Romania: Chinese Are Coming!

BUCHAREST: Li Keqiang visited Romania in November, the first visit by a Chinese premier in nearly two decades, in an effort to deepen cooperation between the two countries in fields such as energy, trade, investment and infrastructure. Bilateral discussions were followed by a meeting with the countries in central and eastern Europe to promote regional cooperation.

This year marks the 65^th anniversary of the establishment of Romanian-Chinese diplomatic ties, as communist Romania was one of the first countries to engage with the People’s Republic of China. Li’s November visit followed the July 2013 visit of Romanian Prime Minister Victor Ponta to China to propose boosting the two countries’ strategic partnership to celebrate the anniversary.

Chinese officials have taken Ponta’s offer seriously, but on their own terms. In a joint statement issued after their meeting in Bucharest, Romania’s prime minister and his Chinese counterpart stressed that they see their countries’ partnership as exemplary for interstate relations. Li suggested that the Romania-China cooperation could become a model of cooperation between his country and central and eastern European countries and could insert new impetus in Chinese-European relations.

Economically, Romania sold itself short, trading valuable energy and raw materials for a few infrastructure projects and a bit more trade. From a political standpoint, though, by underscoring that it has viable alternative economic partners, Romania is standing up to European Union counterparts, which have used the Romanian market for their products, but repeatedly treat the Eastern European country as a second-class member of the Union.

The largest part of the Chinese investments promised will focus on the Romanian energy sector and amount to more than €7 billion. According to the Romanian prime minister, the Chinese will invest around €6 billion in nuclear energy, partly to support group 3 and 4 of an already existing power plant at Cernavoda and partly to construct a new power plant at Tarnita.

Romania should proceed with caution. In 2012, after a safety review of Chinese nuclear power plants, the chairman of China’s State Nuclear Power Technology Corporation acknowledged in passing that problems in 14 areas needed to be resolved, some of which would take three years to fix. But he was mum on the nature of these problems, where or how serious. According to a Transparency International report, Chinese companies are notoriously non-transparent, disclosing the least financial data on a country-by-country basis, in order to avoid accountability. For 2013, Romania ranked 69 and China ranked 80.

Apart from this, Romania chooses to focus on nuclear energy when many European counterparts like Germany and France are committed to reducing reliance on nuclear power, a response to the Fukushima disaster. A failure to provide close oversight of the Chinese investment could cause tension with other member states. While the United Kingdom is also building a new nuclear power plant in Somerset with two Chinese investors, the consortium will be led by France’s EDF, which has decades-long experience in nuclear energy and can ensure adequate supervision of the construction and operation phases. In response to the Fukushima accident, EDF promised to become more transparent with communities and stakeholders, by providing an open reporting culture and working closely with safety, environmental and security regulation and communities around their sites. This is not a commitment that the Chinese are likely to make for Romania.

In exchange for much needed energy, the Chinese will build a high-speed train project for Romania, starting with a pilot project of around €500 million, while also investing in Romania’s IT sector to create around 1,200 jobs.

Another bit of good news for Romanian farmers, hurt by declining demand in European markets: Chinese officials also signed two agreements with their Romanian counterparts to import 500,000 cattle and 3 million pigs during the next years, while also showing interest in importing sheep and other food products. Over the next 10 years, China’s meat demand is expected to rise. China’s growing middle class and fast-paced urbanization have altered the Chinese diet, with meat being increasingly present alongside rice and vegetables.

Romania is an important market and counts Germany, Italy and France among some of its key trading partners. Even so, Germany and France are currently the most vehement opponents of allowing Romania, alongside its neighbor Bulgaria, to enter the Schengen area – now limited to 26 European nations that allow citizens to travel freely across borders – despite fulfilling all technical requirements. Security concerns, as well as fears of a Romanians pursuing jobs, have been invoked as the key argument for not including these two Eastern European countries in the Schengen area, and Ponta has accused fellow EU member states of resorting to populist policies to appeal to voters during this electoral year.

During the Chinese visit, the Romanian prime minister emphasized that, while the EU’s rules of competition will be observed, Chinese companies will be chosen if their bid is strong from a technical and financial point of view. Given the notorious levels of corruption in Romania and China, this news should be received with skepticism.

When questioned whether or not Romania is becoming too close to the Asian giant, Ponta emphasized that all the key Western political leaders, including the US president, the German chancellor and French president, have established strong economic relations with China, and that Romania should take advantage of the same opportunities.

Romania is not alone in forming a partnership with China. Poland also signed a strategic partnership, focused on boosting Polish imports to China and encouraging Chinese businesses to contribute to its infrastructure construction.

Likewise in September, Turkey, which has repeatedly suffered delays in its bid for EU membership, chose the state-run China Precision Machinery Import-Export Corp over US and European competitors to create missile defense systems, in order to grow its domestic arms production. Rapidly expanding bilateral trade between China and Turkey as well as the latter’s acceptance as a dialogue partner in the Shanghai Cooperation Organization mark a deepening relationship. 

Closer Romanian-Chinese relations have just started. Next year and subsequent ones will reveal to what extent China can be a viable partner for its Eastern European counterpart, and China’s partnership with Romania might be an early attempt to tap into central and eastern Europe’s energy reserves and trade opportunities. So far, China seems determined to implement the same strategies as in Africa, where it offers infrastructure and expands trade in needed or advantageous fields, while taking over energy resources required to keep its economy prospering.

But with the move toward China, Romania has signaled a changing approach toward European counterparts. It is not afraid to explore economic alternatives. The partnership with China –creating competition for EU companies – sends a powerful message about the deep concerns felt in Romania and elsewhere in central and eastern Europe about being marginalized within the EU. European counterparts may have to reconsider their policies toward fellow member states.