Italy is the 65th country in the world ranking of the factors determining a country’s capacity of attracting capitals, because of procedures, time and costs required to start a new business. Nevertheless, Italy is now the Chinese second most important market in Europe (after UK) and the fifth worldwide.

1. China and the Western
Campaign
September 2015

2. One of the main objectives of the Italian government for reviving
the country’s competitiveness, is to make Italy a welcoming
environment for foreign investments to reverse a trend
which brought Italy lose a 58% of foreign investments since
2007.
Foreign investment in Italy: -57% from 2007

3. + 3.5% from 2014, but actually…
In 2014, the incoming FDI (Foreign Direct Investments)
amounted to
€ 281.3 billion
with an increase of € 9.5 billion (+3.5%) compared with
the previous year. This has been the best result among the
Eurozone countries of, but the overall stock of FDI on Italian
GDP is still very low.
With a meager 17.4%, also in 2014, Italy is still at the bottom
of the European ranking. Only Greece’s situation is worse
than ours (8.5%).

4. Italy: 65th
in the world ranking of attractiveness
“The excessive weight of taxes, the problems
tied to old and confused bureaucracy, the well-
known slowness of our civil justice, the dreadful
late payments in commercial transactions, the
infrastructure deficit and the low level of
security in some areas of the country always
discourage foreign investor to come to Italy”
CGIA of Mestre.
Italy is the 65
th
country in the world ranking of the factors
determining a country’s capacity of attracting capitals,
because of procedures, time and costs required to start a new
business, to get a building permission, to connect a business’s
electricity consumption to or to solve a legal dispute over a
contract.

5. Nevertheless, Chinese investments in Italy have followed a
continuous growth trend. Starting from € 147 million in 2012
they amounted to almost € 3 million in 2014.
Italy is now the Chinese second most
important market in Europe (after UK)
and the fifth worldwide.
In October 2014 in Rome, the Italian PM Renzi and the Chinese
PM Li Kequiang signed 20 agreements, worth € 8 billion, for
as many direct and indirect investments in Italian business
activities.
Approaching Italy

6. A passion for Italy , but not at all costs
The single largest investment: since 2003, the Chinese
giant Hutchinson Whampoa, led by the now legendary
Li Ka-shing, has invested more than € 13 billion in the
telecommunication company 3 Italia. HW also bought the
company managing the container terminal of the Port of
Taranto for € 100 million. Nevertheless, it recently pressed
charges against the Port Authority for not making
necessary investment to the development of the port and
it is diverting the container traffic on the Port of Piraeus.
The single major acquisition: a compulsory takeover
bid, currently underway, was launched by Marco Polo
Industrial Holding on 76,58% of Pirelli Group. Marco
Polo, controlled at 65% by the Chinese chemical group
ChemChina, already holds, obviously, the remaining shares
of the Pirelli Group.

7. The single largest investment in State companies:
in November 2014, State Grid Corporation of China,
the largest electricity distribution company in the world,
bought the 35% of CDP Reti from Cassa Depositi e
Prestiti. CDP Reti holds a 30% stake in Terna and Snam, the
Italian distribution system operators for gas and electricity
respectively.
... and the second: in May 2014, Shanghai Electric
purchased from Fondo Strategico Italiano, a holding
company of Cassa Depositi e Prestiti, the 40% of Ansaldo
Energia for € 400 million. Ansaldo Energia is among the
world’s largest producers of electrical and gas turbines.
No expense is spared

8. In September 2014, Corriere della Sera published information
drawn from a leaked confidential report that the Intelligence
Agencies had prepared for the government: it highlighted
how Chinese investment in defense, advanced technology
and major critical infrastructures should be very carefully
assessed by the government.
Caveat!

9. Except for the luxury brand Krizia, bought in February 2014 by
ShenzhenMarisfrolgFashion,an8%inFerragamo,Ferretti
yachts and olive oil Sagra&Berio, Beijing has preferred
avoiding the niche Made in Italy brands, rather focusing on the
strategic sectors of energy, telecommunications and industry.
Eni, Enel, Mediobanca and Telecom Italia are some of the
major Italian companies in which the Chinese central bank,
the People’s Bank of China, has a market share of just over
2%, the minimum threshold for declaring the possession of
securities.
Lots of substance and little style

10. Trying to score a goal
After several unsuccessful attempts to enter the shareholding
of the Italian football teams Inter, Milan and, maybe, Roma, the
Dalian Wanda Group - the Chinese tycoon Wang Jianlin’s
holding company - is the main shareholder of the Swiss
Infront since last February which deals, among others, with
the marketing of Serie A broadcasting rights.

11. Why Italy?
If Beijing didn’t let itself be frightened by those difficulties
that foreign investors normally meet in Italy, it is because its
strategy’s ultimate aim seems not to be profit, but rather
the acquisition of know-how and technology. Its goal is
to refine its industrial production - currently largely focused on
raw materials, standardised products and intermediate goods
- by means of competences learned in Italy.
The economic crisis, which brought many Italian companies
in serious difficulties, has done nothing but open the doors
wide to Chinese investors, who are not worried at all by a
generally unwelcoming environment for foreign investments,
but rather, “After years of crisis, they are ready to seize upon
the huge sign ‘Sale’ tacked on the Peninsula”, to quote an
unnamed banking source.

12. The so-called “2% quota”is
a peculiarity of the Chinese presence in Italy.
The People’s Bank of China holds in its portfolio minimal
holdings in most of the major companies in the world. However,
it usually opts for a low profile, keeping its shares always
below the threshold to disclose.
On the contrary, its investments in Italy have very often,
and very narrowly, exceeded the 2% quota.
2% quota

13. According to a recent study of the US think tank, Pew
Research, a 70% of Italians look unfavorably on Beijing. A
very high percentage, higher than the other Western countries.
China’s choice to get noticed seems to be a message of
friendship, but also of power, which - with a minimum
investment - should make the Country more loved in Italy.
It is no coincidence that the first declared investments,
those in Eni and Enel, were made immediately after an incident
in a textile company in Prato, in which seven Chinese workers
(illegal?) were killed.
The purpose? Get Noticed!

14. The major Chinese investments have so far had a positive
impact on employment levels in Italy, and this is definitely
good news.
Chinese capitals allowed:
in many cases, to create new jobs, especially for the
young and skilled workforce
to preserve existing jobs, avoiding the closure of
companies in serious difficulty.
Also, to absorb the target companies’ know-how, the Chinese
consider the maintenance of production, technology and
skills in their original environment a crucial element of their
strategy. This has helped to ease the initial negative perception
towards the Chinese strategy in Italy.
Which profit for Italy?

15. Even if in recent weeks China is facing rather serious economic
difficulties, the investment capacity of Beijing is still huge.
How to protect ourselves from
possible acquisitions of strategic
enterprises or critical infrastructure?
In2012,Italyhasissuedaninnovativelegislationregarding
State powers in the event of extraordinary transactions
relating to companies active in strategic sectors.
State powers

16. With this new regulation:
Italy set aside the “golden share” principle (attribution
to the State of shares in specific strategic companies, with
special powers allowing the government to influence the
decisions of those companies);
the State enjoys a general “golden power”, which it can
use in the event of transactions involving such companies.
It allows, as appropriate, the right to object, veto or dictate
conditions...
Golden power

17. On 22 September 2015, the Cabinet decided not to exercise
the special power on a proposed Joint Venture between
Hutchinson Whampoa and the Bermuda’s multinational
company VimpelCom, for the merger of their respective
subsidiaries 3 Italia and Wind.
However, the government has recommended to the two
companies:
to highlight the key elements of their strategic planning
fromanindustrial,investment,technologicalandemployment
standpoint;
not to move outside Italian borders the management
and security functions, so not to impair national security
and continuity of services.
But will it ever be exercised?