Beijing, August 6, 2014. – China is increasingly present in Italy. Since last Friday, the People’s Bank of China owns shares in Fiat equal to 2% of the company’s capital, signaling another entry into a large Italian company after the acquisition of 2% of Eni and Enel a few moths ago, which required disclosure from Consob. There’s a clear geo-strategic motive behind China’s interest in Italy, according to Alberto Forchielli, managing partner of Mandarin Capital Partners (MCP): to break the alliance between the US and the European Union. Buying companies is not enough to achieve this.
“China wants to buy Italy because it needs to separate Europe from the US,” Forchielli explains, “and Italy is perfect for it. Statistics from the Pew Research Institute state that 75% of Italians nurture antipathy toward the Chinese, the worst evaluation among western countries. Naturally, the Chinese aim to create a channel to Europe—which is crumbling—and low public opinion in Italy is hindering them. If you look closely, we’re talking about five investments that surpassed the threshold of 2%; this is not a coincidence. The Chinese usually prefer to keep a low profile, but these investments were made to be noticed on purpose. It’s a gesture of friendship, but also a warning. From China’s perspective it’s a show of power. It’s their way to endear themselves, a mixture of money and power.”
Romeo Orlandi, a Sinologist and president of Osservatorio Asia’s scientific committee, also believes that severing the US-EU bridge is a temptation for China, but it’s not part of a short-term plan. “It’s evident that the strong bond between the US and the EU could worry China, who’s trying to keep one foot in Europe and the other in the US to acquire power in the geopolitical theater, but it seems like a very slow attempt at the moment” Orlandi explained to AgiChina. “China is still not very mature for such a global ambition. It’s not that it doesn’t want to; it doesn’t know how to.”
The money-power duo in the world of global investments is developing a greater presence and influence in the geopolitical theater: the objective is to reach a more principal role in investments at a global level. A recent editorial that appeared in the Chinese language newspaper, China Daily, focused on the decisive role of emerging economies as both investors and destinations for investments. Among these, China should play an important role among institutional investors. A scholar from the Chinese Academy of International Trade and Economic Cooperation in Beijing, Nie Pingxiang, believes that “while emerging economies continue to acquire more power and participate in current rounds of investments, China needs to try to become one of the countries that dictates the rules.”
In Italy’s case, there are a number of different variables, explains Orlandi. “There is an underlying motivation more than an underlying strategy,” he says. “The motivation is that China needs quality, which can be at a technological level but also financially profitable. This quality will need to be superimposed on an economic model that has been prevalently quantitative until now. The best shortcut is to buy technology, because creating it takes longer. You need universities, research centers, and creativity. Italy has goods to sell. It has attractive family businesses for Chinese buyers. There is some concern that it will lose its identity and the nationality of its production means, but it’s the natural order of things.”
However, the opening of Chinese investors clashes with a mix of mistrust and reluctance on behalf of foreign businesses. Chinese investors’ approval ratings in Italy and Europe are declining compared to several years ago. “The last few years of experience with Chinese investments were disappointing,” Forchielli affirms. “The western world’s distrust has grown, not diminished. There was a period of enchantment between 2006 and 2012, but the spell has been broken. Even when companies are in liquidation, sellers prefer to stay away from Chinese buyers.” For the founder of MCP, the entrance of China’s central bank into large companies will not suffice to rehabilitate China’s image in Italians’ eyes. “They bought shares on the market, like everyone else does, they didn’t need to ask anyone for permission because they’re listed companies. CDP Reti held an auction and the Chinese were the only one to bid.”
It’s a different story for large private companies: Chinese interest has not been desired for a long time. “The families in charge of large companies have created a barricade,” Forchielli explains. “They don’t say it, but they’re not selling to the Chinese. Chinese investors are excluded from the majority of offers: they will never be able to penetrate because they’ve depreciated in the eyes of the western world.”
Italy’s Minister of the Economy, Pier Carlo Padoan, also commented on Chinese presence in the ownership of major listed companies. He declared, “we are observing an growing and concrete interest on behalf of the Chinese when it comes to our country, in which investment decisions are always long-term.” Padoan explains that China “wants to invest in Italy with a different logic than ‘hit and run’: it’s a demonstration that it’s possible to work toward an increase in investment levels.” The problem to resolve rests on the way in which these investments are handled.
“The real problem is not a matter of principle, whether it’s right or wrong to sell family treasures to the Chinese,” Orlandi concludes. “The problem is the management of these complex proceedings. It’s ok if the management means that Chinese capital will buy Italian technology in a win-win situation where we sell and reap profits that allow us to create more jobs, and China acquires technology. If it means that we import management principles that don’t align with international standards, don’t respect local laws, and violate labor and environmental standards,
then it means the situation is desperate and we can’t even put a stop to this frequently opaque way of doing business.”
This article was originally published in Italian on August 6, 2014, on AgiChina24: