It’s money, think it over!

The debt-laden Europe, Italy in particular, has indulged in great expectations that China will buy “a significant amount” of Italian bonds. However, swiftly enough, it was turned out to be an overblown illusion. Maliciously speaking, it’s either a wishful thinking or a self-proclaimed availability for customers. By contrast, Premier Wen Jiabao is adamant in putting things on track, as he clearly indicated in recent statements: “Countries should fulfill their responsibilities and put their own houses in order”, and “Developed countries must undertake responsible fiscal and monetary policies”. China will not be the white knight for Italy. Besides, Beijing faces a strong public opinion, which seems more nationalistic than the country’s leadership. It is difficult to explain why China should be the savior of other countries. Qualities such as hard working, high savings and commitment should be used – according to the common sense – to eradicate poverty, reinforce the welfare state and promote internal consumption. What is the point to finance overdrawn distant countries with colonialist pedigrees against China?
The truth is that China indeed pays more and more attention to Europe and Italy, in particular. A strong and stable European currency is an unquestionable advantage for Beijing, allowing it to diversify its financial investments (against the virtual monopoly of the US Dollar) and to underpin its export to the affluent old continent. What will China ask for as compensation? A couple of gifts seems appealing: The end of the European arm embargo and the political concession of a fully “market economy status” to China. These moves would limit or even write off the trade disputes at the WTO against Chinese companies. On the contrary, many European states have no intention to grant China this status since, according to them, China does not meet the requirements.
There is ample room for negotiation. A move to please Italy- financing part of its huge debt- would be a step towards the heart of Europe, i.e. Germany and France. But, for the moment, It’s likely that China has the intention to buy Italian assets at a very low price. Italy’s GDP is huge (ranking third in the Euro area) and its companies’ quality is of highly sophisticated. The jewels of the crown are several: Utilities – mainly power and oil, technology of capital goods, worldwide reputation of luxury and fashion brands. More tangible assets are to be considered, too: Infrastructures, communication network, and tourism facilities. Consequently, it is quite likely that a future Chinese interest will not target the financial field. For the Italian bonds, the spread with the German ones (still the most favored by the Chinese) is very high, but this is seen as a sign of weakness. Experience and tradition have shown that China prefers prudence, security and stability.
In conclusion, even the most skeptical sectors in Italy have finally felt happy about a possible Chinese help. It’s the ripe time to concentrate over how this should take place. What’s Italy’s appeal for China. Evidently, the protection of national interest must be the guidelines of a complex negotiation. A pragmatic approach, not an ideological one, is advisable. To discuss weather China is a friend or a foe, a threat or an opportunity is useless. It bears no fruit. What really matters is a transparent, frank, mutually beneficial negotiation. On the Chinese side, the position is crystal clear, laden with brutally realism. In order to be awarded in advance the “free economy status” – which will be automatically granted in 2016 – Premier Wen Jiabao showed no hesitation to say in his latest statement: “If EU nations can demonstrate their sincerity several years earlier, it would reflect our friendship”.