The Chinese group at the centre of Czech moves to boost relations and economic ties with Beijing has suffered a high profile and embarrassing setback. A Czech investment group has moved to take control of the Shanghai-based group’s European activities based in Prague citing massive unpaid debts.
For the last five years the Czech Republic and China have moved to boost their foreign and economic relations with Prague hoping to position itself at the centre of Chinese investment in Central Europe. President Miloš Zeman has made frequent visits to China and Chinese president Xi Jinping returned the compliment in March 2016.
Former Czech human rights criticisms and championing of Tibet have been toned down. At the economic and business level, a pay off in terms of a Chinese investment bonanza was hoped for.
And, in as much as the much heralded Chinese investments came to fruit, they overwhelmingly stemmed on the Chinese side from one single group, Shanghai-based CEFC.
The seventh biggest private company in China is mainly focused on energy assets but in the Czech Republic from late 2015 splurged out on almost everything from breweries, to hotels, a tv broadcaster, and top football club, Slavia Prague.
In many of the local deals, Czech investment group J&T appeared to be involved. CEFC actually had a 9.9 percent shareholding in J&T Finance, the banking division of the Czech group, and proposed to boost that to 50 percent as one of the most significant parts of its Czech splurge. That deal hit a barrier when the Chinese firm failed to provide the Czech National Bank with all the documentation it demanded. J&T describes the deal as ʺno longer on the table.ʺ
And the Czech-Chinese corporate relations have clearly been undermined by worldwide media reports and speculation about the fate of CEFC and its young founder, Ye Jianming, an advisor to Czech president Miloš Zeman, amid reports he was under criminal investigation. Zeman actually sent some of his closest aides to China to find out what was happening.
In the latest episode of a souring saga, the private equity arm of J&T dropped the bombshell late Thursday that it had exercised its shareholder rights and thrown out CEFC’s nominees on the board of its Prague-based division, CEFC Europe, controlling its myriad Czech assets estimated to be worth around. One of the victims of the move is former Czech Social Democrat minister and the face of the Chinese spending spree, Jaroslav Tvrdík.
J&T said that CEFC failed to honour its pledges to pay the outstanding 11.5 billion crown debt. It added that it received signals that CEFC was taking steps to block the local creditors from taking action. And its spokesman said Tvrdík talked on his Twitter account of sums of money that CEFC simply did not have.
CEFC has reacted angrily saying it does not recognise the ousting of its board members and is prepared to take all legal steps against J&T, the newcomer board members put in place, and to protect its Czech assets.
The only peace signals on the horizon are J&T’s statement that’s willing still to talk to CITIC, the Chinese state company with a 49 percent stake in CEFC, which it said it regarded as a trustworthy and transparent partner.