A New Prime Minister, a New Czech-Chinese Relationship?

Written by: Audrey McGrory

Few countries have been as successful in promoting authoritarian ideals abroad as Russia and China. The two nations have framed themselves as rising global superpowers, eager to spread their brand of capitalism, which lies in state control. Bashing western democracies and their capitalistic economic systems, Russia and China have sought to tie economic prosperity to nationalism, as they project the claim that economic growth leads to global admiration. And while a degree of suspicion still exists between the two nations, deriving from the Soviet-Mao era, the mission to spread authoritarianism has aligned them, uniting the countries in their efforts.

In respect to spreading authoritarianism, Russia’s main interests lie in Eastern Europe,  where amiable relationships among neighbors benefit its economic and diplomatic goals. Fortunately for Russia, many Eastern European leaders have rallied for its support, as leaders such as Belarusian President Alexander Lukashenko and Hungary’s Viktor Orban have adopted Russian President Vladimir Putin’s playbook on censorship, propaganda, and suppression of the opposition.

Distinct from its Eastern European neighbors that have adopted these authoritarian political practices, the Czech Republic rejected the ruling party, ANO 2011 in the recent legislative election. Under current Prime Minister Andrej Babiš—a member of the ANO 2011 party—the Czech government has adopted many right-wing, populist and pro-Kremlin stances. Expanding into multiple levels of government, the pro-Kremlin sentiment has been largely enabled by the right-wing and pro-Kremlin president Miloš Zeman, who—having served as president of the Czech Republic since 2013—defined himself as a close ally to the prime minister upon his election in December 2017. While the Czech Republic’s close proximity to Russia and other quasi-authoritarian countries have made the nation particularly vulnerable to falling to a similar fate, its focus must turn to a country over 4,000 miles away: China. 

China’s interests in the Czech Republic are complex, and its approach has been distinct from Russia, which often uses social media campaigns to sow doubt into the integrity of the foreign democratic nations’ processes and institutions. Instead of employing vast social media campaigns (though certainly China has used social media to abet its goals), China has drawn on private Chinese-based companies to weaken democratic institutions and processes.

In order to do so, China relies on corrosive capital—referring to capital flows from authoritarian countries to democratic countries with a clear goal of weakening democratic processes and institutions. While questionable flows of capital between countries have occurred throughout history, corrosive capital is a newer type of capital flow that has been largely enabled through globalization and a growing desire by authoritarian countries to replicate their state-controlled yet seemingly capitalistic economic systems abroad. In its application, capital from an authoritarian county is sent to a government official, or entity in a democratic country, creating a conflict of interest and hampering the official, or entity’s ability to execute its governmental responsibilities. 

CEFC China Energy—a now-defunct Chinese energy company that set up its European headquarters in the Czech Republic in 2015—serves as a prime example of China’s strategy. CEFC China Energy—or simply, CEFC—was a “growing oil and finance conglomerate,” destined to become “one of China’s energy giants.” It was funded largely by the state-owned institution, China Development Bank, and was distinct from other private Chinese companies in that it had “layers of Communist Party committees across its subsidiaries.” When CEFC sought to expand into the European market, it looked to the Czech Republic as an entry point.

Starting in 2013 when Chinese President Xi first visited the Czech Republic, CEFC immediately raised its stake in the J&T Finance Group—a company with banks in many countries including the Czech Republic—from 9.9% to 50%. Strategically, the move was seen as a way to help CEFC “gain better access to the eurozone.” 

In addition to vast investments in companies with ties to the Czech Republic, curious connections between CEFC’s most prominent figures and the Czech government’s most prominent officials began arising. One connection of note is the appointment of Ye Jianming, CEFC’s chairman, as an economic advisor to Czech President Milos Zeman. Notably, President Zeman often praised the company despite its poor economic performance—naming it “the flagship of Chinese investment in the Czech Republic.” Beyond this seemingly misplaced praise, other occurrences raised suspicions surrounding CEFC.

Further aiding its transition into the European market, CEFC began hiring Czech officials who held prominent posts in the government, directly ensuring critical influence in the government. For example, Jaroslav Tvrdík, the former defense minister and campaign manager for the Czech Social Democratic Party, was hired by CEFC to head the CEFC Europe unit. Concurrent with his hiring, Tvrdík served as a lobbyist for PPF, a Czech financial conglomerate, working in its “Home Credit” division to expand its consumer loan operations into China. Halting PPF’s expansion plans, Chinese representatives of the company insisted that the Czech Republic would need to strengthen its relationship with China before a license for such expansion was approved. In May 2014—less than a year after Czech President Zeman rose to power—Tvrdík’s lobbyist goals were made successful when a new Czech-Chinese policy was adopted. Later that year, Home Credit received the license. 

Broadly, Tvrdík’s ambiguous loyalties often made it “unclear whether he represented a Czech company, a Chinese company, or the Czech state,” as he often drew on his government relationships to “[serve] as the hub of a triangular relationship linking PPF, CEFC, and the offices of the Czech president and prime minister.”

The relationship between CEFC and Czech government officials was so strange that the Czech media also began to speculate if the energy company was “purely commercially driven,” or if it “[operated] under the influence of the Chinese government.” 

The Czech Republic’s diplomatic history with China makes the actions of CEFC and its affiliation with the Czech government all the more questionable. Upon the Czech Republic’s independence from the Soviet state of Czechoslovakia in 1993, the Czech Republic and China did not have much of a diplomatic relationship. It was not until 2013—the same year President Zeman came to power—that the Czech Republic began to embrace China as not merely an ally, but a loyal partner. Even China’s Ministry of Foreign Affairs website highlights 2013 as the year in which Czech-Chinese relations were strongly established: “At the end of 2013, the two countries had one pair of sister province[s]/region[s],” the website declares. With this new relationship in place, China began to utilize Czech politicians as a means to convert the nation’s deep-seated, anti-communist foreign political stance into one that favored China. In light of such efforts, Zeman called the Czech Republic, “China’s gateway to Europe.” 

The future of Czech-Chinese relations remains unclear, largely due to the complicated nature of the Czech legislative elections. Conventionally, following the conclusion of an election, the Czech President would consult the parties that have won seats in parliament, negotiating a proposal for the next government. This first step has been greatly complicated by President Zeman’s rapidly deteriorating health, as it has been reported that he received a letter from the Central Military Hospital, noting that, due to his poor health, Article 66 of the Czech constitution would be utilized to remove him from his presidency. Acting in response to the request, the Czech Senate declared that Zeman’s constitutional powers would be shared between ANO 2011 party member, Radek Vondracek and Prime Minister Babiš. Next, by conventional standards, parliament would be called back into session within a month of the election to elect a new speaker. Finally, the former government would resign, and the president would announce the next prime minister and the new cabinet. 

Should President Zeman’s duties be restored, he could very easily reinstate Babiš as prime minister for another term, arguing that the ANO 2011 party’s ability to capture “the biggest single share of seats” justifies his reinstatement. Despite this argument, opposition parties—namely the center-right SPOLU party, which gained the popular vote—have been adamant that their “opposition majority” indicates a desire for government change. 

If Babiš were to be reinstated, he would be subject to a confidence vote, which—should it fail—would force his resignation, giving President Zeman the ability to appoint his second choice for prime minister. If this second vote fails, “the lower house speaker can pick the prime minister,” likely falling to a representative of an opposition party. Most signs point to Petr Fiala of the SPOLU party as Babis’ successor, though President Zeman’s deteriorating health and the fact that “there is no deadline for the [appointment] process” fill the future of the Czech government with uncertainty. Despite such uncertainty, the likelihood of a new Czech government remains high. 

Accompanying the likelihood of a new Czech government, questions immediately arise regarding how the new government will frame its foreign policy, particularly relations with China. While China is said to expect weakened relations under the SPOLU party, a new government with Babiš and Zeman no longer at its helm could also throw China’s corrosive capital strategy into question. Although CEFC has been disbanded since 2017, its operations still continue in the Czech Republic where CITIC—a Chinese-based company—has taken on the same duties with plans to expand, though plans for such expansion would be undoubtedly complicated by a new government. And what is the future of the Czech Republic as it relates to authoritarianism?

With authoritarianism on the rise in Eastern Europe, the Czech Republic seems like an anomaly, rejecting the ruling party that has embraced the right-wing, populist sentiment that has greatly encouraged the rise of such ideology. Yet, with the future of the government hanging in the balance, many important questions remain, drawing attention to the Czech Republic as a potential indicator of the future of the increasingly authoritarian eastern part of Europe.