24 October 2016
A store sports Chinese characters on its facade in downtown Prato which has the highest concentration of Chinese of any city in Europe. Photo: Internet
A store sports Chinese characters on its facade in downtown Prato which has the highest concentration of Chinese of any city in Europe. Photo: Internet

Why Italians blow hot and cold over Chinese investment

For 40 years, the rich and famous of Europe and North America have bought luxury Ferretti Yachts.

The client list includes Richard Burton, Brigitte Bardot and Sophia Loren. The yachts sell for up to US$15 million.

Since 2012, Ferretti Yachts has continued to offer its full range of products but with one difference — it is now a Chinese company.

In 2012, Weichai Group of Shandong, which makes heavy machinery and automobiles, acquired 75 per cent of the firm for 374 million euros (US$425 million).

Ferretti is not alone.

Last year Italy ranked top in foreign countries for investment by Chinese firms, attracting US$14 billion out of a global total of US$73.3 billion, according to official Chinese figures.

The investments include some of the biggest names of the economy.

In March this year, ChemChina paid 7.1 billion euros to acquire a controlling 26.2 per cent of Pirelli, the world’s fifth biggest maker of tires founded in 1872 and sponsor of the famous Inter Milan soccer team.

The company went to Russia, Japan and South Korea looking for a strategic investor before deciding on ChemChina.

Chinese firms own more than 10 per cent of the national power grid, natural gas network and electricity and telecoms companies, as well as a 2.01 per cent in Mediobanca, the country’s pre-eminent investment bank.

In March 2013, a unit of CNPC paid US$4.21 million to acquire 28.57 per cent of the East Africa operation of the state oil firm ENI, giving it rights to a large oilfield in Mozambique.

A total of 321,000 Chinese live in Italy, one-fifth of them businessmen. They have registered 66,050 companies. They run grocery stores all over the country’s two main cities of Rome and Milan.

Driving this flood of investment are the welcome of the government, the cheap prices and high debt of Italian companies after the financial crisis of 2008 and the need of Chinese firms to acquire high-quality brands, technology and workforce and gain a foothold in the European Union.

“If multinationals want cheap labour, they go to Vietnam or Africa, not China,” said Romano Prodi, former Prime Minister of Italy and president of the European Commission from 1999 to 2004.

“China’s role in the world has changed. In Italy, we have many small companies with specialised technology. The financial situation of most of them is bad.

“For a small sum, Chinese firms can acquire them and obtain cutting-edge technology which they can take to an even larger market. Italy is the main door to enter Europe and to enter North Africa.

“More than 90 per cent of the Chinese in Italy come from Wenzhou. They constitute the largest Chinese community in Europe,” he said.

“Wenzhou people account for one third of the population of Prato.”

This is a city in Tuscany with a tradition of centuries in the textile industry. It has the highest concentration of Chinese of any city in Europe.

One-third of children born in the main city hospital have Chinese mothers.

The “Prato model” began in the 1990s when firms imported fabric from China and made it to order, working 24 hours a day, to make high-fashion garments sold with the “made in Italy” label.

With the income from this, many Chinese have acquired ailing local companies.

Firms employ people who work 15-16 hours a day in conditions and wages that are against the law; many of the employees are illegal immigrants.

These practices have caused great resentment among the local population who see the competition as unfair and illegal, but they have been unable to stop it.

Zhang Songpo arrived from Wenzhou in 1996 and started selling umbrellas.

Now he runs a 1,000-square-meter general store in Milan and explains why Italians cannot compete with Chinese. “They are not as hard working and do not want to compete, They avoid it.”

His and other Chinese stores remain open until late in the evening, even midnight, and employ members of the family.

The Italian stores close at 4 p.m. or 5 p.m.

Zhang has created his own brand of women’s stockings named “Alan Stocks”.

Initially, he had them manufactured in Wenzhou but has switched production to Romania and Portugal where costs are lower.

To differentiate them from his other products, he sells them at a dedicated counter.

The views of Prodi and the business community are well ahead of the general public.

They see the Chinese investment as essential to bring in new capital and management and enable Italian companies to grow abroad, especially in China.

“The public is not happy about the sale of their firms to Chinese companies,” Prodi said.

“They see it as ‘theft’ of our brands and technology. But I see it as ‘win-win’. Both sides benefit.”

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Hong Kong-based journalist and author. He had worked as a correspondent for the South China Morning Post in Beijing and Shanghai.

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