TRADE RELATIONS BETWEEN CHINA AND ITALY: DRIVING FACTORS

IIntroduction

Following the economic recession and the globalisation, trade partnerships have become crucial for the internal growth of the countries. Recent reports issued by the European commission and OECD underlined the importance of small and medium- sized enterprises (SMEs) and trading partners as effective tools to overcome the current economic crisis and to support the growth of the business system in the medium and in the long run.

Considering the Italian context, Small and Medium- sized Enterprises represent the backbone of the economy and the major source of new job opportunities. However, the latest empirical surveys about entrepreneurial activity, showed that Italy has one of the lowest entrepreneurial rates among industrialized countries. On the other hand, due to its fast and considerable economic development over the last two decades, China is now considered as a powerful alley as well as an ideal trading partner.

Moreover, the fact that an increasing number of new Chinese industries are active in both the tradeable and non-tradeable sectors and the inclusion of China into an increasing number of global and regional value chains are great incentives for both China and all her major trading partners, including Italy, to further improve their cooperation.

The main objective of this study is to analyse the trade relations between Italy and China and the factors that strengthen this cooperation. After shaping the current status of the Sino-Italian partnership and the factors that encourage it, it will be possible to understand the future prospective of this cooperation and comprehend if it actually represents a threat or an opportunity for both countries.

IILiterature Review

The trade relations between China and Italy have been object of several studies. According to the literature available, the two countries have been trading partners for a long time. Their economic partnership officially started in 1971 but their trade relations became significant when China entered the World Trade Organisation in 2001. With the entry into the WTO, bilateral trade between Italy and China jumped from 9.41 of Euro billion in 2000 to 39.57 billion of Euro in 2011. (Prodi, 2013). The majority of the authors consulted, agreed in saying that the shift in the relation between China and the rest of the world, including Italy, occurred after the economic recession, when China ended to be just an exporter of low-price products and became a major importer and a dynamic economic power.

Considering the main reasons of this partnerships, many authors believe that this tight relation between Italy and China is due to some ‘similarities’ and ‘complementarities’ between the two economic models. Previous studies on the similarities, evidenced how both the countries are leader in the manufacturing and industrial sectors as well as nations characterized by a strong export-oriented system. In addition, they underlined how both Italy and China rely on an increasing share of foreign inputs in their exports (ITA, 2016)

On the other hand, several researchers focused on the complementarity between Chinese and Italian companies and on how China started to benefit from the collaboration with high-tech enterprises in highly industrialized countries, such as Italy. As a matter of fact, specialised industrial machinery, which is one of the most important flagship sectors for Italian exports, showed deep and rising complementarities with Chinese export capacities. (ITA, 2016)

To conclude it is clear that these previous studies inspired this paper and contributed to organise this research in a more complete and comprehensive way. Taking into account their findings, this study will attempt to focus on different aspects that have been neglected by prior researches.

III Methodology

To conduct this study, the available literature review concerning the economic relation between Italy and China was studied. At the same time, all the major reference concerning the Italian foreign trade were carefully analysed and all the most relevant data collected.

The research was undertaken using the data collected from the Italian Trade Agency (ITA), the government organisation which promotes the internationalisation of the Italian companies and that has been focusing on the activities of the Italian companies in the Chinese market for a very long time.

IV Topic- Centered Discussion

A Trade Relations between Italy and China

According to the latest statistics, the relation between the Italy and China increased in the last few years in terms of trade. Italian imports from and exports to China have been increasing over the last few years. Italian exports to China show a strongly increasing trend, with a 21.1% rise since 2010 (Figure I). Unlike exports, Italian imports from China are still 2.2% down compared to the 2010 level. However, imports have recovered since 2013, after a decline in Italian demand in the aftermaths of the global crisis (ITA, 2016)

I Aggregate Trade Flows between Italy and China from 2010-2015

Source: Eurostat

Regarding the sectors involved in the trade, Italian exports to China are mostly related to the furniture, vehicles and machinery segments while imports from China mainly involve mechanical appliances, iron, steel, optical, photo and measuring apparatus (Figures II and III).

II Italian top 10 export to China

Source: Eurostat

III Italian top 10 imports from China