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In recent years, the entrenched stereotypes of "poverty," "backwardness," and "conservatism" that Western Europe held towards Eastern Europe have been significantly revised. This shift is largely attributed to rising energy costs in Western Europe, which have diverted substantial investment flows eastward. Furthermore, Eastern European nations face less severe immigration challenges compared to their Western counterparts, turning this into a developmental advantage.
Starting today, January 1, 2026, Bulgaria officially joins the eurozone, adopting the euro after two decades of effort. However, the Czech Republic, one of Eastern Europe's strongest economic performers, remains hesitant to join. Why is that?
A recent visit to the Czech Republic revealed a nation of contrasts: relatively conservative yet fragmented, where tradition coexists with openness, and a sense of melancholy blends with childlike whimsy. It is the land of Milan Kundera's "The Unbearable Lightness of Being," with its themes of pain, philosophy, and powerlessness, yet also the birthplace of "The Little Mole," a beloved character that has healed countless childhoods—a creation unfamiliar to and never conceived by Disney.
Like other Eastern European countries, it is vibrant and bustling, attracting many tourists from Western Europe, even for holidays. The reasons might surprise domestic readers: compared to Western Europe, Eastern Europe is now perceived as safer, offers relatively lower prices, and boasts a stronger "festive atmosphere"—a stark contrast unimaginable a decade ago.
In 2023, tourism contributed a significant 2.36% to the Czech GDP, reaching 1800 billion Czech koruna (approximately 61.9 billion yuan). While this pales in comparison to France's roughly 2000 billion euro (16.4 trillion yuan) tourism industry, it sustains 224,000 livelihoods, representing a major and rapidly growing sector. The largest groups of foreign tourists now come from Germany, the US, the UK, Northern Ireland, and Italy, with efforts underway to attract more visitors from China, Canada, and the Middle East.
——Rising Costs
The first meal in Prague was at a highly conspicuous sushi buffet in the old town. The restaurant featured modern, new decor in a prime location within a shopping mall, neighbored by Five Guys, making them the two busiest eateries in the building.
This mid-to-high-end restaurant in a prime location charged 499 Czech koruna per person for lunch, about 20 euros or 170 yuan, excluding drinks, with a pot of tea costing around 4 euros. For the location, price point, and service level, this was indeed more affordable compared to Western Europe. The restaurant's rules felt familiar: a two-hour dining limit, QR code ordering, with a maximum of seven items per order, repeatable after a few minutes. The place was bustling, nearly full.
The ordering system closely resembled those in China, with QR codes and a direct Chinese menu option; the waitstaff also appeared Chinese. A casual inquiry confirmed that almost all servers were Chinese women, and the owner was Chinese—it was essentially a Chinese-run restaurant. Over the past decade, Chinese restaurants or those operated by Chinese owners have proliferated in Prague.
It was previously noted that the biggest challenge for Chinese restaurants in the Czech Republic is the reliance on imported seafood and aquatic products, leading to high logistics costs, expensive labor, and difficulty in finding experienced chefs and service staff. Another, less noticeable factor is the steady climb in local living costs.
Research indicates the average gross monthly salary in the Prague region is about 68,400 koruna (23,200 yuan, over 2,550 euros), 1.2 times the national average. While significantly lower than the average gross salary of 4,500 euros in Paris and Berlin, this still exceeded prior expectations for Prague's wage levels. During a previous visit to Slovenia, locals emphasized that much investment, particularly in manufacturing, was flowing into the Czech Republic instead of Slovenia because Czech wages were considerably lower.
For instance, factory workers in Slovenia command monthly salaries of 1,000 to 1,500 euros, with total employer costs exceeding 2,000 euros per worker including benefits. In contrast, Poland, the Czech Republic, and Hungary represent low-cost labor hubs in Eastern Europe, attracting a surge of factory investments from Western Europe and China in recent years, based on the logic of "Eastern European manufacturing serving Western European markets."
Europe itself remains a competitive arena. Some Portuguese factories offer monthly wages of just six to seven hundred euros, while Spain, also attracting significant Chinese manufacturing investment lately, boasts similar labor advantages.
Likely due to increased investment and more job opportunities, local prices have been soaring. For example, the average local housing price has reached 141,000 koruna per square meter, nearly 48,000 yuan—a 12% increase within a year. Prices in some popular districts have even surged by 26% compared to last year. Similarly, rental costs have risen by 9%.
——Why Not the Eurozone?
As an EU member, the Czech Republic is part of the Schengen Area but has delayed joining the eurozone. EU rules stipulate that as a member, the Czech Republic must eventually adopt the euro, akin to being "engaged," but the "wedding date" remains unspecified.
Exchanging 100 US dollars at a Prague currency exchange yielded 2000 Czech koruna—interestingly, 100 euros also fetched only 2000 koruna, despite the exchange rate being approximately 1 euro to 1.17 US dollars. While many businesses accept euro cash directly, the euro price for the same item is often significantly higher than the local currency price.
Currency barriers are a two-way street. The Czechs' favorite travel destinations—Croatia, Slovakia, Italy, and Austria—are all eurozone countries, meaning consumers bear exchange rate costs. For instance, paying 20 Czech heller (0.83 euros) for a public restroom in Prague using a card incurred an additional 1.1 euro currency conversion fee from the French bank, precisely because it's not in the eurozone.
The currency issue affects businesses and investment, not just individuals. Skoda, the largest local manufacturer and a subsidiary of Volkswagen Group, sells most of its cars in Europe, conducting settlements in euros and paying many local suppliers in euros. Over the past decade, increasingly more corporate borrowing is in euros, while small and medium-sized enterprises struggle to access favorable euro loans, increasing investment and operational costs.
Despite this, the Czech Republic consistently emphasizes that the Czech koruna is one of Europe's best currencies. It has remained relatively stable—even after decoupling from the euro in April 2017—and has appreciated recently.
——Bulgaria, Not the Czech Republic, Marks the Eurozone's Eastern Expansion Milestone
Starting today, January 1, 2026, Bulgaria officially joins the eurozone, adopting the euro after striving for 20 years. Meanwhile, the Czech Republic, outperforming Bulgaria in many aspects, shows no signs of following suit.
The eurozone, actively pursuing "eastern expansion" in recent years, has been eager to welcome the Czech Republic. The EU is the Czech Republic's most crucial source of foreign investment. According to UNCTAD's 2024 World Investment Report, the largest investors in the Czech Republic hail from the Netherlands, Luxembourg, Germany, Austria, France, and Cyprus. UNCTAD data indicates the Czech Republic leads Central and Eastern Europe in both annual FDI inflows and total FDI stock.
From the perspective of fostering business connectivity and investment, joining the eurozone offers advantages. However, the Czech National Bank is content with the status quo, believing its independent currency better ensures local economic stability, crisis response, and growth stimulation.
Simultaneously, two-thirds of Czech goods exports are destined for the eurozone. The country boasts one of the EU's lowest debt levels and a budget deficit below the eurozone average. Among Eastern European nations, the Czech Republic appears the ideal candidate for euro adoption. Yet, it remains reluctant. While joining would eliminate conversion costs and enhance perceived reliability, the Czech central bank asserts its primary mandate is price stability, not aiding exporters and investors.
——A Sense of Crisis in Europe's Auto Industry?
As a key manufacturing hub in Eastern Europe for the automotive industry, the Czech economy faces significant risk exposure to German automakers. In 2021 alone, German companies generated an annual output value of 250 billion euros in Eastern Europe, securing 1 million direct jobs, not including downstream产业链 or contractors.
Exports to Germany account for one-third of the Czech Republic's and one-quarter of Hungary's total export value. Slovakia follows, with one-fifth of its exports going to Germany. Among these Eastern European countries, Poland demonstrates greater industrial diversity and less reliance on the German auto sector.
Over the next year or two, the best-case scenario involves maintaining current production levels in these Eastern European companies; the worst-case involves output reduction and layoffs. Some auto parts suppliers who planned capacity expansions between last year and 2025 have largely shelved those plans.
However, proactive自救 efforts are underway, including strategies to attract more investment from Asia and the Middle East. Hungary, for example, is vigorously courting Chinese investment in batteries and electric vehicles, aiming to position itself as a bridgehead for the EU's EV industry connecting East and West.
Professor Miklós Losoncz, a Hungarian economist and former Dean of the Doctoral School of Business and Entrepreneurship at Budapesti Corvinus Egyetem, previously analyzed that, statistically, Hungary has been the top destination for Chinese investment in the EU for two consecutive years. In 2024, Hungary attracted 31% of China's direct investment in the EU, becoming a key European base for companies like比亚迪, CATL, and Sunwoda.
Regarding cooperation with China, Hungary is undoubtedly the most vocal and proactive among Eastern European nations, while the Czech Republic maintains a more ambiguous, even somewhat detached stance. Nonetheless, China has become the Czech Republic's second-largest global trading partner, with bilateral goods trade reaching $23.23 billion in 2024, an 8% year-on-year increase. Collaboration spans automobiles, machinery, chemicals, technology, and logistics, with over 50 Chinese companies established locally. According to China's Ministry of Commerce data, Chinese direct investment in the Czech Republic exceeded $13 million in 2022, with a total investment stock of $320 million.
Despite political noise and the Czech Republic's attempts to find a balancing act, strengthening cooperation with China is an undeniable reality.
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