Italy shuns doubt to reach out to China
For many years, the Italian political approach to China was open, but skeptical, often ambiguous. Today it is radically changing. Let me summarize the main points of this possible transition. Italy did not recognize Market Economy Status to China in 2016 and was in the forefront of EU’s increasing criticism and skepticism related to the growth of China’s overseas investments, supporting the need to define an EU regulation for scrutinizing the investments. Nonetheless, Italy always recognized the importance of Chinese development and showed huge interest in BRI.
In the last few years, Italy became one of the main destinations of Chinese investment in Europe. For example, Cassa Depositi e Prestiti (CDP), the Italian development bank, has already built successful synergies with China. In 2014, State Grid of China bought 35 percent of CDP RETI, which controls the main Italian corporates (Terna and Snam) in the energy transmission sector. In the same year, Shanghai Electric Corporation and Ansaldo Energia signed two joint venture agreements. In 2017, on the occasion of the visit of an Italian government delegation to Beijing, CDP and China Development Bank agreed to create a new €100 million instrument that will invest in the capital of Italian and Chinese small and medium-size companies. These are just a few important examples of Chinese investment dynamism in the last few years. Not all the deals were considered economically sustainable, but on the whole Italy has gained from Chinese capital flows.
The problem is that, until few months ago, the country did not draw a plan or a consistent strategy. This is the main reason why Michele Geraci, the new undersecretary at the Ministry of Economic Development with vast knowledge about China and the international economy, recently said, “We are very different from the previous government on China, and we are trying not to ignore China as has been done in the past”. The point is the lack of a systematic, long-term country strategy for China. It is not possible to reap the maximum benefit if there is no constant institutional work to deal with the potential of the BRI, to negotiate investment and trade agreements without defining national priorities and so on. For example, the current government will be set back by new EU attempts to scrutinize the investment from China, after years of criticism toward important Chinese acquisitions of European assets. The government believes that we could get more benefits from a systemic-country approach to China and its international projects. Our exports to China are growing, also because Chinese imports are in a positive territory that will last longer. We should sign agreements to further penetrate China’s expanding consumption markets.
France, Germany and UK progressed well in the last 20 years, but Italy fell back. We could do much better. Indeed, the new government is moving fast. In a few weeks, we had many high-level official visits and the leaders of the new Italian government are both on the same page on the national strategic interest in China. Italy has the right and the potential to better exploit its geographical location in the BRI and offer many channels of cooperation.
For these reasons, the Italian Ministry of Economic Development established a task force on China with representatives of economic, cultural, financial and political national communities of both countries. The aim is to investigate each economic sector and each bilateral cooperation issue in order to move as a system. It considers the multiple benefits that accrue from strengthening China-Italy relations: investment, trade, public finance, employment, technological advancement, ecological cooperation, international development etc. Summarizing the main goals of the task force China, the Italian government will focus on six key points: 1) promoting the entry of strategic capital and direct greenfield investments in Italy; 2) favoring Chinese investments in government bonds and private companies; 3) promoting Italian exports to China and Chinese tourism in Italy; 4) assisting Italian companies in the agro-food sector; 5) facilitating the expansion of the green economy in China and Italy; 5) helping Italian companies to connect with Chinese investment programs financed by the Belt and Road Initiative; 6) enhancing mechanisms of scientific collaboration and R&D.
It is not a case that during the last visits, Italy confirmed the intention to cooperate with China in third countries, such as those of the African continent. In this respect, an MoU signed during the last visit is already an important outcome. Moreover, at the end of the year another MoU will be signed to fully involve Italy in BRI so that it could become China’s main partner in Europe. We need to adapt to our changing world in a constructive way.