Italy opens the European door to China
Italy is desperately looking for solutions to its debt crisis. And it may have found them in... China. Italian representatives have reportedly negotiated with the largest sovereign investment fund in the world, China Investment Corp. Italy is hoping that the Chinese will invest in Italian debt and various Italian companies (source: FT).
This is happening in the middle of the second hysterical sell-off on the financial markets for the last month. The last one resulted in increased prices on which Italy could re-finance its debt. On Monday the profitability of the 1-year Italian obligations surpassed 5.5%. Yesterday Italy tested the markets with another emission of debt for another 7 billion Euro.
There is still no detailed information about what exactly the Italian and Chinese side were negotiating because most officials involved are keeping confidentiality. There's no information about the exact size of the Chinese investments in Italian debt up till now, but FT calculates that we're probably talking of 4% of the 1.9 billion Euro debt (which is more than Spain, Greece and Ireland put together, so you can imagine).
But still, the talks between the two sides are causing some conclusions that this could be a major step in the process called "Chinese colonization of Europe". For years China has been trying to step steadily into Europe and various Chinese companies have made big investments in Europe. Like the purchase of the automobile company Volvo. So far the European leaders, although keeping good relations with the Chinese, have kept the strategic industries from the influx of Chinese capital. But now may be the turning point where Italy sets a precedent and opens the door for fresh Chinese capital. After all, it's a globalized world where capital is presumably free to flow around unimpeded, right? And given Europe's deep trouble with Greece and the other suffering countries, China might be their last and only option left.
This is happening in the middle of the second hysterical sell-off on the financial markets for the last month. The last one resulted in increased prices on which Italy could re-finance its debt. On Monday the profitability of the 1-year Italian obligations surpassed 5.5%. Yesterday Italy tested the markets with another emission of debt for another 7 billion Euro.
There is still no detailed information about what exactly the Italian and Chinese side were negotiating because most officials involved are keeping confidentiality. There's no information about the exact size of the Chinese investments in Italian debt up till now, but FT calculates that we're probably talking of 4% of the 1.9 billion Euro debt (which is more than Spain, Greece and Ireland put together, so you can imagine).
But still, the talks between the two sides are causing some conclusions that this could be a major step in the process called "Chinese colonization of Europe". For years China has been trying to step steadily into Europe and various Chinese companies have made big investments in Europe. Like the purchase of the automobile company Volvo. So far the European leaders, although keeping good relations with the Chinese, have kept the strategic industries from the influx of Chinese capital. But now may be the turning point where Italy sets a precedent and opens the door for fresh Chinese capital. After all, it's a globalized world where capital is presumably free to flow around unimpeded, right? And given Europe's deep trouble with Greece and the other suffering countries, China might be their last and only option left.