Monthly Archives: October 2009

Why Italy Matters to People’s Republic of China (and vice versa, of course)

by Gabriele

It is common knowledge that the Chinese economy is driven by exports, which produce forty percent of the country’s total annual GDP. The nickname “Exportweltmeister” (World Exports Champion), Germany’s label for itself, will very soon also be appropriate to China. After all, the country known as “the world factory” is at the present time the third biggest national exporter, after the aforementioned Germany, and the United States.

China is Europe’s biggest source of manufactured imports, and the sixteen European countries that use the euro (including Germany, France and Italy), are a crucial market that is even more important than Japan or South Korea.
According to the European Commission, Europe’s imports from China grew by around twenty-one percent per annum from the period 2003 to 2007. In 2007 alone, the EU imported €231 billion (¥2,209 billion) worth of goods from China. Of course, Chinese goods can only be sold to the affluent European consumers (around 490 million people) if they are able to reach European shops and malls. This is why Italy is so relevant to Chinese prosperity.

At the present time, Chinese companies prefer using the efficient ports of Northern Europe, particularly the port of Rotterdam in the Netherlands. However, the distance between Rotterdam and the main Chinese ports is much farther than the distance between the Italian ports and China, and at present Chinese ships have to cross the whole Mediterranean Sea, past the Strait of Gibraltar, and then coasting Portugal, Spain, France and Belgium to reach their destination. More distance means not only more time, but also more fuel, more potential shipping hazards and, quite simply, more money.
As stated in a report by the Italian government, “Italian ports have the advantage of being reachable by the ships passing Suez Canal with seven days less than the ports of Northern Europe” .

Recently, Chinese COSCO, one of the largest shipping companies in the world, signed a deal with the Piraeus Port Authority, which controls the port of Athens (one of the most
important ports of the Eastern Mediterranean Sea). The deal concerned the thirty-five year concession of the port’s cargo facilities to COSCO. According to the Greek Prime Minister, Costas Karamanlis, “Greek ports can operate as transit centers for Chinese products to European Union states but also the broader area of southeastern Europe and the eastern Mediterranean” . Of course, Greece is adjacent to Turkey, a country of seventy-four million inhabitants that also has the potential for economic prosperity. However, Turkey has a GDP of $400 billion, less than the GDP of the tiny Netherlands, and its two biggest suppliers are Russia and Germany.

Moreover, the journey to Austria, the gate of European markets, from the port of Athens is longer than, for example, the journey from the port of Naples in South Italy (1600 kilometers and 950 kilometers respectively), and involves crossing deeply unstable countries with poor transit routes such as FYROM (Macedonia), Serbia, Bosnia-Herzegovina and Croatia. Additionally, as all these countries are not members of the European Union, Chinese goods from Athens must cross at least five borders before reaching their destination, and deal with all the incumbent bureaucracy arising from this. Moreover, Greece itself is an unstable country. Many experts fear that it could become “a centre of terrorism in Europe” , and this unrest is demonstrated by the fact that police often clash with political protesters. What’s more, the powerful Greek dockers’ union seem very unhappy about the deal with COSCO .

The Italian government, for its part, is particularly eager to make Italy the first European stop on a new “Silk Road” connecting China with Europe. What’s more, Italian ports already play an important role in the trade between the two powers: in the port of Naples, where COSCO operates, 1.6 million tons of Chinese goods enter every year. Additionally, Evergreen Marine Corporation is active in the port of Taranto (Southern Italy).

However, all this is not enough for either China or Italy, which really needs Chinese investments to boost its shaky economy (this year Italy’s GDP is projected to contract by 4.4 percent, and the Italian government is cash-stripped). The very important port of Gioia Tauro (Southern Italy), the center of a hub-and-spoke system encompassing Genoa (an industrial city in Northwestern Italy particularly close to France and Milan), La Spezia (Northwestern Italy) and Leghorn (Central Italy), has huge potential. Also, the port of Trieste (Northeastern Italy), once the largest port of the whole Mediterranean Sea, is just 160 kilometers from Austria.

Therefore, China should strengthen its import relationship with Italy for reasons that are both commercial, and also related to security. The Mediterranean Sea, which is very distant from Chinese shores, is a “Western lake” controlled by the Americans, the French and the Italians. Although it is true that Greece could also be a loyal partner to China, as the old saying goes, “don’t put all your eggs in one basket”.

– Pocket World in Figures (2009, The Economist).
– “Comparazione fra l’attrattività di alcuni porti italiani sulla rotta Europa-Cina connessa con la presenza di dotazioni materiali e immateriali nell’hinterland”, Ministero degli Esteri Italiano (June 30, 2004).
– “Hu Departs Greece with Key Port Deal in the Bag”, AFP Asian Edition (Nov 25, 2008).
– “Death Threat to Greek Media as Terrorists Plot Bomb Havoc”, The Observer, 22 February, 2009.
– “In Greece, China finds EU Trade Battering Ram: PM”, AFP Asian Edition (Nov 24, 2008).