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18/07/2018

Foundation

Presentation of the 2018 Report at the Farnesina

The Italy China Foundation today presented its 9th Annual Report China. Scenarios and perspectives for companies, the forecast report that collects research, risk analysis and forecasts in the short to medium term on China. The Report is elaborated by CeSIF, the Italy China Foundation's Center for Business Research, and is elaborated by Filippo Fasulo and Alberto Rossi. The Roman stage is the fourth of the roadshow that has already touched Ancona, Florence and Milan.

The presentation of the 2018 edition was held today in the International Conference Room of the Farnesina and was opened by the Secretary General of the Ministry of Foreign Affairs and International Cooperation, Elisabetta Belloni, followed by the new President of the Italy China Foundation, Alberto Bombassei, by Ettore Francesco Sequi, Italian Ambassador to China (video conference from Beijing), Li Ruiyu, Chinese Ambassador to Italy, and Francesco Palumbo, General Director Tourism at MIBACT, moderated by Nicola Lener, Central Director for the Internationalization of the Ministry of Foreign Affairs and International Cooperation. The contents of the Report have been illustrated by Filippo Fasulo, Scientific Coordinator of CeSIF. His speech was followed by those of Enrico Toti, Head of China Desk NCTM, and Eugenio Raffaelli of Diacron. The business cases were brought by Fausto Palombelli, Director of Marketing and Development Aviation Aeroporti di Roma, and by Luigi De Vecchis, President of Huawei Italia. Virman Cusenza, Director of the newspaper Il Messaggero, moderated the debate.

"Changing China will bring great opportunities for Italian companies and, to continue to grow trade, we need a greater awareness of this change," said the President of the Italy China Foundation, Alberto Bombassei "The commitment poured out in the commerce sector, as in that of industry, must maintain an engaigement also in another crucial economic area: the tourism sector. China is the largest tourism market, both in terms of spending and the number of trips abroad, and prospect factors such as increased income and reduced bureaucracy will make it easier and easier for the Chinese middle class to travel. For the Italian tourist market this is an opportunity and, to seize it, it is essential that communication and services offered by the various destinations are adapted to the new challenge".

IN BRIEF_ 2017 was the year of the strengthening of Xi Jinping's position internally and internationally. The 19th Congress of the Chinese Communist Party held in October certified its rise in a process that was completed with constitutional reform in March 2018. Davos's speech on globalization and the official launch of the Belt and Road Initiatives have defined Xi Jinping's new foreign projection of China. The evolution of the internal political context has a strong impact, as it certifies the continuity of the lines of economic policy defined by the Chinese government. The context of reference continues to be that of the New Normal, namely the recognition that China is in a new phase of its economy characterized above all by a slower growth rate, and that the country is facing a profound transition, which will to be an advanced economy based in particular on consumption, services and innovation. The cornerstone of this new economic phase is that quantity must therefore now replace quality.

THE THREE BATTLES_ In order to achieve the stated objectives, Xi Jinping, who in the meantime has focused on economic power, has outlined the most significant strategies and themes. Its economic policy action, in fact, revolves around the concept of Supply side structural reform, which provides for an improvement of the production process through the reduction of overcapacity. Furthermore, during 2017, the Chinese President identified the priorities of the Chinese economic agenda, the so-called "three battles": eliminating poverty, reducing financial risk and protecting the environment. These three themes are consistent with the New Normal model and are an indication of the continuity that the strengthening of Xi's power can give to Chinese economic policy.

LONG PERIOD_ Progress is a consolidated feature of Chinese reforms, which are also seen in the medium and long-term objectives set by the Chinese leadership. The Chinese Dream, a powerful national success image made famous by Xi Jinping in 2012, aims to make the country fully modern by 2049, the year of the centenary of the founding of the People's Republic of China. In the meantime, in 2021 the achievement of a moderately prosperous society will be celebrated, coinciding with the centenary of the birth of the Party, and 2035 will be a fundamental step in view of full modernity. Another crucial event will be 2025, when the first stage of Made in China 2025, the plan aimed at the redevelopment of the entire Chinese industrial fabric, will end. The qualitative growth of the Chinese production commercial fabric will in the long run lead to the need to enhance Italian creative and productive excellence.

THE WAR OF DUTIES_ 2017 was also the year of China's great global rise. However, Chinese overexposure is not only linked to the Belt and Road Initiative, but to the intensification of a latent trade conflict with the United States that was fully manifested in the spring of 2018. This type of friction was foreseen by the CeSIF, also taking up what President Trump had announced during the election campaign that led him to win the presidency. The contrast, however, can not be framed only by reciprocal reprisals on tariffs, but rather opens a long phase of confrontation between China and the United States on global economic leadership, which will lead to the revision of the relative weights of the major world economies. In this context, the topic of technological primacy will have a decisive role, and it is no coincidence that President Trump's action has focused on the sectors involved in the Made in China 2025 plan.

CONSUMPTION AND TECHNOLOGY GROWING_ It is possible to confirm also in 2018 the two main dynamics for those who want to deal with the Chinese market. On the one hand, therefore, there is the constant growth of consumption driven by urbanization, which opens up retail opportunities both in low-cost sectors and in the luxury sectors, provided, however, that the methods of access to the market are well calibrated. positioning and distribution [2017 has seen the best performance ever for Italian exports, for the first time over 20 billion dollars: + 22%, growth never accelerated since 2010 and the best result of an EU country in China]. The second element, instead, is the growth of the technological level of Chinese industrial production, a circumstance that will require skills and knowledge in the short term, and which will open important niches in mechanical components. To these is added a particularly relevant theme, but it will only be evident in the medium term: the Chinese push for globalization, referred to by the Belt and Road Initiative. In this light it is opportune to observe the key themes: consumption, quality and globalization.
The 2018 edition of the Annual Report consists of 309 pages, 251 graphs, 28 tables and boxes. The publication includes six sections: the first four report a country risk analysis from a political, macroeconomic and business environment point of view. The fifth shows the main sector implications and opportunities for foreign companies in China, with particular reference to Italian ones, but also for Italy as a country. Specifically, 11 sectors are analyzed: food, healthcare, retail, luxury goods, energy and clean technologies, environment, chemistry, machinery, automotive, media and entertainment, furniture. The last chapter presents the opportunities in Italy: Chinese tourism and shopping, investments and incoming students from China.

For more information and to buy the Report write to savoldi@italychina.org

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