How are trade relations between Italy and China going?
Italy is the only G7 country that has signed the memorandum with China on the Silk Road, and now it has to decide whether to renew the agreement or not. This is what makes the decision difficult. The article by Roberto Rossignoli, Portfolio Manager of Moneyfarm
The Silk Road dossier is hot. Italy is the only G7 country that signed the memorandum with China in 2019 and that now has to decide whether to renew the agreement or not . There are many pressures: on the one hand there is Beijing which would like the continuation of the Memorandum and on the other the US which is pressing for this not to happen. For its part, the Italian government has asked (and obtained) more time before making a final decision.
Trade relations between China and Italy
Over the years, China has acquired considerable importance in the Italian trade balance, currently accounting for almost 9% of imports and 4% of exports. It is also interesting to note how the higher growth in imports from China reflects the success of the commercial and economic strategy set up by Beijing in recent years. However, the trend is slowing down after reaching its peak, as shown in the graph below, both in terms of imports and exports. According to the Chinese National Bureau of Statistics, in the two-month period January-February 2023, exports decreased by 6.8% and imports by 10.2% compared to last year, in a context of slowing and above all deteriorating global economy of domestic demand. The import-export dynamics between China and Italy have inevitably been affected by all this.
If we then compare the annual variations of imports and exports between Italy and China with those of the other countries of the Euro area, it can be observed that in the last 30 years this differential has been negative both in terms of exports and imports. In other words, our trade with China has grown much faster than that of our European partners, to then stabilize in recent years in which the growth rate of investments appears to be quite equivalent or lower (in the last year). But be careful not to jump to conclusions. It is certainly true that China plays an important role in the Italian trade balance but, according to Eurostat data, the most important trading partner for our country, as well as for most European countries, remains Germany. Finally, if we broaden our gaze to the European Union, it is equally important to underline that in 2021 China was the most important trading partner for the 27 member states, exchanging values for 696 billion euros (import and export): more important than the United data in hand.
What advantages for Italy from the Silk Road?
In 2019, the Conte government signed the first Silk Road Memorandum with China. As mentioned, Italy was the only EU and G7 country to join the Chinese development project: have we had any advantages from this Memorandum? The answer is found in the data. China has invested a lot in Italy in the last 15 years. Observing the constant monitoring of FDI, i.e. foreign direct investments, it can in fact be seen how the Dragon has moved against the trend, compared to the rest of the world, especially from 2019 onwards. Since 2004, the flow of Chinese FDI to our country has grown more steadily and more consistently than in the rest of the world.
As can be seen from the graph below, the net flow of investments towards Italy, on a global level, was very low (if not even negative in some moments), while the Dragon represented a constant for our country. A trend that was sealed by the signing of the Silk Road Memorandum between Italy and China in 2019 and which has continued to bear fruit to this day. In fact, the data shows that for this year Italy has received direct investments for a value of 70 billion euros from China and 20 billion euros, on average, from other European countries: a difference of no small importance.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/italia-cina-rapporti-commerciali-memorandum/ on Sat, 03 Jun 2023 05:39:31 +0000.