Czech-Chinese Ties Strained As Prague Stands Up To Beijing

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On a typical day, Prague's City Hall is buzzing with discussions about contracts to upgrade the centuries-old city's network of cobblestone streets or sewers. But this month, assembly members have been debating a bigger topic — China, and what to do about it.

"This is clearly a topic for our Ministry of Foreign Affairs, and a complicated one at that," city assembly member Patrik Nacher lectures Prague Mayor Zdenek Hrib during open debate. "And here you are, pulling Prague into a matter of such importance."

Hrib looks off into the distance stone-faced, not bothering to respond. For months, the 38-year-old mayor has been at the center of a controversy involving his city, Beijing and the Communist Party of China.

In 2016, a month before a state visit to the Czech Republic by Chinese leader Xi Jinping, Prague's previous administration approved a sister-city relationship with Beijing. It included a provision to adhere to the "One China" policy, Beijing's insistence that Taiwan — with its own democratically elected government — is part of China.

Nearly three years and one city election later, Hrib, who worked briefly as a medical intern in Taiwan before becoming mayor last November, began calling for the One China language to be eliminated from the agreement. "A sister-city agreement should not include things that are not related to the cities' relationship," he said.

Beijing swiftly punished Prague institutions that have interests in China, canceling a planned 14-city autumn tour of China by the Prague Philharmonic Orchestra — which spent 2 1/2 years in preparation and lost nearly $200,000 on the tour, says Director Radim Otépka. "It was the biggest project we've ever had," he says.

Beijing also terminated the sister-city relationship this month, before Prague's city assembly could vote to do so.

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"It was quite obvious that the only thing that the Beijing side was focused on was their propaganda, and not the political or cultural exchange we were interested in," Hrib tells NPR.

Czech President Milos Zeman wrote to Xi, making it clear he did not agree with the Prague politicians who wanted the One China language excised from the agreement. He urged Xi to preserve specific areas of cooperation between the two countries, including China's investment in its assets inside the Czech Republic.

But the sister-city termination is only the latest in a list of episodes with China's government that have ended badly for the Czech Republic.

"There's been this backlash building up slowly. People really feel cheated," says Prague-based China expert Martin Hala. "And a lot of things that have been happening in relation to China have been driven by local actors."

In particular, Hala notes one company with a big stake in China: the PPF Group, a privately held financial and investment group with more than $40 billion worth of assets.

Its Czech founder, Petr Kellner, is among the wealthiest people in Europe, worth an estimated $15 billion. PPF's lending division, Home Credit, has become one of China's top foreign lenders, specializing in loans for individuals with little or no credit history.

Hala says when Home Credit started doing business in China in 2007, Beijing spelled out the terms under which it would grant the lender access to its market. "According to [Home Credit's] own accounts, they were immediately notified that this would not happen until the relationship between China and the Czech Republic improved," Hala says, "because at that point it was still quite chilly."

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For years, the Czech Republic — formerly part of Czechoslovakia, a Soviet satellite — had kept its distance from Beijing. Its first president, Vaclav Havel, championed the cause of the Dalai Lama and Chinese dissidents. But this changed when Zeman, a populist, took office in 2013.

PPF went straight to work, hiring former Czech politicians to help flip the government's anti-communist foreign policy into a pro-China one, arranging a Beijing visit by Zeman in 2014, even supplying a private jet to fly him back to Prague.

Zeman proclaimed his country would be "China's gateway to Europe," invited Xi for a state visit and appointed the CEO of a Chinese energy company as his honorary adviser after the company went on a spending spree in Prague, buying part of an airline, a football club and a brewery.

But four years later, the company, CEFC China Energy, suddenly became insolvent. Its CEO disappeared, and the head of its nonprofit arm landed in prison in New York after a U.S. federal court found him guilty of bribing African heads of state.

A Chinese state-owned company took over CEFC's assets in the Czech Republic, but the Czech government was left with a missing presidential adviser and a pile of debt.

PPF, meanwhile, continued to thrive. "It's now the richest private company in the Czech Republic," says Jiri Sticky, a financial journalist for the Prague-based Reporter Magazine.

PPF declined NPR's requests for an interview. According to a company prospectus filed in preparation to sell its shares on the Hong Kong stock exchange, the Home Credit division made loans worth nearly $15 billion to Chinese consumers in the first three quarters of this year alone, equal to nearly two-thirds of its overall lending portfolio worldwide.

That's why, when Home Credit offered to become a corporate sponsor of Prague's Charles University this autumn, it nearly led to the resignation of the university's rector. As part of the sponsorship, the university would have had to sign an agreement stating it would not hurt Home Credit's global interests — including keeping China's government happy.

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"It was translated as, the university would have to stop all their critics towards China," Sticky says.

Charles University — Central Europe's oldest, most prestigious learning institution — is the academic home of many influential critics of China, including Hala and his organization Sinopsis, which has examined and exposed questionable dealings with Beijing by the Czech government.

Within days of learning about the Home Credit sponsorship requirements, students, faculty and local media lambasted university leadership for selling out its academic freedom to please a sponsor with business interests in China. That prompted Home Credit to withdraw its offer and Rector Tomas Zima to publicly apologize for his role in the matter.

"I would like to apologize to all of you," Zima told an overcrowded meeting of the university's senate in early October. "I underestimated the reaction to this. I never thought this could threaten our academic freedoms, freedom of research and freedom to teach."

While Zima's apology may have saved his job — for now — his secretary in charge of the university's Czech-Chinese center, Milos Balaban, was forced to resign on Oct. 24, after Czech media revealed that China's government was funding the center's largely pro-China conferences.

Hala says all of this has left a bad taste in the mouths of Czechs, who are tired of their government and biggest institutions doing the bidding of Beijing.

"In a democracy," he says, "there's a cacophony of voices, and people have different opinions, and the People's Republic of China doesn't like that."

The Chinese embassy in Prague did not respond to NPR's requests for an interview.

Back at Prague's City Hall, Hrib listens with a fatigued face as a city assembly member warns that Beijing may retaliate further. When NPR asks if he's worried that China's government may limit its hundreds of thousands of annual tourists to the city — something it has done in the past to countries that offend it — Hrib shakes his head.

"Because the Chinese tourists do not stay here a long time, they are using their own Chinese agencies, and they are basically not the tourists we would like to focus on," he says.

Plus, he says, anyone who has been to Prague in its peak summer season knows the city has too many tourists anyway.