As foreign direct investment lags, Italy courts China

The past few years saw surging Chinese investments in Europe marked by big projects and record numbers across countries in the crisis-hit continent.

Chinese investment in the UK hit an all-time high of some 8 billion pounds last year, a fivefold increase over 2011, the Daily Telegraph newspaper reported.

China's outbound direct investment in Germany increased more than 100 percent last year, overtaking Germany's annual investment in China for the first time. Germany was the destination for more than 50 percent of China's ODI in Europe in 2012.

In France, growth in Chinese investment has been phenomenal over the past decade as it rose more than 10 times, although Paris still lags behind Berlin and London in the investment stakes.

In comparison, Italy, the third largest economy in the eurozone, had still very modest levels of Chinese investment in recent years.

Shandong-based Weichai Group's 374-million made a euro ($482 million) deal for a 75-percent stake in the world's largest luxury yacht-maker Ferretti in early 2012 and Changsha Zoomlion's 271-million euro acquired concrete machinery maker Compagnia Italiana Forme Acciaio Spa in 2008, but few more major projects have been seen.

At a time when Italy is seriously dealing with its economy, Sun Yanhong, an expert on European economy at the Chinese Academy of Social Sciences, said it's a chance to invest in the Alpine Peninsula - but with caveats.

"Chinese investors fell more unfamiliar with the business environment of Italy, compared to other countries," she said. Italy is thus committed to promoting a better perception of investment opportunities.

But with "a large amount of Italian companies having financial difficulties" since last year, Sun said. "It's now a chance for Chinese investors".

"Chinese investors may get very good offer to help them get into the market and find proper partners. They can inject vitality into the Italian market when many small and mid-sized enterprises face a broken funding chain," she said

Italy's high-tech sector is the most attractive for Chinese investors, she added.

The national statistic agency predicted earlier this month that Italy's economy will shrink by 1.4 percent this year, a much sharper contraction than previously forecast.

Italy SMEs, as it happens for any SMEs, need a solid financing and managing structure to survive competition.

Amid the general freezing of bank funding in Europe, it is the SMEs - which account for 80 percent of Italy's economic output - that are bearing the brunt.

Corporate finance in Italy is overwhelmingly raised through bank loans. Loan credit accounts for about 90 percent of corporate funding in Italy, compared with 70 percent in the UK and 45 percent in the US, according to the Financial Times.

The first Chinese "flagship" investment in Italy was in 1986 when Air China opened a commercial office in Rome.

From the mid-1980s to the end of the 1990s investments were sporadic. They included an office in Turin for the Nanjing Motor Corp, a commercial office for Cemate Machinery Technology and a branch of Bank of China in Milan.

Large numbers of home businesses from Wenzhou in coastal Zhejiang province then opened many trade companies in Italy in the early 2000s, focusing on trade in textiles, garments and shoes.

But many of them left the country after just a few years when competition got increasingly fierce and the value of the Chinese currency appreciated rapidly.

Despite of the current challenges, Italian Ambassador to Chinese Alberto Bradanini remains optimistic about the future of his country's economy.

He stressed Italy's role as "the second manufacturing country in Europe" in an interview with China Daily about a week ago.

"We are trying to promote our country because Italy is an important country in the eurozone. The European currency will stay alive and one day will be one of the major currencies together with dollar," he said.

"There are some (Chinese investments in Italy). But of course there should be more," said Bradanini.

Contact the writers at zhanghaizhou@chinadaily.com.cn and lvchang@chinadaily.com.cn

Qing Yujiao contributed to the story

(China Daily 05/31/2013 page17)