by Andrea Carli
For Italian companies that want to invest in China, the most interesting opportunities are in products with high technology content, the annual report by the CeSIF study center for enterprise of the Italy-China foundation showed.
Beijing’s objective is to increase the added value of production and remove the “low quality, low price” image that distinguishes “Made in China” manufacturing. From 1996 to today, spending in China on research and development has grown by more than 38 times, with an average annual rate of growth of more than 20%. In 2016, China was the second biggest global investor in research and development (about $224 billion, equivalent to 2.08% of gross domestic product) and according to the OECD it will overtake the United States by 2019.
This opens up some opportunities for Italian companies. That applies to those which are already in China: 1,700 at the end of 2016 (2,150 considering Hong Kong as well) with 130,000 employees and a turnover of €16.5 billion. It also applies to those who are not yet in China. In 2016, Italy’s “exports grew by more than 6% while imports shrank 3.12%,” underlined Ivan Scalfarotto, undersecretary of the Ministry of Economic Development, along with the “decline of 8.8% of our trade deficit. These are encouraging figures,” he added.
Many foreign companies in the sectors of nanotechnology, synthetic materials, biotechnology, software and telecommunications are now looking to China as a source of technological innovation. The increasingly high-tech face of Chinese industrial production will in the short-term call for competencies and knowledge and will open important niches in the machinery components sector.
The new frontier is robotics, one of the chapters of “Made in China 2025”, the transformation plan of Chinese industry. According to the International Robotics Federation (IFR), in 2016 in China 90,000 industrial robots were sold, about a third of the global value, with growth of over 30% compared to more than 68,000 in 2015. The development plan of the robotics industry 2016-2020 presented in April 2016, foresees that every year China will produce 100,000 industrial robots classified as “Made in China” by 2020, and at least 500,000 advanced industrial robots. Also by 2020, sales of robots in services should surpass 30 billion renminbi.
Those who want to invest in China cannot overlook the project of Chinese President Xi Jinping for the new Silk Road. The initiative, known with the acronym Obor, from the English One Belt, One Road, or Bri, Belt and Road Initiative, was announced in 2013: it foresees the creation of corridors from China to Europe with the involvement of central Asian countries via land, and those of south-east Asia via sea. Italy has nominated Trieste, Genoa and Venice to be involved.
And finally there is consumption. More than 1 billion people, about 70% of the Chinese population, will live in 600 cities between 2030 and 2035 (today that figure stands at 57%). This will have consequences on demand: food and health, clean technologies and infrastructure for mobility, aside from retail and distribution are the segments that will show the highest levels of growth. In the background is the digital boom (731.3 million Chinese had access to the internet at the end of 2016, more than one in two Chinese people navigates, chats and gets information and makes purchases through their own computer or mobile device) which offers opportunities in retail (both low-cost and luxury).
The Chinese market also has its downsides: cost increases, scarcity of human resources and protectionism, aside from the long-running problem of the violation of intellectual property rights. These are all factors that could undermine profitability of foreign companies which enter the market in 2017