“China’s objective is to infiltrate the block of Western countries, and to make Europe more autonomous from North America. Naturally, they are starting with the weakest European countries, like Italy, where it’s easier to enter and garner interesting operating spaces.” 58-year-old Alberto Forchielli, founder and managing partner of Mandarin Capital Partners, the biggest private equity fund specializing in the Sino-European axis, comments on Chinese investments in Italy, which have been multiplying in recent months. First, a global leader in the production of machinery for energy generation and mechanical facilities, Shanghai Electric, acquired 40% of Ansaldo Energia and the alliance with the strategic Italian fund, Cassa Depositi e Prestiti. Then, there were the revelations that the People’s Bank of China (China’s central bank) exceeded the 2% threshold of shares in listed Italian companies from Generali to Eni, Telecom to Enel, and Prysmian to Fiat. The third blow was State Grid Corporation of China investing more than 2.1 billion Euros to purchase of 35% of CDP Reti, which heads Terna (transportation of electric energy) and Snam (gas). Other operations are being delineated, like the elevated offer from a Chinese network comprised of China CNR Corporation (a global leader in locomotive construction) and Insigma Group (active in signaling systems) for shares in Ansaldo Breda (trains) and Ansaldo Corporation (railway signaling systems).
In only a few months the acquisition campaign was impressive. In what direction is Beijing moving?
For each European country there’s an advantage. London has been awarded the international offshore Renminbi capital. Germany has been offered interesting opportunities in China’s huge automobiles market and trade flows. Beijing got into France through Peugeot, which is suffering, and it’s buying nuclear reactors. China bought the port of Piraeus in Greece, which will become the premier point of entry for Chinese goods in Europe. Investments are multiplying. They’re decorated in scintillating wrapping paper, but they’re all—large and small—Trojan horses for China’s expansion in Europe, which is following their conquest of Africa.
Isn’t talking about conquests exaggerated?
In fact, the operation is still under way. And the way it will end depends on the ability of Europeans to produce alternatives. In only a few years, the Chinese have built strong positions and have obtained complete control over strategic nodes, like raw materials. But not only that; they also export people. Today, at least 1 million Chinese people are working in Africa. And now, after Africa, Europe’s moment has arrived, and Italy in particular.
Why right now?
Prices are so low to the extent that the Italian government needs to sell. It’s good for them. Why be surprised? On the other hand, they have huge amounts of money and they can’t buy anything in countries like the US and Germany, with few exceptions.
Are there other reasons?
The Chinese warn that Italian public opinion is hostile and they’re trying to improve their image. Based on surveys conducted by the Pew Research Center (an independent research center in Washington DC), China’s popularity in Italy is clearly free falling, by far and away the worst among European countries. The last survey conducted in July 2014 confirms this with 75% of Italians judging the Chinese negatively. The level of enthusiasm for China across all of Europe is very reduced. China’s image is much less positive compared to a few years ago.
Why is this?
For a number of reasons. Among industrialized countries, Italy is perhaps the most stricken by Chinese competition, which is even more competitive since Chinese companies don’t respect the rules. At this point it’s evident that they don’t make trustworthy partners. It’s easy to end up in trouble working with the Chinese. They’re aware of their unpopularity and they’re attempting an image campaign on a large scale. Also to prepare for Chinese Prime Minister Li Keqiang’s expected visit to Italy in mid-October.
Will they continue to buy in Italy?
If we still have something good to sell they certainly will.
Is this also due to Premier Matteo Renzi’s visit to Beijing last June?
Only partially. Let’s say it’s part of the mix. He gave that minimum confidence necessary to attract investments to Italy. I don’t think they would have done it with Berlusconi in government.
Why?
They didn’t like him.
Instead, they really like Romano Prodi…
Yes, he’s reaping what he sowed over 30 years of visits. Unfortunately, however, real friends don’t exist in China. It’s always strategic.
Will Beijing take over Italy?
This depends solely on Italians. We certainly need to get smarter.
How?
First, Italy has an annual trade deficit toward China of 15 billion Euros, and China is using part of that money to buy Italian businesses. Selling parts of our economy to pay off debts won’t work. We need to create conditions where we’re exporting more to China. Second, we need to create a public entity to monitor and protect small Italian businesses that have and are still suffering abuses of every kind in China. Third, The Guardia di Finanza needs to keep Chinese investments in Italy under control with new methods and instruments. Fourth, we need to create a committee similar to Canada’s model that examines each operation to verify if it threatens national security and offers real economic benefits.
The real news at an international level is the excellent relations between China and Russia. What changed?
It’s a fruit of the US’ mistake, subsequently followed by Europeans, that pushed Vladimir Putin into China’s arms. It was a huge error, and irremediable in the short term. However, I don’t believe that the Chinese and Russians, in the middle and long terms, will get along. It’s only a matter of time.
