By Robert Muller and Jan Lopatka

PRAGUE (Reuters) - Chinese President Xi Jinping began a two-day state visit to Prague on Monday to promote business ties, crowning efforts by Czech President Milos Zeman to build a strategic relationship with Beijing.

Zeman has been keen to forge stronger ties with China and Russia since his election in 2013 rather than with partners in NATO and the European Union. EU relations with both Beijing and Moscow are tainted by disputes over human rights and trade.

"Now we are again an independent country and we formulate our foreign policy which is based on our own interests," Zeman told Chinese television before the visit.

Xi said in an article published in the Czech daily Pravo on Saturday the two countries should boost relations and "see them from a strategic viewpoint and long-term perspective."

His visit, the first by a Chinese president, will include a business forum and the signing of Chinese investments in the nation of 10.6 million people. China is Prague's third-biggest trade partner, with bilateral trade worth some $21 billion.

Zeman, a former leftist prime minister, has taken the lead in courting China despite the fact that the Czech government, not the president, is chiefly responsible for foreign policy.

In the past, ties were damaged by a center-right government that was "submissive (to) pressure from the United States and... the European Union", he said.

China was deeply appreciative that Zeman attended a massive military parade in Beijing last September marking the end of World War Two, the only Western leader to do so.

On a previous 2014 trip, Zeman said he had come to China to "learn how to increase economic growth and how to stabilize society" rather than "teach market economy or human rights".

That marks a sharp contrast with the Czech Republic's first post-communist president, Vaclav Havel, a Soviet-era dissident and personal friend of the Dalai Lama, the exiled spiritual leader of Chinese-ruled Tibet.

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FLAG PROTESTS

Zeman's remarks and Xi's visit have drawn protests from the Czech opposition, which has compared it to the warm welcome extended to Soviet leaders during the Cold War.

Police arrested 12 people on Monday who replaced Chinese flags with Tibetan ones along the main route from the airport, CTK news agency reported.

On Saturday, unknown activists defaced dozens of Chinese flags with black paint. China's state-run Global Times, in a Monday editorial, said this showed "major lapses from the Prague police and the hidden hostility in Czech society".

But Chinese Foreign Ministry spokesman Hong Lei said the attempt by a "handful of saboteurs" to disrupt the visit would not damage relations.

Efforts by Chinese intelligence to build influence in Czech political circles have raised eyebrows in the Czech counter-intelligence service. In its 2014 annual report, it said unnamed Czech civil servants and politicians were aiding these efforts.

CEFC BUYING

Chinese investments so far have mostly consisted of acquisitions by CEFC China Energy, a firm with unknown owners which says it is the sixth biggest private enterprise in China.

Last year, CEFC took a 9.9 percent stake in J&T Finance Group, which owns banks in the Czech Republic and Slovakia, and stakes in airline Travel Service, brewery group Lobkowicz, a media house and soccer club Slavia Praha.

CEFC is completing investments worth 18 billion crowns ($747.29 million) to add to 20 billion crowns spent already, Executive Vice President Marcela Hrda told Reuters. They span finance, energy, healthcare, industry, tourism and e-commerce.

A Czech source said CEFC was also interested in the Czech GE Money Bank, which has been put up for sale.

The CEFC parent holding is chaired by Ye Jianming, who was given the post of an adviser to Zeman in a highly unusual move to promote relations.

(Additonal reporting by Chen Aizhu, Jessica Macy Yu and Ben Blanchard in Beijing, Jason Hovet in Prague; Editing by Mark Trevelyan)