Romania dreams of modern silk road with China

Romania has discovered that relations with China bring prosperity but has hitherto simply stood by and watched other EU members signing agreements with Asia’s economic powerhouse. But the country’s 62-year diplomatic relationship with the world’s second biggest economic power may prove to be an asset that will strengthen business ties between China and Romania.

Ovidiu Posirca

Romania wants to become the Eastern European logistical center for Chinese goods, according to Andreea Vass, economic counselor to Prime Minister Emil Boc. The statement was posted on the counselor’s blog, shortly after a Romanian delegation returned from an official six-day trip to China. Vass went on to say that Romania is strategically placed for receiving Chinese commercial fluxes. In 2005, Cosco, a Chinese shipping company, considered operating the container terminal at Constanta Port. However, discussions reached a dead end and the Chinese opted for the Greek port of Piraeus instead.

Friendly relations between the two countries go back to the early 90s, when the Chinese monetary authorities deposited foreign currencies in the Central Bank of Romania, when supply was scarce.
The Chinese didn’t forget this aid and have expressed availability to deliver major investments in Romania. Moreover, China Development Bank has been invited to open a branch in Romania, in order for Chinese financial institutions to gain a foothold in the EU.

Hu Jintao, the Chinese president, has pushed for a pragmatic collaboration between the two states, while the Chinese Prime Minister Wen Jibao has called for the traditional friendship
between China and Romania to enter a new era, where prosperity is the new rule, two encouraging statements made during official meetings held this August.

In Romania, about 10,000 companies have Chinese participation with capital of EUR 318 million in the retail, manufacturing and IT&C industries. In fact, Romania’s business environment seems to be attracting an increasing number of Chinese, as a 10 km strip of commercial centers worth EUR 27 million, called China Town, was recently inaugurated in the outskirts of Romania. Approximately EUR 40 million has been invested in a Chinese tobacco factory in Buzau County.
A EUR 10 million investment in the same area is transforming plastic waste into raw materials.

Bikes are manufactured in Deva by DHS with most of the production exported to Germany, while in Ploiesti a Chinese company has invested EUR 5 million in the production of printing cylinders. In addition, millions of euros are circulating in the trading business. Previously, Chinese investment was associated with bazaar-style wholesalers like Europa, Niro and Dragonul Rosu with their murky book-keeping.

In 2010, exports between China and Romania stood at EUR 2.6 billion, while Romanian exports to China amounted to EUR 309 million. Nonetheless, there is room for expansion, so Romania is trying to reposition itself as a strategic partner for Chinese export flows and delivering projects in a public-private partnership.

Political officials organized a Romanian-Chinese Economic Forum in Beijing, at which dozens of Romanian and Chinese investors were present Some of the Romanian companies that participated in the forum include state-owned energy firm Hidroelectrica, wine producer Murfatlar and the local subsidiary of telecommunications giant Motorola.

According to Gabriel Ghelmegeanu, the president of the Romanian-Chinese Chamber of Commerce and Industry, the latest Romanian visit to China sent out a political signal, but relations should be taken to the next step, as signals have been given in the last ten years without any positive outcome.

The Chinese were invited to participate in massive investment projects that will be built through a public-private scheme. Chinese labor is needed for erecting Reactors 3 and 4 of Cernavoda Power Plant, modernizing mines in the former thriving region of Valea Jiului and building essential transportation routes connecting Romania to the EU by road. Romania is willing to commission further agriculture and electricity projects to Chinese companies.

The Romanian mission to China had some bold plans but the details may dent the enthusiasm. Romania doesn’t have a direct flight between Bucharest and China, and its diplomatic presence in Beijing is slim, as no new Romanian ambassador has been appointed since the last one resigned 10 months ago. Still, the foreign affairs minister has announced that an experienced diplomat will take up the position this fall.

Ghelmegeanu concludes that the Chinese are willing to invest in Romania, thanks to the two countries’ longstanding historical relationship.
They might actually feel obliged to do so. However, Romania should act pragmatically, say commentators, presenting its Chinese counterparts with solid projects that should be negotiated at a moderate pace. Only through continuous collaboration is Romania likely to achieve something.

ovidiu.posirca@business-review.ro