The Chinese endeavour
The blunt figures show that in the first five months of 2016 the bilateral trade volume of Romania and China reached 1.76 billion USD, and China has become the ninth largest trading partner of Romania globally
However, for many years, China has had only several large companies present and active in Romania, mainly in technology, energy, trade, farming and several newly announced ones in automotive. Conversely, a major economic sector such as infrastructure seems to be prohibited ground for the Chinese flag, due to the confusing tendering process in Romania.
o far, the estimates of the Chamber of Industry and Trade in Romania put the trade between Romania and China at a value of 3.4 billion Euro, registered at the end of 2015. Romania's exports were worth 524.78 million Euro and imports stood at a value of almost 2.9 billion Euro. At January 31st, 2016, according to the National Office Registry of Commerce, in Romania there were 4,250 active companies with Chinese capital and majority ownership (according to NBIS), with a total social subscribed capital of 227.6 million Euro.
Forums announce investments in automotive, real estate and energy
In March this year, the Chamber of Commerce and Industry of Romania (CCIR) hosted the Romania - Qingdao business seminar, at which an important economic delegation from Qingdao, Shandong, China and Romania participated. The main objective of the seminar was to facilitate dialogue between the Romanian companies interested to extend their area of activity, and the business environment from the Shandong province. On the occasion, CCIR president Mihai Daraban declared in the opening of the event that the Romanian Chamber System has the great advantage of representatives in every county in the country. "In the bilateral discussions we had, I pointed out the geostrategic advantages on both sides, my task being, of course, to promote Romania with all its advantages. I underlined the fact that every merchandise that comes from the Far Orient towards Europe must, in one way or another, pass the Suez channel. We have the advantage that the distance between the Constanta Port and the Suez channel is only three and a half days." Daraban also pointed out the importance of the Number Seven European Corridor (Danube - Black Sea), through which European inland countries can be reached and he underlined that in the Constanta Port ships can enter with the biggest tonnage accepted by the Turkish authorities in order to transit the Bosphorus.
In June the Ministry of Ministry for Economy, Trade, Industry and the Business Environment said that five investments projects worth over 118 million Euro to be run by Chinese companies in Romania have been signed in China, during the ministerial reunion for the economic and commercial promotion between China and the countries of Central and Eastern Europe. The quoted projects of bilateral cooperation aim for the following domains: auto, renewable energy, real estate and education. For instance, the Chinese investors intend to build a factory for auto parts in Brasov, an investment estimated at 45 million Euro. Similarly, there is a project in the domain of car ornaments which will be made with an investment worth 17.6 million USD and the construction of a solar power station of 20MW worth 33 million Euro. At the same time, the Chinese intend to invest 23 million Euro in the development of real estate units in the capital city and to develop a project of cooperation and exchange in the domain of education in Hunedoara. At the same time, the energy projects where two companies of China want to invest were recalled - the power station in Rovinari, in the Energy Centre Oltenia and the project for reactors Three and Four in Cernavoda.
More recently, in September this year, a 30 million USD Chinese-Romanian automotive investment project was announced during an investment forum organized by InvestRomania in partnership with the People's Government of Xiangshan County (China), supported by the Chinese Embassy in Romania with the aim of attracting Chinese investors from Xiangshan County. The event was attended by Shi Jianding, Deputy Head of Xiangshan County Government, who was on an official visit in Romania, along with several high-ranking officials and businessmen representing a large number of companies from China from sectors like textile industry, plastics, auto parts and IT hardware, and also by Manuel Costescu, Secretary of State at InvestRomania. The forum proved to be a success as a memorandum of understanding was signed between Ningbo Huaxiang Electronic Co. Ltd., China (NBHX) and Hib Rolem Trim, Romania - a German-Romanian company from the automotive sector, for implementing a 30 million USD new investment project.
"I truly believe that business partnerships such as the one between NBHX and Hib Rolem Trim will bring more such initiatives of the kind, because investors already present in our country continuing to choose Romania for opening new business facilities will represent, by the power of example, the best promotion tool possible. Romania stands as a regional hub for the IT industry and more recently for the automotive/auto parts, sectors of great interest to the Chinese investors present here today, and besides its very qualified labour force, can represent an important gateway to the European market," stated on the occasion Manuel Costescu, Secretary of State for Trade and Investment Promotion.
The construction of the 15,000 square-metre factory would start in the first quarter of 2017 and would begin production in the second quarter of 2019 creating 265 new jobs. The new factory will produce parts and accessories for the automotive industry, consisting of decorative items for interiors such as: dashboard decorations, centre consoles and door decorations for Daimler (Mercedes Benz), classes A and B, addressing the European market. According to InvestRomania, last year at the "China (Ningbo) - Romania Investment Forum" the two sides have signed a letter of intent for an investment that involved transferring a production line to Romania manufacturing interior decorations for BMW. The construction of the ten million Euro plant creating 200 new jobs, started in early July 2015, is to be finished by December 2016.
In May this year, a major transaction has been announced in the field of energy, with Chinese company China Energy Company Limited (CEFC) becoming the majority shareholder in Dutch-based oil and gas group KMG International, the former Rompetrol Group. According to data on the market, the Chinese group and the Kazakh state-owned oil company KazMunayGas (KMG) signed an agreement, on April 29th, to build a joint venture where China Energy Company has a stake of 51 per cent and KMG holds the remaining 49 per cent. The Chinese company takes on a series of responsibilities, including investing in new projects in the European Union and the neighbouring countries of the Silk Road, according to the agreement.
The local hall of fame started on two wheels of Eurosport DHS Deva
One of the largest and known Chinese businesses in Romania, the DHS brand, was established back in 1999 by Chinese private investors at Petrosani, in Western Romania. Later on, in 2004, the investors set up Eurosport DHS company and production facility at Deva and so far, the company invested locally more than 20 million Euro, according to their official estimates. Since 2015, the plant at Deva produces and exports bicycles for its partner and also shareholder, the German company Prophete Gmbh.
According to the company general manager, Yang Tianqi, the bicycle industry in Romania has the potential to supply the majority of Europe's demand for bicycles due to its competitive advantage in labour cost. The manager stated that "the existing players in this industry in Romania are already contributing hundreds of millions of Euro in GDP, and if counting the upstream potential which includes metal profile makers, painting services, logistics, component production, the bicycle industry can easily contribute to billions of Euro in GDP and countless jobs in underdeveloped regions."
On a long term, according to Yang Tianqi, general manager of Eurosport DHS Deva, the company strategy is to increase the investments in the local production facility. "There are many changes in the bicycle business in recent years, among which the most serious factor is a surplus of production capacity for bicycles in Eastern Europe including Poland. We have decided to increase investment in our production facility in order to secure our competitive advantage as a production company. Furthermore, we are in the process of starting a new painting facility in order to better serve our clients by reducing lead time for models with highest demand by the market during sales season," stated Yang Tianqi. However, the local market brings several challenges; "The greatest challenge is the lack of competitive suppliers of components within our geographic location. We are going to have more bicycle assembly factories in Romania in the near future yet there's no news of players from the upstream of the industrial chain who are going to invest in Romania. As of now, key components for bicycle production in Europe is still heavily relying on import from Asia, not just for Eurosport DHS but for all assembly factories. This results in long lead times and companies need to keep their cash flow blocked for many months, and the market has proven to us that any change can happen during a four to five month period," Yang Tianqi explained.
Recently, management decided to separate the company into three separate entities, with Export and Domestic sales to soon have independent general managers to manage the activities as independent companies. Eurosport DHS will remain strictly as a production company with the two-year plan of becoming the most competitive bicycle makers in Eastern Europe, according to the GM. "And we are currently open for hiring new members for production, quality control and R&D department. We are also currently looking for partners in Public and Government relations in order to better convey our visions for the bicycle industrial chain in Romania to the public and government," Yang Tianqi said.
Also, as part of the business strategy, the company plans to focus on domestic sales in order to fulfil the revised company mission in the country in which it operates. "The mission is to bring about the awareness to the Romanian public that bicycle and electric bicycle are the inevitable new mode of transport for this country. In the current global economy where most average young people who live in major cities across Europe spend at least 25 per cent to over 50 per cent of their monthly disposable income on private autos just to waste hours of their day in traffic, Eurosport DHS feels compelled to bring the public to the awareness that an alternative lifestyle could result in much higher quality of life by adopting bicycle and E-bike as a part of their daily life, a fact that has already been proven in many Western European countries including our neighbour Hungary, who took advantage of the European cohesion fund in the past to develop safer bicycle infrastructures," Yang Tianqi added.
The competitive advantage of a complete industrial chain is needed
According to the GM of Eurosport DHS, along with the incentives and terms offered to foreign investors in the field, the Romanian state should have a dedicated commission which includes private experts in the industry to better understand what the industrial chain for bicycles is, can identify where competitive advantage can be reached in the long run, then make a strategic plan on offering conditions tailored for the bicycle industry to attract foreign and domestic investors. "I would recommend the Economics Ministry send delegates to Taiwan, Southern China, Vietnam, and the newly rising bicycle industrial park in the Porto region of Portugal to investigate what it means to have tailored solutions for a unique industry that is currently up for the taking for the most committed European country with the vision to see the long term immense benefit of being the dominant exporter of an entire industry on a continent," Yang Tianqi said.
That is because, as the manager stated for The Diplomat - Bucharest, regarding regional shifts it has become clearer that the biggest global players in this industry have already decided to focus their investments in Portugal where the government provided many concrete benefits to investors in order to secure their nation's competitive advantage in bicycle production. "In my opinion, it is still not too late for the Romanian government to see that with increased amounts of consideration and action, Romania can become the leader of bicycle production. We have powerful existing assembly factories already in Romania and more to come in the near future, but assembly factories are at the end of the stream of the industrial chain. For a nation to truly capitalize on an industry, they need to do everything possible to make sure that the entire industrial chain is present in order to sustain its competitive advantage," Yang Tianqi concluded.
Smithfield Romania emphasizes sustainability in doing business
Romania is already playing in a global market where the domestic influences and evolutions emerge on a competitive market. According to Bogdan Mihail, president of Smithfield Romania Group, "it is obvious that the local market gained new features, especially adjusting the business to the final consumer asking for innovative products. At the same time, the modern consumer demands to be provided with the possibility to choose from the overall product offer and opt for those products that have been created in a sustainable manner. Furthermore, the consumer is now driven by information, acting according to his beliefs and making his own choices. The quality of the product and the competitive aspects of the price are essential to his choice, but the modern consumer also pays attention to the sustainably that has to be proven by the companies all along the production chain, ′from farm to fork′. This aspect starts to represent one of the main differentiators on the agro-food market."
According to Smithfield Romania′s president, in 2016 the company continued consolidation for the semi-processed segment and translated the demands of clients into their production plans. "On the long term, our presence represented by Romanian products exported on the European and Asian markets will create the suitable premises to promote a sustainable development of agriculture, farming and food processing in Romania," Mihail stated.
In 2015, the company recorded a growth of five per cent for pork meat production, translated in various products, even as the overall prices for these kinds of products have dropped in the EU and Romania following the global trend. They plan to be able to maintain this evolution in 2016, within a steadier global environment. "Also in 2015, we started to implement the first development stage of growing the number of hogs in our farms. We successfully implemented a series of new investments in new technologies that are estimated to grow by ten per cent the number of hogs registered by our division, Smithfield Ferme," Mihail added.
Smithfield Romania is producing 100 per cent made-in-Romania fresh hog meat and products, among the best available not only on the local market, but also for export. The core business is focused on answering local demand, the majority of the production being delivered throughout local distribution chains to all major key accounts, but also to local retailers in Romania. Nevertheless, the company representative stated that they are among the few being allowed to export the products into the high-standard EU market - over 21 per cent of Smithfield-produced volumes being shipped to various EU countries (from Spain to UK), ex-Yugoslavia area, and Moldova. Starting last September, China became another strategic market for Smithfield as well, with a large demand of niche market products, complementary to the ones traditionally consumed in Europe.
Overall, the farming and agricultural industry was highly impacted by the geopolitical tensions of previous years, as bans on exports and overproduction in some European regions put pressure on price levels and on the margins local producers in Romania can make. Thus, finding new markets, increasing competitiveness, reducing costs and restructuring underperforming actives became a strategic mantra for the industry. "We managed to successfully implement this strategy and take all proactive measures allowing Smithfield to play in the ′big league′. As always, the context of a steady economic growth, predictability of local legislation and geopolitical stability in the region have an important saying on any development and investment plans in the industry. A better access to EU agriculture funding programs could also boost investment perspectives," the Smithfield official added.
The recent EU ban lift on live hog exports from Romania added to the strategic development directions' big picture of the industry, offering new perspectives to local producers who can also afford to be competitive on international markets. Smithfield company created over 2,000 direct workplaces within the group in Romania, distributed in its processing facility, farms and combined feeding products. The company recruited employees mostly from Timis and Arad, so that over 80 per cent of employees came from these regions.
In terms of education partnerships, Smithfield Romania has also developed joint training and practice programs with local universities, which are encouraging young students in various fields of interest for the industry (veterinary medicine, agriculture, zootechnics, ecology & environment protection, management, communication) to become involved with the business, periodically allowing the company to recruit the best resources on the market.
ZTE Romania committed to integrated technology performance
The mother company of ZTE Romania successfully managed to break through in Government and Enterprise industries for more than ten years. At the end of 2013, ZTE formally established G&E business group, and fully optimized its organizational structure, greatly enhancing the independent operation ability of relevant business. The G&E business has become one of ZTE′s three major strategic businesses and a key growth engine for business development. In this context, according to Lorian Vintila, chief strategy officer Management at ZTE Romania, "the company follows the path opened by ZTE Corporation and we are willing to deliver projects according to local requirements and regional demands."
According to the official statement, as a member of the UN Global Compact, ZTE corporation puts a great value on sustainability as the ongoing aligned trend of all industries and companies. "The company is committed to a vision of balanced, sustainable development in the social, environmental and economic arenas and incorporates innovation, technological convergence and the concept of ′going green′ into the product life cycle. This includes R&D, production, logistics and customer service, also maximizing energy efficiency and minimizing the CO2 emissions and providing integrated end-to-end innovation to customers," Vintila stated.
In the government sector, ZTE grasps the opportunity of China′s Central Government promoting safe city and intelligent city concepts; therefore ZTE proposes "Four I", the Information, Intelligent, Innovation, Interaction concept, which promotes all types of digitalized/informatized perceptive data and build platforms and applications, in order to provide advanced and convenient services to citizens, and abundant and efficient data for government in its decision-making process. ZTE has been ranked Number One in China′s smart city industry for its comprehensive competitiveness and has been rewarded many records for its worldwide presences by global industrial organizations such as TMF in Europe.
On the local market, the company′s local investments increased employee numbers by creating professional and social satisfaction for their careers and this represents the main asset of ZTE Romania.
Huawei plants the Seeds for the Future
Huawei, one of the leading global information technology and communications (IT&C) solutions provider, recently announced that it will continue to support the Romanian educational system, especially the IT&C universities, by developing new educational programs and internship programs. The company already developed a range of educative programs, like "Telecom Seeds for the Future", in partnership with the local Government and Universities.
During previous years, Huawei′s internship programs became more and more popular among the Romanian IT&C students. "Telecom Seeds for the Future" is one of the largest developed internship programs by the students, and, according to company officials, one of the "most wanted programs". The internship consists of a two-week intensive training program in China dedicated to local IT&C students. This year′s edition of the program took place between 27 August and 11 September and ten students from technical universities in Bucharest, Iasi, Craiova and Cluj-Napoca benefitted from it. The young Romanians who took part in this program had the chance to experiment a multi-cultural experience in China: first in Beijing, where they were introduced to the Chinese culture and language and next in Shenzhen, at the Huawei Academy centre. According to Vlad Doicaru, enterprise director Huawei Romania, "the goal of Huawei′s educative programs is to help develop Romanian IT&C talent and promote a greater understanding of the telecommunications sector. Telecom Seeds for the Future is Huawei′s most popular CSR program, that offers students the opportunity of working in a top IT&C company, with access to the latest technologies and the latest innovations from our industry."
Huawei Telecom Seeds for the Future program is part of a long-term strategy made by Huawei to support the young Romanian specialists who wish to develop competencies in the companies′ technical fields.
In Romania, Huawei has become a strategic partner for the main communications operators by developing high-technology solutions and providing personalized services for its clients. According to their official statement, the company plans to extend its local mark by increasing its employee number and local resources, adding value to the regional centres (GSC and ASSC) and investing in local communities through partnerships with the Romanian universities and creating long term perspectives through internship programs.