China sniffs out EEurope investment opportunities

Chinese Prime Minister Li Keqiang arrives in Romania on Monday ahead of a summit with 16 Central and Eastern European leaders keen to woo investment from the world's number two economy, AFP reports. The trip, the first by a Chinese premier to Romania in 19 years, sees Li accompanied by the heads of more than 200 Chinese major public and private companies. On Tuesday he will attend the Bucharest summit that "will be an opportunity for countries in the region to find out what the Chinese are after," the head of the Romanian-Chinese Trade Chamber Gabriel Ghelmegeanu told AFP. The gathering comes days after China and the European Union began talks in Beijing on a landmark agreement aimed at increasing two-way investment flows. Hundreds of Eastern European businessmen will vie for Chinese attention -- and money -- showcasing energy, transportation or agriculture projects lingering for lack of funds. "Developing a partnership with Central and Eastern Europe (CEE) is a logical option for China, first of all because it gives it access to major sea ports such as Constanta (Romania) and Burgas (Bulgaria) as a safeway for its exports," economic analyst Razvan Orasanu told AFP. "Moreover, the countries in the region register high growth rates while regulations in terms of labour or visas are less strict" than in Western Europe, he added. In the early 2000s, Chinese investment in the region was almost inexistent. In 2010 it topped $800 million, according to the Warsaw-based Central and Eastern European Development Institute (CEED). Two-way trade between China and the region has also grown rapidly. While it amounted to $3.0 billion in 2000, it surpassed $41 billion in 2010, with China registering a net surplus. Following the eurozone crisis, the CEE countries with their "hybrid economies, somewhere between emerging and developed markets... appear as more dynamic places to put Chinese money into," the CEED said. Yet past experience in the region provides a measure of caution for those hoping for quick results. In April 2012, Li's predecessor Wen Jiabao told 16 CEE leaders attending a summit in Poland that China would commit a total of $10.5 billion in credit lines and funds to boost economic ties with the region. But analysts say that 18 months later the promise of massive Chinese capital injections into the former communist bloc has yet to materialise. The China-CEE Investment Cooperation Fund (ICF) has not made any headway and prospects are unclear. Poland, China's second-biggest partner in the region, has seen no major Chinese investment since the 2012 summit. Neither have the Baltic states, Slovakia or the Czech Republic. After lengthy negotiations, Romania has secured a deal with Hudian Engineering on the construction in 2014 of a power plant at Rovinari. Romania hopes to sign contracts worth billions of dollars on the construction of two new nuclear reactors at Cernavoda and of two power plants. Shuanghui International's recent takeover of US's Smithfield Foods, which owns a pork producer near Timisoara in western Romania, is expcted to boost exports of meat and livestock to China. In Bulgaria, China's Great Wall Motor opened an automobile assembly plant in Bahovitsa in February 2012, becoming the first Chinese automaker to start production in Europe. But two deals by China's Build Your Dreams to assemble electric buses and build a technological park in Bulgaria have been frozen. Hungary, which has seen Chinese investment treble since 2010 to $2.5 billion, appears as Beijing's favourite partner in the region. Budapest has recently signed a bilateral currency swap deal worth 10 billion yuans ($1.63 billion) that will back trade and investments. IT and telecom giants Huawei and ZTE, chemical firm Wanhua have invested hundreds of millions in Hungary. The decision to grant residency permits to foreigners buying 250,000 euros of Hungarian bonds has encouraged Chinese investment, analysts say. Serbia, which is not an EU member, will be the site for China's first multi-million euro infrastructure project in Europe after a preliminary contract to build a much-needed bridge over the Danube in Belgrade was signed. Other major projects including the overhaul of two power plants and the construction of motorways and tunnels are underway in the Western Balkan country. But plans by Chinese companies to build highways in the region have failed in several other countries, after local authorities said the terms the Chinese sought were unacceptable. Beijing's first step to into the region's public works sector suffered a major flop in 2011 when Poland ended the contract on a major highway because the tender winner COVEC failed to pay Polish subcontractors. In Romania, China Communications Construction Company was among the bidders for a 50-kilometre (30-mile), $4.5 billion motorway. But the firm withdrew from the tender in September when officials said it could not import the workforce and the materials from China as it planned to. "The problem is that the Chinese want to be in command of a project and insist on getting state guarantees. But this is not possible," Ghelmegeanu said. "If they want to expand they must adapt to our system, to the EU's system."