Paths International Ltd

Abstract:

Romania has long been at the top of the list of favorite destinations for Chinese outbound
investment. In one of China’s earliest Outbound Foreign Investment Catalogs of 2004, which indicated the most attractive countries and sectors for Chinese capital outflows, Romania ranked first, on par with Germany and closely followed by Poland, Czech Republic and Hungary. Against this background of very promising odds, Romania did not take advantage of the momentum and has failed to come up with a coherent strategy to match up China’s enthusiasm and readiness for increasing mutual economic cooperation. Instead, it had focused all its attention on acquiring NATO and EU membership. Another auspicious moment was that of 2013, when a Chinese delegation of high officials and businessmen came to Romania to discuss about and create new opportunities for economic cooperation. Up to this point however, a significant Chinese presence on the Romanian market has not yet been established. Some of the oldest and most discussed projects in bilateral meetings were either projects of infrastructure development (e.g. building a high-speed rail line, connecting major cities through a highway network, etc) or projects relating to energy production, such as upgrading, building or extending existing power plants. Among them can be mentioned the Cernavodă Nuclear Power Plant project consisting of building reactors 3 and 4 and the initiative to build a hydroelectric power plants in Tarniţa-Lăpuşeşti, or the Rovinari coal-fired power plant. All these ambitious projects inherently included contracts with the state, whose negotiation proved to be extremely cumbersome, spanning over many years. As a result, none of these initiatives was finalized. On the other hand, there are several successful examples of private Chinese investment in Romania, such as the acquisition of Rompetrol by CEFC China Company Limited. Another high caliber investor was the Huawei regional center, which is said to have reached now close to 1000 employees.
Thus, it appears that private investments have had better odds of being successful in Romania, rather
than private-to-state and state-to-state businesses. This fact is of high importance and it may imply the need for a change of perspective from China’s standpoint when it comes to planning new investments in Romania, as well as in other CEE countries.
This paper will start by providing a brief overview on the fundamentals of China-Romania relations
within the CEE 16+1 framework and will analyze the advantages of investing in the private sector, rather than in sectors or projects where the state is the leading actor.

Keywords: China-Romania relations, Chinese investments in Romania, the 16+1 format, state to
state investments, private Chinese investments