

My successor in the Presidential Office, Mr. Zeman, completed his trip to China two weeks ago and as far as I know he made the same points during his talks with Chinese President Xi.

4) My final point relates to the Chinese Belt and Road Initiative. I take it as an interesting, innovative and rational Chinese foreign policy project which tries to promote, explain and justify massive Chinese infrastructure investments world-wide. It is a truly strategic initiative.

I don’t believe in geoeconomics or in the economics of geopolitics. I don’t view the world in terms of political geography, I don’t like what is in the literature sometimes called “mappism”. But the logic of the “balance of dependence” (the term coined by the Norwegian political scientist Glenn Diesen in a book published in 2018) seems to be a good and meaningful idea. The Chinese strategists should explain to the people in Europe and Asia that this type of Chinese commitment to Eurasia is not driven by political strategic considerations only but by economic ones as well. It should be mutually advantageous for all of us.

Václav Klaus, Leadership of Future City Summit, Global Council of the Belt and Road, Wuzhen, Tongxiang, May 5, 2019