Economy

Chinese Stores, Made in Italy

Business models are changing, but Chinese presence in Italy's business world remains high.

Via Carlo Alberto in Rome's Chinatown
Via Carlo Alberto in Rome's Chinatown
Maria Rosa Tomasello

ROME — It all started with spring rolls and cheap screwdrivers: this is how China first entered our homes. If the restaurants with the dragon sign put us in contact with Asian cuisine, the shops that populate our cities, thanks to the low costs and the big assortment, paved the road for the invasion of Chinese products. But over the past few years, Chinese entrepreneurship has adopted a different guise, transforming what many believed to be a colonization into a new resource for our economy. Today, between 40-50% of the products displayed in Chinese shops are "made in Italy" or are distributed by Italian import-export businesses to meet EU security requirements.

Because of development, the cost of labor has almost tripled in China, while the euro-yuan exchange rate has fallen 20-30%, reducing the wholesale margin, explains Francesco Wu, honorary president of the Italy-China Entrepreneur's Union (UNIIC) and advisor on foreign entrepreneurship for Italy's Confcommercio business association. Another key factor is that the quality of products has risen, and as a result, their prices as well.

"It has become less profitable to import jewelry, toys, and clothing at the same rate of the early 2000s," says Wu. "Many large chains today have a mixed assortment of Chinese and Italian products, some are even of European origin." An interesting case, he says, is that of Aumai, a megastore chain in northern Italy where you can buy good quality Italian products, such as shoes and clothing, at competitive prices. The trick, says Wu, to keeping the prices down is that the products are bought in large stocks, so customers may not find the latest model.

The Hua Yi Si Buddhist temple, located near via dell'Omo — Photo: Google

In Rome, changes are visible in the historic Chinatown in the via dell'Omo, an area filled with industrial warehouses and wholesalers, a large part of which are Chinese. One after another, there are shops selling household products, clothes, shoes, display shelves and much more. Marco Wong is spokesperson for Associna, the association of second-generation Chinese Italians, and an entrepreneur in the food imports sector. Wong explains that there are nearly 80 wholesalers, but there used to be more. Distribution has changed. Many sellers don't come here anymore for supplies and instead go directly to the representatives, many of whom work for Italian companies."

In the morning, clients are scarce. Due to the cost of rent, wholesalers who need large spaces have moved outside of Rome, say the operators, and as a result the area is gradually emptying out. The same happened in Rome's central Piazza Vittorio and in Milan's via Paolo Sarpi, where the showrooms that had changed the neighborhood's identity are closing down or converting into new businesses. "Things may appear unchanged to those who do not pay attention," says Wong. "But an evolution is underway."

A telltale sign for the change is that many Italian goods or goods distributed by Italian companies are actually made in China. "Christmas products are mainly marketed by two Italian companies, one from Nola, in the province of Napes, the other from Apulia," explains a business owner. "One of the main distributors of household goods is also from Apulia. Oftentimes, Chinese stores sell Italian cosmetics. A small company from the center of Italy has grown mainly by selling to Chinese shops and today has a huge revenue."

For example, pots, detergents, soaps, and paper are distributed by Italian companies. However, hardware, car and cell electronics parts come from China. "What allows Chinese businesses to still offer competitive prices is a mentality of management based on rotation: this means that they make sure that clients return by keeping prices low," Wong says.

The very model of Chinese stores has reached saturation.

Bing Lin, 50, has been in Italy for almost 23 years. He's the manager of an import-export business: his 4,000-square-meter warehouse hold thousands of products, from toys to coat hangers. "Compared to ten years ago, the advantage of important products from China has decreased because the costs of materials and labor have gone up," he says. "Today, a transport container costs between $1,200 and $1,900, while customs clearance costs depend on the value of the goods. I mainly import hardware, plastic, and fake flowers. Italian suppliers have more experience with the Italian market and the quality is greater."

A Chinese warehouse in Rome — Photo: Gdoweek via Twitter

"The very model of Chinese stores has reached saturation and is struggling, also because the economic crisis has reduced the spending power of the lower-middle class, who are the consumers of these products," explains Wu.

There are those who have closed their shops, those who have returned home. Thanks to China's frenzied development, immigration has slowed down, even though Chinese entrepreneurs are the most represented in Italy: over 80,000. In Rome, many have changed fields, opening up bars or tobacco stores.

In Milan, second-generation Chinese have diversified and are present in many sectors. There are those who try out new business models coming from China, by importing regional cuisines, for example or those who have found their fortune in sushi. "In Milan today there are around 500 sushi restaurants, most of which are run by Chinese," says Wu. "The first Japanese restaurant that won a Michelin star, Iyo, is run by Chinese. We are business people. We go where the business is."

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Geopolitics

Iran-Saudi Arabia Rivalry May Be Set To Ease, Or Get Much Worse

The Saudis may be awaiting the outcome of Iran's nuclear talks with the West, to see whether Tehran will moderate its regional policies, or lash out like never before.

Military parade in Tehran, Iran, on Oct. 3

-Analysis-

LONDON — The Iranian Foreign Ministry spokesman Saeed Khatibzadeh said earlier this month that Iranian and Saudi negotiators had so far had four rounds of "continuous" talks, though both sides had agreed to keep them private. The talks are to ease fraught relations between Iran's radical Shia regime and the Saudi kingdom, a key Western ally in the Middle East.

Iran's Foreign Minister Hossein Amirabdollahian has said that the talks were going in the right direction, while an Iranian trade official was recently hopeful these might even allow trade opportunities for Iranian businessmen in Saudi Arabia. As the broadcaster France 24 observed separately, it will take more than positive signals to heal a five-year-rift and decades of mutual suspicions.


Agence France-Presse news agency, meanwhile, has cited an unnamed French diplomat as saying that Saudi Arabia wants to end its costly discord with Tehran. The sides may already have agreed to reopen consular offices. For Saudi Arabia, the costs include its war on Iran-backed Houthis rebels fighting an UN-recognized government in next-door Yemen.

The role of the nuclear pact

Bilateral relations were severed in January 2016, after regime militiamen stormed the Saudi embassy in Tehran. Amirabdollahian was then the deputy foreign minister for Arab affairs. In 2019, he told the website Iranian Diplomacy that Saudi Arabia had taken measures vis-a-vis Iran's nuclear pact with the world powers.

It's unlikely Ali Khamenei will tolerate the Saudi kingdom's rising power in the region.

He said "the Saudis' insane conduct toward [the pact] led them to conclude that they must prevent [its implementation] in a peaceful environment ... I think the Saudis are quite deluded, and their delusion consists in thinking that Trump is an opportunity for them to place themselves on the path of conflict with the Islamic Republic while relying on Trump." He meant the administration led by the U.S. President Donald J.Trump, which was hostile to Iran's regime. This, he said, "is not how we view Saudi Arabia. I think Yemen should have been a big lesson for the Saudis."

The minister was effectively admitting the Houthis were the Islamic Republic's tool for getting back at Saudi Arabia.

Yet in the past two years, both sides have taken steps to improve relations, without firm results as yet. Nor is the situation likely to change this time.

Photo of Iranian Supreme Leader Ali Khamenei in 2020

Iranian Supreme Leader Ali Khamenei in 2020

commons.wikimedia.org

Riyadh's warming relations with Israel

Iran's former ambassador in Lebanon, Ahmad Dastmalchian, told the ILNA news agency in Tehran that Saudi Arabia is doing Israel's bidding in the region, and has "entrusted its national security, and life and death to Tel Aviv." Riyadh, he said, had been financing a good many "security and political projects in the region," or acting as a "logistical supplier."

The United States, said Dastmalchian, has "in turn tried to provide intelligence and security backing, while Israel has simply followed its own interests in all this."

Furthermore, it seems unlikely Iran's Supreme Leader Ali Khamenei will tolerate, even in this weak period of his leadership, the kingdom's rising power in the region and beyond, and especially its financial clout. He is usually disparaging when he speaks of Riyadh's princely rulers. In 2017, he compared them to "dairy cows," saying, "the idiots think that by giving money and aid, they can attract the goodwill of Islam's enemies."

Iranian regime officials are hopeful of moving toward better diplomatic ties and a reopening of embassies. Yet the balance of power between the sides began to change in Riyadh's favor years ago. For the kingdom's power has shifted from relying mostly on arms, to economic and political clout. The countries might have had peaceful relations before in considerably quieter, and more equitable, conditions than today's acute clash of interests.

If nuclear talks break down, Iran's regime may become more aggressive.

Beyond this, the Abraham Accord or reconciliation of Arab states and Israel has been possible thanks to the green light that the Saudis gave their regional partners, and it is a considerable political and ideological defeat for the Islamic Republic.

Assuming all Houthis follow Tehran's instructions — and they may not — improved ties may curb attacks on Saudi interests and aid its economy. Tehran will also benefit from no longer having to support them. Unlike Iran's regime, the Saudis are not pressed for cash or resources and could even offer the Houthis a better deal. Presently, they may consider it more convenient to keep the softer approach toward Tehran.

For if nuclear talks with the West break down, Iran's regime may become more aggressive, and as experience has shown, tensions often prompt a renewal of missile or drone attacks on the Saudis, on tankers and on foreign shipping. Riyadh must have a way of keeping the Tehran regime quiet, in a distinctly unquiet time.

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