Monthly Archives: December 2015

Dec 2015

More than ever, all roads lead to Rome

As China’s Belt and Road Initiative unfolds, Rome has a pivotal role to play. In fact, the Mediterranean Sea, with Italy at its centre, sits at the end-point of the maritime Silk Road. Combining a land-based Silk Road Economic Belt and a sea-based 21st Century Maritime Silk Road, which connects China to Europe through Southeast Asia, Central Asia and the Middle East, the Belt and Road Initiative aims to boost connectivity and commerce between China and 65 countries traversed by this grand project.

China’s total financial commitment to the project is expected to reach $1.4 trillion (1.3 trillion euros). Beijing has already committed about $300 billion for infrastructure loans and trade financing in the coming years, a sum that includes a $40 billion contribution to the Silk Road Fund for infrastructure development and the $50 billion initial capital (to be raised eventually to $100 billion) allocated to the China-initiated Asian Infrastructure Investment Bank. In March 2015, after the UK lead, Germany, France and Italy joined the bank as a founding member.

The People’s Bank of China, through the State Administration of Foreign Exchange, which manages foreign exchange reserves, has invested more than 3.5 billion euros ($3.9 billion) in stakes of about 2 percent each in 10 of Italy’s largest companies: These include Monte dei Paschi di Siena, Unicredit, Saipem, Mediobanca, Fiat Chrysler Automobiles, Telecom Italia, Prysmian, Assicurazioni Generali, ENEL and the state-controlled ENI (oil and gas operator). This has made the People’s Bank of China the 10th-largest investor in Italy’s stock exchange.

Chinese President Xi Jinping and Italy's Prime Minister Matteo Renzi shake hands

Chinese President Xi Jinping and Italy’s Prime Minister Matteo Renzi shake hands

Alongside the bank, Chinese state-owned enterprises have been active in the Italian market. For example, in May 2014 Shanghai Electric Group bought a 40 percent stake in the power engineering company Ansaldo Energia for 400 million euros. This was quickly followed by China’s State Grid’s acquisition of a 35 percent stake in the energy grid holding company CDP Reti for 2.1 billion euros.

In March 2015, China National Chemical Corp bought a stake of 16.9 percent in Pirelli, the world’s fifth-largest tire-maker, in a deal worth 7 billion euros. Beijing has so far invested more than 6.5 billion euros in listed companies on the Italian stock market, a sum that corresponds to about 10 percent of total Chinese investments in European stocks.

In the past 12 months, Italy has been the top destination in Europe for Chinese outbound investment, surpassing the UK. The ancient motto “All roads lead to Rome” has never rung more true.

An extended version of this article (written with Rita Fatiguso) was originally published in the China Daily Europe