The Chinese, to write the word “crisis,” use two characters, one meaning “danger” and the other, “opportunity”.
2020 marks the 50th anniversary of Italy-China relations. It’s been quite a challenging year due to the global pandemic, but one of lessons learned and marked by an unprecedented showing of reciprocal solidarity between the two countries with new partnerships unleashed and, for those of us Italian diplomats in China, a host of challenges and work methodologies different from those we had been accustomed to.
Although the topic is wide, I want to try and synthesize it by articulating three principle areas of change; so much so, they can almost be considered a “disruptive innovation” – one that’s destined to leave a profound mark on society while at the same time showing the way for the work world of the future.
I would call these three areas: Diplomacy of Sustainability, Healthcare (and Digital) Diplomacy, and a New Economic Diplomacy post-pandemic (with new models for Business and Supply Chains).
Diplomacy of Sustainability
“We do not inherit the Earth from our ancestors, we borrow it from our children.”
This Native American saying has come back to the fore in this year of pandemic, becoming for those of us charged with orchestrating a great many events in China centered on Italy, a sort of mantra – used to underscore our Country’s commitment to sustainability issues.
For a country such as Italy (patria of biodiversity), one of the leading European countries for renewable energy consumption and recycling rates, a country holding the greatest number of UNESCO sites in the world, one with the most geographical markers across Europe, known as “The Healthiest Country on Earth” (Bloomberg listing, et.al.), respect for the environment and the vocation toward increasing sustainability are almost part of our identikit. It also takes priority when it comes to guiding our foreign policy.
The COVID-19 pandemic reminded us all of the importance between humankind and nature; what a crucial role humanity plays in maintaining the equilibrium of our planet. During the lockdown in Italy, photographs of fish swimming in the Venetian canals or dolphins frolicking along the coast of Cagliari are eloquent, lasting impressions on our collective memory.
It’s for these reasons that this year, Italian diplomacy in China reaffirmed even more vigorously its commitment to sustainability; working to reinforce bilateral collaboration with Beijing commercially, academically, scientifically and in other ways as well.
Amongst the numerous events that we organized and lent support were those with an eye toward “integrated promotion” of Italian companies – firms working in the environmental sector who export to China, or those with already established ties through joint ventures and/or their own factories – we counted the following initiatives:
“Sustainable Technology, Mechanics and Mobility” seminar with the support and participation of the prestigious Tongji University • The “Green Carpet Fashion Award” recognizing Chinese textile companies and sustainable fashion (with a speech given by video by Prime Minister Conte) • “Earth’s marketplace” featuring Shanghai’s Slow Food China movement • The donation of an olive tree by the Italian Consulate in Shanghai to the Caoyang High School (which offers Italian language as part of its curriculum) and serving to educate young and old alike in sustainability issues.
Some of these happenings were part of the official calendar of events recently held by the Festival of Sustainable Development organized by ASVIS in Italy. They served as a platform to presage the priorities for the G20 Italian presidency, starting December 1, 2020: Public Health, People, Planet, Prosperity. The goals are to promote a reboot of the global economy with “more green” aspects.
Italy’s forthcoming G20 presidency will also coincide with the Italian co-Presidency of COP26 (United Nations Climate Change Conference) together with the United Kingdom. Next year, we will host in Milano the “Youth4Climate: Driving Ambition” event, to stimulate a greater involvement of up and coming generations, so that they may play an active role in the future of our planet.
Italy’s strong showing both multilaterally and on the European stage moves us closer to seeing that a “Green Deal” becomes a reality after it’s launched by the European Commission.
Diplomacy in Healthcare (and Digital)
During the bleakest months of Italy’s pandemic at the start of the year, we put into play the most powerful “airlift” ever realized between Italy and China, so that Italian hospitals and organizations could receive all necessary assistance possible. Departing just from Beijing, our Embassy orchestrated 12 flights, each carrying 25 tons – between donations and ventilators, facemasks and other essential protective equipment. The airlift touched down in nearly every major Chinese city, so Chinese experts and physicians could come to Italy to help manage the pandemic.
In what we perceived as a race against time, with the news media dispensing with the numbers of the deceased and spread of Covid in Italy, the diplomatic-counsellor corps in China worked 24/7 so that we would serve as the lynchpin between local administrations and Italian organizations, donors and Chinese suppliers, and customs agencies.
Our specific mandate emanating from China toward Italy was also that of recounting all that we were doing here to contain the virus to inspire Italian policy makers. We were operating under a vastly different process, one that was difficult to replicate: In China, each citizen was traced by way of various apps. They had to display on screens a QR Code for good health (with three colors like a traffic light). The wellness code would be required to enter any office, store, supermarket, pharmacy or on public transport. If anyone did not show a green light, they would be unable to leave their premises. If the code was yellow (meaning, a person who tested negative but who has been in the same train or plane as someone who tested positive), or a red color (testing positive for COVID), one just needed a negative test to get back to a green bill of health. All of this would be revealed automatically and in real time, with local health clinics linked to a central master server.
Another QR code was activated during the Chinese epidemic: tracking via GPS people’s movements (so those with greatest exposure were tracked down immediately). Each day, addresses and places where positive tested people frequented would be published on WeChat. Aside from satellite technology surveillance, physical checkpoints were activated across a capillary network, using video cameras and police squads. Steep and immediate fines were levied on those who violated quarantine or who tried to hide their symptoms.
This impressive level of computerizing the crisis – and in this, the Chinese model is unique across the world panorama – served as inspiration to those of us at the Italian Consulate of Shanghai (more on this later).
During this time, we deployed the same effort in terms of consular activities to provide assistance to those Italian families who had been separated due to the strict pandemic measures and lack of international flights. We also provided assistance to the great many Italian companies operating in China and who were being hit with tremendous economic repercussions (helping them access capillary means of assistance such as subsidies, fiscal benefits as provided by the Chinese government to foreign companies).
Another diplomatic success for Italy was receiving authorization (as one of three such foreign countries) to operate special charter flights for bringing Italian businesspeople back from China. Coordinated by the Beijing Embassy, the Italian Chamber of Commerce in China was able to arrange three flights through the Italian company, NEOS, to carry back “home” hundreds of Italian residents in China.
I was personally on hand to welcome back one such flight coming from Nanchino. With me were a number of parents who burst into tears in seeing their children again (behind a glass partition) after months of separation. We spent a few days in Nanchino to assist the hotel designated for the quarantine of all passengers on board (among them, many children, a pregnant woman and handicapped passengers as well).
As Chapter Leader of the Luiss Alumni Association in Shanghai, I decided to promote – in a semi-deserted Shanghai in lockdown – a small Consular event with the Chinese friends of ALL – to help raise funds for Luiss to donate an ambulance to Rome’s Spallanzani Hospital. The gesture of solidarity shown was profound.
During those challenging times affecting us all, even in diplomatic circles we see people wholeheartedly employing mutatis mutandis those work instruments and digital/virtual means of communication used across the private sector. Just like you, dear reader, I’ve lost track of the number of webinars I’ve organized or in which I have participated.
In the incredibly dynamic China of today, where digital services for citizens have been part and parcel of daily life for years (there are government apps of all kinds, even for handling wait times at hospitals), our Consulate was already considered avant-garde. In fact, it was the first foreign consulate to launch, in 2019, a Mini-Program thru Wechat (the leading messaging and service platform for Chinese with over 1 billion users). This translates into an additional communications tool in the Consular toolkit and one that can enact a multitude of interactive services geared toward the community at large.
Today, an Italian citizen and resident in Eastern China no longer has to send an email prior to making an appointment at the Consulate’s Commercial Services office. All it takes is a click through their cellphone. Idem should they lose a passport, need to register a birth certificate, and many other services.
Throughout the pandemic, reaching out to the Italian community with urgent advisories became a pressing imperative. So it was for this reason, in a world like the Chinese one where websites have been replaced by Wechat mini-sites, we are launching our very own Mini-Program feature: invasive pop-up notifications appearing at the top of the user chat feed, listed as “News Alerts”. This way, with just one click, the majority of our 7000 Italian countrymen residing in Shanghai and eastern China could, within seconds, receive the most important notices (the service is expected to be active later this year).
Leading up to the economic dossiers that I’ll cover in my third point, I will go so far to state that the health crisis with its accompanying social distancing, also greatly changed the trade show participation or rather, the economic diplomacy. This year, for the very first time, the Italy-China Business Forum took place entirely virtually. There have also been a number of trade shows held online, out of necessity by both Italy and China over the last few months. This was yet another strategy we implemented to adapt and respond to new forms and rules in a post-pandemic business world.
The New Economic Diplomacy in the post-pandemic recovery (the case for new Business and Supply Chain models)
How has the pandemic altered the Chinese business world (and that of the rest of the world)? How can we take advantage of new opportunities? How can we access the tools placed at our disposal by the Italian government? Prior to giving you my “recipe” for doing business in a post-pandemic China, I’d like to address two premises, both of which are economic in nature: one on China in general, and the other on Shanghai, starting with a simple data point.
First off, just like “my” Ambassador (Italian Ambassador for southeast China, Luca Ferrari) never tires of stating, China is, and will be, the market of reference in a post-pandemic world. It’s the first market to recover and grow, with its manufacturing indexes back at 2019 levels for the same period. This came about through a huge public infrastructure plan and investment. Secondly, the World Bank in the next decade forecasts that one third of worldwide growth will come out of China, one third from the OSCE zone and one third from the rest of the world (India and Brazil included). These are impressive numbers.
A geopolitical flash: The Italian Consulate of Shanghai covers the provinces of Anhui, Jiangsu and Zhejiang, a territory made up of 225 million residents across an area of 349,740 square kilometers and with a GDP of 3000 billion euro in 2019. It’s an area roughly the size of Germany with a population greater than that of Brazil and a GDP greater than France or the United Kingdom.
But I’d like to draw your attention to some of the many first-place recognitions Shanghai has garnered: It’s the most populous city in the People’s Republic (PRC) with over 24M inhabitants, holding the longest metropolitan subway system in the world, the largest urban economy in the country (with a GDP of about 493 billion euro in 2019), and is the leading place for attracting FDI in all of China. It holds the number one port in the world in terms of volume of containers moved (more than Hong Kong or Singapore) and the third most-trafficked airport on earth for its sheer volume in cargo. It was the first Chinese city to create a free trade zone, hosting the impressive Pilot Free Trade Zone (enlarged in 2019 to encompass an area of over 240 square kilometers). Shanghai and its surrounding areas represent the greatest concentration of Italian companies in all of China; over 1200 mapped by the Consulate General. In the financial sector, Shanghai is the first Chinese city to establish inside its own Financial Market, the STAR Exchange, a “Sci-tech innovation board” intent on competing with the New York stock exchange NASDAQ index.
To the above, one must add the latest news: According to the influential Global Financial Centers Index 2020, Shanghai has risen one slot in the ranks to become the third major financial district after New York and London (surpassing Tokyo, which slipped to fourth place). This news seems to give credence to the existence of that process described by some observers as proof of “the shifting of the global financial hub” toward Asia.
Given the above two premises, I add one more data point as of the date of this publication: Within the context of the challenging global economy due to the pandemic, the majority of Italian companies operating in the People’s Republic are rapidly absorbing its counter-effects in terms of commerce and financial ledgers. Since the health crisis swept over China, Italian firms have already achieved the same sales volumes (and in some instances surpassing them) as during the same period in 2019.
Many wonder how such an “economic miracle” could be possible:
First off, it is due to the commercial success of our own businesses operating in China [with a boom in sales for Italian sports cars, excellent business for machinery and components companies, software and integrated circuit manufacturers, and rising sales for many luxury brands]. Secondly, the intense dynamic of new market entrants and qualified Italian investment in China serving the Chinese and Asian markets, together with Italy’s active participation as guest of honor or principle partner country in key trade shows and events promoted by local authorities or other Chinese organizations.
And last but not least, I’d like to remind readers of the ceremony in which the first stone was laid for the newest facility for the Italian company, SPAL in Changzhou, and signing ceremony for the joint venture for the first manufacturing facility of medical supplies world leader, Diasorin, which took place in Shanghai. Add to this the fact that this fall, Italy has played an active part in major events for the wine industry in China: In September, participating in the CIIF Shanghai, the preeminent industry trade show in the PRC, followed by the Wine to Asia event in Shenzhen in November and Roadshow Vinitaly (held in a number of Chinese cities). Italy was selected as the leading foreign partner in major events organized by Chinese institutions, including: International Day in Hangzhou, the Culture and Tourism Festival of Shanghai, which, for the very first time, was held at the Italian Florentia Village outlet mall in Shanghai.
It’s clear that these results were made possible by the ongoing support and co-participation of Italian institutions, among them: Pact for Export, providing financial support for international relations through SACE-SIMEST, the launch of the Export.Gov.it portal (offering a wealth of highly recommended tools), along with the diplomatic-consular network across the PRC that fully understood how to channel energies and resources across all the various expressions of the Sistema Italia there; advancing a cogent Teamwork involving the Embassy, Consular offices, the ICE – Italian Export Office, SACE-SIMEST and the CCIC-Italian Chamber of Commerce in China.
Right in the throes of this annus horribilis of the pandemic, the CCIC increased its membership from 380 to 500 companies, in a clear display that even in difficult times, opportunities for working together become more evident. This chamber membership in sync with the diplomatic network does not mean that it serves only Italian companies based in China; but rather, serves as an instrument carrying both positive and significant repercussions even for those Italian-based headquarters, as well as more generally, those exporters whose goods and services impact domestic production.
Here again, a case study is the aforementioned Italian participation in leading trade shows in the PRC: the CIIF in Shanghai last September. We asked ourselves, How can we make a credible stand during this period of highly restricted travel and quarantine? From here, an idea was born: Let’s make a tradeshow with all those already present in China.
There are a number of absolutely top-notch Italian companies already based in China and producing. Of these, let’s identify those firms representing high exports from Italy toward China, in order to produce there. In this way, we are able to indirectly aid the Italian mother companies producing and thereby creating jobs back home. The result went well above our expectations and our participation was crowned with a totally unexpected and unparalleled success, both politically and commercially. We brought 58 Italian companies to the trade show (as the leading foreign country in terms of number of companies represented; above Germany, France and Japan). Forty-seven of these united in a National Pavilion coordinated by the Italian Chamber, along with ICE and the entire Sistema Italia as its backbone. Note: These firms were models of the utmost industrial excellence, already integrated in local supply chains and focused on serving Chinese and Asian markets.
So, what were the ‘lessons learned’ and my ‘recipe for success’ in a post-pandemic business world? It’s opportune when venturing into the Chinese market to employ whole new models for productivity: meaning, to “produce in China for China” by way of inserting one’s firm into the “double economic cycle” or “double circulation”, a concept put forth by President Xi. Integrate into Chinese supply chains, concentrate on innovative and non-polluting sectors rather than insisting on the old models of delocalized production. It’s necessary to approach this market with a long term vision, through putting up longstanding investment and not “spot” ones, and establishing key partnerships/joint ventures with Chinese counterparts (even institutional ones – thanks to the State and its diplomatic network working alongside you in the PRC), and for both B2B and B2C markets.
The Chinese market holds promise for: machinery, pharmaceutical/medical, software, IT and integrated circuits, environmental solutions and clean energy, fashion, design and retail sales, with a focus e-commerce, services (digital, insurance, asset management), and innovative start-ups (only for those with sound working frameworks).
Given all of the above, why did the pandemic and its repercussions and inevitable challenges to international commerce put global supply chains at risk (within the backdrop of tensions between Beijing and Washington)? It brought about the aforementioned decoupling and in China in particular, a new policy of “securing” supply chains – proving even more cogent after President Xi Jinping offered his theory on “double circulation” as mentioned above.
That doctrine, considered a dialectic between international and domestic economic circulation, with an emphasis on the latter during pandemic uncertainty and commercial disputes, will constitute ostensibly one of the focal points and ideological pillars of the XIV Chinese 5-year Plan scheduled to be issued in 2021.
In short, in determining which are the positive or negative scenarios of Italian companies in China, their model for industrial presence is key. Those who may expect the greatest results in this recovery are firms that already have a local presence within the supply chain or already operate there, with local Italian managers based in the PRC to serve the local market. We are talking about companies that already work under new business model development and NOT those firms that operated mere delocalized production means in order to take advantage of low costs of production (which, in China hardly exist anymore), to then re-export back to Italy, to Europe and western markets.
In conclusion, I revert back to my opening statements concerning the Chinese characters for “crisis” as a hallmark of two teachers who inspired me: The first, Jean Monnet, who said, “People accept change only when they see the necessity to do so, and they see the necessity only should they find themselves in a crisis.”
The second comes from Daisaku Ikeda: “The most difficult experiences present an opportunity to deepen our self-awareness.” I believe the pandemic catalyzed these processes, inviting us to engage collectively in self-examination and pushing us to accept profound and disruptive change for the survival of our civilization and our planet. I believe this to be a new, precise mission also for diplomacy.
Ludovica Murazzani, Diplomatico (Consolato Generale d’Italia a Shanghai) e Chapter Leader Shanghai
Il presente articolo è scritto a titolo personale esclusivamente in qualità di laureata Luiss e non rappresenta la posizione ufficiale del Governo.