About HKTDC | Media Room | Contact HKTDC | Wish List Wish List () | My HKTDC |
繁體 简体
Save As PDF Email this page Print this page
Qzone

1.5 Potential trade opportunities

Overview

Integration of the Czech Republic into the EU (since May 2004) has played a significant part in the fast expansion of the Czech Republic’s external trade. Being a small country, with a population of slightly more than 10 million people, the Czech Republic has managed to realise a compound annual growth of 9% in trade between 2004 and 2009. This not only indicates the Czech Republic’s potential of serving as a trade gateway for Hong Kong companies to explore other markets in Central and Eastern Europe, but also helps prune away scruples in relation to the country’s small domestic market.

Chart: Foreign trade turnover in the Czech Republic

Given its centric location in Europe, European countries like Germany, Slovakia and Poland are always major trading partners of the Czech Republic. This pattern existed long before the Czech Republic’s joining of the EU in May 2004, but the country’s EU membership has further streamlined and strengthened its trade ties with other EU countries. Nowadays, more than three-quarters of Czech trade is conducted within the EU, and eight out of the country’s top-10 trading partners are EU members. Among the most important trading partners, Germany, accounting for 27% and 31% of Czech exports and imports respectively in 2009, is by far the country’s No.1 trading partner. Evidently, it is unlikely that Asian suppliers can challenge the dominant role of European countries in the Czech Republic’s external trade in the near term. However, it is worth noting that the country’s growing interest in sourcing from Asia, especially the Chinese mainland, has already made China its fourth largest trading partner and second largest import source in 2009.

Chart: Czech imports by country, 2009 (Total: US$105 billion)

Total imports by countries, 2009

 

 

US$ million

% Growth 08/09

% Share in 2009

1      

Germany

27,898

-26.8

26.6

2      

China

10,541

-15.3

10.1

3      

Poland

6,721

-19.4

6.4

4      

Slovakia

5,702

-27.7

5.4

5      

Russia

5,390

-41.0

5.1

6      

Italy

4,590

-28.1

4.4

7      

France

4,052

-30.5

3.9

8      

Austria

3,836

-27.7

3.7

9      

Netherlands

3,515

-19.6

3.4

10   

Japan

3,291

-30.3

3.1

Source: Czech Statistical Office

Chart: Czech exports by country, 2009 (Total: US$113 billion)

Total exports by countries, 2009

 

 

US$ million

% Growth 08/09

% Share in 2009

1            

Germany

36,401

-19.1

32.3

2            

Slovakia

10,161

-24.4

9.0

3            

Poland

6,567

-30.9

5.8

4            

France

6,349

-20.9

5.6

5            

UK

5,567

-20.9

4.9

6            

Austria

5,308

-23.5

4.7

7            

Italy

4,934

-27.8

4.4

8            

Netherlands

4,357

-24.6

3.9

9            

Hungary

2,883

-30.6

2.6

10        

Belgium

2,869

-26.9

2.5

Source: Czech Statistical Office

Apart from being a landlocked country, Czech importers, limited by the small market size and hence small order quantity, used to turn to Western European distributors, especially German, for imports from Asia. In so doing, thanks to the provisions on free movements of goods within the EU, the goods, after customs clearance and breaking bulk in Germany or other EU countries, will be counted as Czech imports from the EU instead of Asia. This logistical dependence on German ports such as Hamburg in receiving sea cargo from Asia also partly explains why Germany has the lion’s share of the Czech import mix.

Nowadays, although small Czech importers, given their small order quantities, continue to source from German traders, medium- and large-sized companies, especially retail chains, have started to import directly from manufacturers in Asia, especially the Chinese mainland. This trend has been reflected by the ever-growing share of China’s goods in Czech total imports, which increased from 5.2% to 8.9% between 2004 and 2008. Even in the midst of global recession, this ratio kept increasing and reached 10.1% in 2009.

Looking forward, as more and more Asian suppliers, including Hong Kong and mainland companies, are willing to reduce their minimum order quantities to make their debut in new markets to diversify away from recession-hit mature markets, and Czech importers’ enhanced ability to place larger orders with overseas suppliers on the back of a strengthening of import demand alongside their deeper pockets, the scope of direct sourcing is poised to expand further to encompass a wider variety of products, portraying a rosy picture for Hong Kong’s exports in the post-crisis era.

Thanks to the limited production of, but rising appetite for, consumer goods in the Czech Republic, Hong Kong’s trade with the Czech Republic, despite the 2009 recession, has fared well in recent years. During 2004-2009, Hong Kong’s total exports to the Czech Republic expanded by 114% or a compound annual growth rate (CAGR) of 16%.

Chart: Hong Kong's trade with the Czech Republic

Owing to its small market size and hence small orders, the Czech Republic is still very much uncharted territory to most Hong Kong suppliers. While exports to the region remain scanty, sales growth, before the outbreak of the global financial crisis, has been impressive. As Czech consumers become more willing to spend to improve their living standards, and Czech importers grow larger, along with an increase in purchasing power of consumers following the gradual recovery of the global economy, many, including regional distributors, will be big enough to become direct customers for Hong Kong exporters. In particular, Hong Kong companies look set to have the strongest competitive edge in electronics (both consumer electronics and parts and components), toys and games, fashion and giftware, while other products such as timepieces and jewellery are also quite well received in the Czech market.

Hong Kong’s exports of selected products to the Czech Republic

(US$ million)

2006

2007

2008

2009

Value

Growth

Value

Growth

Value

Growth

Value

Growth

Total exports

600

+75%

582

-3%

715

+23%

586

-18%

Electronics^

469

+93%

422

-10%

542

+29%

441

-19%

Telecom equipment

13

16%

26

+105%

43

+62%

44

-5%

AV equipment

51

+44%

158

+213%

312

+97%

260

-17%

IT equipment

150

+111%

127

-16%

95

-25%

71

-26%

Toys and games

24

+59%

21

-14%

30

+44%

46

+53%

Fashion products

38

+38%

57

+48%

55

-3%

39

-29%

Clothing and accessories

22

+104%

34

+56%

30

-13%

23

-24%

Footwear

8

-22%

10

+24%

12

+23%

9

-28%

Travel goods

8

+23%

13

+52%

13

+2%

8

-42%

Gifts and premiums*

41

+41%

44

+7%

50

+14%

36

-28%

Watches and clocks

6

+7%

7

+20%

10

+42%

7

-29%

Jewellery

1

+56%

6

+318%

7

+30%

4

-38%

^ Includes finished electronic products and parts and components of electronic products
* Includes items covered in other categories
Source: Census & Statistics Department, HKSAR Government

Hong Kong as a platform for Sino-Czech trade

On the back of the aspiration to export diversification and a global trade shift towards Asia, there is a growing trend for Czech brands and products wanting to launch on the China market. For instance, since the launch of the 2nd generation Octavia in China in 2007, Škoda Auto – the Czech Republic’s largest exporter – has been gaining a foothold in the Chinese market (the world’s largest auto market), while the world-famous Bohemian glass and lighting products have successfully built a following among consumers and interior designers in Hong Kong, the Chinese mainland and other parts of Asia Pacific. Against this backdrop, Czech’s exports to the Chinese mainland increased by a CAGR of 21% between 2004 and 2009, when the country’s import from China boded even better at a CAGR of 30%.

Chart: Bilateral trade between the Czech Republic and China

Given the lack of in-depth and first-hand market information on the Chinese mainland and other Asian countries, Czech companies have been seeking cooperation with Hong Kong companies in order to leverage on the latter’s knowledge and network in the Asian region. As such, apart from selling to the Czech market, Hong Kong companies can explore the opportunities to partner with Czech companies that are interested in expanding their business coverage to Asia, especially the Chinese mainland.

On the other hand, a slew of Chinese enterprises is interested in using the Czech Republic as a platform to enter the EU market. So far there are already a number of ventures between Czech and Chinese enterprises having production in the fields of TVs, foodstuffs, operator systems, bicycles and canned meat in the Czech Republic. Hong Kong companies, which have years of experience in trading with different markets across Europe, can certainly assist new-to-Europe Chinese enterprises to tap into the borderless market of 500 million people by providing a wide range of services including business, financial and legal consultancy and support.

Content provided by Hong Kong Trade Development Council
Comments (0)
Shows local time in Hong Kong (GMT+8 hours)

HKTDC welcomes your views. Please stay on topic and be respectful of other readers.
Review our Comment Policy

*Add a comment (up to 5,000 characters)