United Daily News (UDN), one of the primary Taiwanese news groups, recently reported that the Czech Republic’s central bank announced that it has liquidated all of its RMB bond holdings. People familiar with the matter said that this move was primarily motivated by political factors and risk of Chinese invasion of Taiwan.
The Czech-China relationship had cooled significantly since the beginning of this year. The UDN report cited a Financial Times interview with newly-elected Czechian president Petr Pavel, who said “China and its regime is not a friendly country at this moment, it is not compatible with western democracies in their strategic goals and principles.” Pavel was the first elected European head of state to speak to Taiwanese president Tsai Ing-wen. China’s foreign ministry said that Pavel “ignored China’s repeated attempts to dissuade him” and “persisted in stepping on China’s red line”.
According to the latest data released by the Czech National Bank, as of June 30 this year the Czech central bank no longer had any RMB assets in its investment portfolio. In the foreign exchange reserve currency allocation table, the RMB column is no longer present. Members of the Czech financial regulatory organization confirmed that the possibility of a Chinese attack on Taiwan went into the decision to liquidate RMB positions, as did the “economic and non-economic context” surrounding the Czech-China relationship.
At the end of March 2023, the Chinese currency RMB still accounted for 1.9 percent of the foreign exchange reserves of the Czech National Bank. The Czech Republic has been deepening its ties with Taiwan, including exchange of high-level political visits, direct flights between Taiwan and Prague, and a commitment to co-operate in computer chip development.
UDN, September 1, 2023
Financial Times, February 1, 2023