A Chinese food company opened its first European plant earlier this week in a Czech village, seeking to turn the sleepy spot into a launching pad for its European and North American expansion.
Chinese firms need to meet EU standards in order to tap into its lucrative market
State-owned Shanghai Maling Food Company plans to bring its Chinese-style fare -- luncheon meat, canned pork, ham and ready-to-eat meals -- to Western countries, where product standards and import restrictions hamper imports coming directly from China.
Helped by Czech tax breaks and using European meat, Maling plans to produce 10,000 tons a year at its 400-million-koruny (16.5 million-euro, $25.4-million) plant, production manager Jiri Vancura said.
"They need to be somewhere in the EU so the plant meets all the standards," he said. "They otherwise can't export to the markets where they want to -- and once used to -- be."
The new canning factory in Hrobcice, once a farming village of 950, is China's second manufacturing investment in the Czech Republic, which joined the European Union in 2004.
Returning to old communist markets in central and eastern Europe, now EU members, is the first goal, firm's business manager Petr Valentik said. Maling products are set to show up soon on supermarket shelves in the region.
Attractive tax breaks
China wants to sell more of its products in Europe
Old Czech industries such as textiles and shoe making have been hard hit by Chinese competition. While Taiwanese companies, including electronics makers Foxconn and Tatung, have helped create new jobs in the central European country since the fall of Communism in 1989, mainland Chinese companies have been more cautious.
Sichuan Changhong was the first electronics firm to begin churning out flat-screen televisions in the Czech Republic last year. Other Chinese investors have settled in Bulgaria and Hungary.
Changhong spent 320 million Czech crowns on its plant in Nymburk, east of Prague, aiming for a share of the 35 million TV sets sold in Europe annually.
Government incentives played a role -- in Maling's case a tax break of up to 3.5 million euros applicable within five years, as well as lower investment and labor costs than in western Europe.
"We were looking at how expensive it would be to build the plant in Germany," Vancura said. "Just the construction would cost 50 to 100 percent more."
Maling was shopping around the region before finding the right location for the plant. In the end, Vancura said, the company chose the Czech Republic mainly due to earlier personal contacts.
Good for Czechs
Hrobcice Mayor Bozena Zemanova is happy that the Chinese manufacturer chose her village, where unemployment only recently declined from around 20 percent to about 12 percent.
While the Czech Republic and other eastern European countries have a shortage of highly skilled workers, jobs are scarce for the area's unqualified who once worked on farms, she said.
"It will amount to a windfall for our people," she said.