Aiming potential

For more than half a century, regardless of changes in the international and domestic situations of our two countries, friendship and cooperation have always been the basis of relations between China and Romania. In order to highlight the current status of dialogue between the two countries, The Diplomat - Bucharest talked with Xu Feihong, Ambassador of the People's Republic of China in Romania, about the present and future

2016-10-22 07:49:00 - From the Print Edition

Ongoing developments and ways to improve

How is perceived, at the diplomatic level, the relationship between Romania and China, within an economic-oriented context?
Ambassador: Currently, relations between China and Romania have entered a crucial period of development. China is the second largest economic entity all over the world and Romania is the second largest country in Central and Eastern Europe, which brings a rare opportunity for the vast thoroughness of the development for each side. Moreover, the Belt and Road initiative proposed by China and the cooperation mechanism between China and Central and Eastern European countries will link China and Romania even closer.
In this context, some significant achievements of economic cooperation between China and Romania have been made with both sides' efforts in recent years. In the first five months of 2016, the bilateral trade volume reached 1.76 billion US dollars, and China has become the ninth largest trading partner of Romania globally. Some major projects that Chinese company participates in, such as units 3 and 4 of Cernavoda Nuclear Plants, Rovinari Coal-Fired Power Station have been made great progress. The exports of meat products, dairy and eggs towards China have grown dramatically and the Chinese companies that come to Romania to make research have multiplied, in regards to investments in sectors such as auto parts, clothing and textiles, presenting a very good development perspective.
However, China-Romania cooperation potential is far beyond the above-mentioned results. Bilateral trade volume has not reached the level of our aspiration and enthusiasm. No China-Romania key economic project has started its construction. No Chinese company has yet won tenders for Romanian infrastructure projects such as motorways and railways. Next step, both sides need to show more confidence, to tap the potential and seek appropriate methods, in order to push forward the mutual beneficial cooperation between China and Romania.
However, there is enough local ground to show optimism regarding future improvements in bilateral trade and economic exchanges between the countries, with several local advantages which, in the eyes of Chinese investors, can be the starting point of speeding up the investments in Romania.

Local benefits

From economic perspective, which are Romania's greatest advantages to develop and grow the economic trade with Chinese companies and investors?
Ambassador: First of all, geographical location. It is the second largest country in CEE offering significant market potential in terms of size (the ninth in EU) and population (the seventh in EU). It is at the crossroads of three great markets: the European Union, the CIS states and the Middle East. Meanwhile, as a member of EU, it is a gateway to a 500 million consumer market and have the right of tariff-free trade to access to EU markets. Second of all, economy stability. Romanian economy is robust with higher growth rate in the EU, low inflation, external deficits and strong FDI inflows, which are bright spots that I think Chinese companies and investors are recognizing.
Third of all, financial support. In Romania, foreign investors can enjoy the national favorable treatment and get state aid for investment. Moreover, taxation rates are low such as corporate tax, which is one of the lowest in EU. Last but not the least, competitive labour costs, skilled workforce and rich resources are the factors which make Romania an attractive destination for trade and investment.

Eyes on the road

Which are the major industry fields identified by Chinese investors in Romania as attractive?
As the Chinese Ambassador stated for The Diplomat - Bucharest, the local need of infrastructure development can find its answer in the Chinese expanded experience in building roads. As stated before, the only downsized is the tendering process in Romania, that makes it hard for Chinese companies to participate and win contracts.
Ambassador: According to Romania's development plan, the infrastructure is a priority field of national importance. Throughout over 30 years of reform and openness, China accumulated a vast experience in the field of infrastructure, having at this point 110,000 kilometers of highway and 16,000 of railway for high speed trains, which grants China the top position in the world. The Chinese -Romanian cooperation in this field responds to Romania's necessities of development. Besides mentioned above, Chinese investors have the intention to invest in energy field, such as nuclear energy, hydroelectric energy and the manufacturing field, such as auto parts, household appliances and so on. The eco-agriculture projects are also the increasing attractive for Chinese investors.

The macroeconomic inviting landscape

Which macroeconomic aspects in Romania should be improved in order to have the strongest effect on the Chinese investment strategy in Romania?
One of the first stages of the due diligence process run by any investor before stepping into a new business territory points to the macroeconomic landscape. The Chinese Ambassador summarized the main criteria to be taken into account by Chinese investors when looking towards Romania.
Ambassador: When deciding on investment, Chinese companies will take such aspects as below into consideration:
First is the country safety situation. In these two years, EU is facing many challenges, such as the Greek debt crisis, the migrant crisis and Brexit threaten. Although Romania is less exposed to these risks than some other European countries, they will affect foreigners' operational risk in some extent. Romania should manage carefully to keep domestic economic environment safety and stable.
Second is the stability and transparency of legislation. It is also the main concern for Chinese investors. If not so, I think it will undermine the operating environment and dampen investors' confidence.
Third is the policy. Romania grants foreign investors the national favorable treatment, Chinese investors hope they can enjoy the same rights as European countries'. Meanwhile, attracting Chinese investors entails that Romania takes measures to streamline the visa procedure to make the investors get visa quickly and easily.

Progress on structural reform is needed

Predictability in legislation and transparent decision making: What improvements and challenges can be identified in today′s Romanian business environment?
Ambassador: I am very happy to see that Romania has made some progress on this agenda. Romanian government has drafted the budget for 2016 to maintain the macroeconomic stability targets and monitor the use of budgetary resources. The public administration is reformed through the professionalization and the effectiveness of the fight against corruption to increase the efficiency. In order to make administrative decision more transparent, the access to public information is improved and practice of prior consultation of citizens is established. In order to make public service more efficient, a performance management system for public administration employees, which is differentiated pay system based on performance, is developed and implemented. Moreover, the government publicized the "Investor's Guide 2016" to support foreign investors to navigate the Romanian business environment when opening a business.
However, keeping the policy continuity and stability may be a challenges for Romania in the future. And accelerating the implementation of structural reforms has a long way to go.