Chinese firm heads to Czech village to conquer Europe (News Feature)

May 26, 2008, 17:53 GMT

Prague - A Chinese food company opened its first European plant Monday in a Czech village, seeking to turn the sleepy spot into a launching pad for its European and North American expansion.

State-owned Shanghai Maling Food Co Ltd 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 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 (25.4-million-dollar) 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.

   Old Czech industries such as textiles and shoe making have been hard hit by Chinese competition. But Taiwanese companies, including electronics makers Foxconn and Tatung, have helped create new jobs in the central European country since communism fell in 1989.

Mainland Chinese companies have been more cautious, yet also began arriving in the central and eastern Europe in recent years.

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 koruny (20.3 million dollars) 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 86.4 million koruny applicable within five years, as well as lower investment and labour 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 per cent 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.

Hrobcice Mayor Bozena Zemanova is happy that the Chinese manufacturer chose her village, where unemployment only recently declined from 20-per-cent levels to about 12 per cent.

While the Czech Republic and other East European countries have a shortage of high-skill 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.