“In Italy what we have is the capacity to continuously innovate products, but its done by small and medium companies, so you need to go there and be with them”
Italy played a major part in the coming of age of China’s “going out” policy. It was here, in 2007, that Zoomlion purchased a 60% stake in Italy construction equipment manfacturing company CIFA, for EUR 163 million (USD 241.4 million), which dwarfed all prior investments that Chinese companies had made abroad.
Since then Chinese investment in the boot of Europe has only picked up as they chased Italian luxury brands for the growing pool of Chinese consumers, and looked to other firms for their technical knowhow.
The Italian government is making sure that the Chinese know exactly what the country has to offer. China is one of a small group of countries targeted by Invtalia, the national investment promotion body, for special attention. The group has been setting up regular seminars to inform Chinese companies what talents are on offer in Italy, what investment incentives are in place, and help the companies speed their way through the national bureaucracy.
Invest In spoke to Giuseppe Arcucci, inward investment director for Invitalia, on the sidelines of the China Outbound Investment Fair in Beijing. He spoke of changes in Italy’s investment climate, sectors that the Chinese need no incentive to invest in, and encouraging Chinese to look at other sectors where Italy has special knowhow.
Q: Is China now a major focus for your institution?
A: We have main areas of activity, one is proactive and one is reactive, we have a whole set of services running from general information services to supporting business establishments, we give financial support and can arrange to allow extra personnel to come to Italy for example. All these services are given to any investor from any country that’s interested in investing in Italy in any sector in any region. We call this reactive. The other one is proactive, we identify a few countries in the world in which we do some active promotional activity, and these are China, Japan, Australia, India, gulf area,the US and Israel for technology transfer. In these countries we go and proactively promote Italy through specific sectoral seminars. For example in Japan we run seminars once a year with Mitisubishi bank, last year we did two seminars with 70 selected clients, explaining opportunities in logistics and renewable energy in Italy for example.
Q: Do you have specific sectors you are targeting?
A: Logistics, renewable energies, tourism and life science. We think that in these areas we are building expertise and a specific portfolio of business opportunities. The one that we do most is logistics and renewable energies.
Q: What about more common industries such as machine parts or fashion?
A: We don’t need to promote them. We support companies that are interested in fashion, food and machinery, some aspects of the automotive chain, design. But you don’t need to promote that, all over the world they know we can do that. We are trying to focus on some sectors that we think there is future potential. If people from China and are looking to buy machinery, ok, we can give support. Going to explain something abroad is a different thing.
Q: How do your renewable subsidies compare with other European countries
A: Our solar subsidies are number one in Europe. There are two forms of incentives: one is a subsidy for each megawatt, and then there is also the possibility to sell the energy produced. We also subsidize wind energy and biomass. In wind most of the capacity has been completed though, so there is not much space for more projects. Our intent is not only to promote investments related to the production of energy, but also to develop some technology in Italy.
Q: Is there any specific investments or companies that are already doing work in that area?
A: We supported China Energy Conservation and Environment Protection Group, which is one of the biggest if not the biggest state owned Chinese group in renewable and energy in general. There is also the China Development Bank (CDB) which we have an agreement with and is financing big projects in Italy. There is a fund 90% controlled by Suntech and 10% by a Spanish company, funded by CDB.
Q: Has there been a sizable uptic in investment in italy since the CIFA deal in 2007?
A: I don’t think it's related to the CIFA deal, I think it’s related to a general trend. When I started to follow these activities in October 2008, there were 38 Chinese companies in Italy, now, the last official date is 57, and 11 companies were supported by us during this period. When the end of 2010 figures come out in June I expect that [Chinese]companies in Italy will be almost double the 38 companies.
Q: Is there any particularly impetus?
A: I think its two or three things together. First Chinese companies are starting to look abroad for investment, in the first phase they looked at acquiring natural resources. So they went to Africa, South America, Australia, wherever, but now with the go abroad policy of this five year plan, I think even more with the next five-year plan, companies are starting to look abroad for the development or the manufacturing of high end products. Since in Italy we have some excellence they are starting to also be more focused on Italy. I think the crisis also made them understand that they cannot go on focusing on low-cost, low-quality products, but they need to focus also on the higher end products. In Italy what we have is the capacity to continuously innovate products, but it's done by small and medium companies, so you need to go there and be with them in order to use the competence that has been developed in these specific areas and these specific sectors.
Q: Of Chinese companies in Italy how many are in your targeted sectors, how many in more generic sectors such as fashion?
A: The majority are in commerce. But obviously there is a good presence in logistics, among the first Chinese companies to invest in italy were the logistics giants such as COSCO and Hutchinson. We also see new trends in renewable energies and machinery.
Q: Is it a different experience working with state-owned enterprises (SOEs) vs. private companies.
A: Some private companies need more help than SOES, especially the smaller ones but the bigger companies are about the same. Some of the smaller private companies are not well prepared, they just want to go to Italy. They make a decision and then they try to understand the market. Maybe that’s linked with how the Chinese economy has grown; they grab the opportunity and the risk. So we try to guide them to be better prepared for the Italian business environment especially, which is pretty different from China.
Q: What markets are Chinese companies in Italy looking at?
A: There are different kinds, some come to develop knowhow, some obviously come to be close to Europe, and then there is a third which we hope will grow in the future, that comes to buy Italian companies to produce goods. This is still small, but in the future we think this is going to be a trend, because there are some products that need to be produced close to the market. I think in the next 10 years we will see more and more Chinese companies coming to Europe to produce.
Q: Italy and China famously had some trade problems a few years back, do you find this new investment relationship is helping ease trade tensions?
A: Up until two years ago, three years ago, there was something of a tension regarding the Chinese world in general, but this has dramatically changed in the last 2-3 years – there is more openness to cooperation with Chinese companies. On October 7, Wen Jiabao and Berlusconi met, and announced that Italy and China are aiming to double trade to EUR 80 billion by 2015. And obviously in their speech they spoke of the importance not only regarding trade, but also in investments. That is to say the general mood has changed, it's not any more a matter of fear, it's just trying to find the right way to cooperate. There are still some worries about [IP protection] but this is not a problem with big companies, which is why we try to focus on bigger companies. There is also more interest from Chinese companies to come to Italy to buy Italian made products to sell in China. They want Italian made products because they want to service the new Chinese middle class.
Q: In your experience what difficulties have Chinese companies had in Italy and how have they been able to overcome them?
A: I think the main difficulty is regarding the visa, and the culture. Not in the real cultural sense, but in all the procedures for the authorization and this kind of thing. This is something that’s a problem for Chinese but also for non-Chinese: English or Germans or those from the US. Now there are specific services to mitigate this problem, which is why I think there’s been more activity than in the past. The government is trying to introduce new regulations, to make it more simple to open a company in Italy, but you know, honestly I have to say this is still a problem. This is the main thing we help with.
Q: What’s the average time to open a company and how long can you guys cut it down?
A: It’s not easy to answer this in general, but for example sometimes it can take one year to get a working visa, if you come to us, I cannot say how fast we can arrange it — it depends on which prefecture you are investing in — but there are some cases where we’ve been able to cut down this process to a couple months. There was one case where it was only one month. We are working to simplify the process for the investor, for the investors to understand very quickly if the space is available, what sort of authorization is needed, and what kind of authorization is already there. We cannot say if we can do it in one week or two months, but something that could take two years or three years we can cut down to no more than six to eight months. If you go above the eight months, it starts to be very tricky for them to start an investment, because one year is a long time in this world.