Not just pizza: Italy’s attractiveness for an upgraded ‘Made in China’

Rebecca Arcesati China Plus Published: 2017-12-28 20:25:22
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Recent recognition of the Neapolitan art of pizza-making by UNESCO, while well deserved, does not do justice to Italy’s creativity and entrepreneurial mindset. Abroad, few know that Italy is not just about food, wine, fast cars, fashion brands and design – precious assets indeed. It was 1495 when Leonardo da Vinci signed the first project of a robot ever recorded. Today, besides excelling at robotics, aerospace, advanced manufacturing, machinery, biotech and healthcare are some sectors in which the so-called ‘Bel Paese’ displays its leading capacity to innovate and develop disruptive technologies. Incidentally, these are also major pillars of Made in China 2025, China’s grand plan to upgrade its entire industrial sector through technological innovation starting from traditional industries. 

Gino Sorbillo, center, one of best known Neapolitan 'pizzaiuoli' (pizza makers) is flanked by friends as they celebrate UNESCO's recognition outside their restaurant in Naples, Italy, Friday, Dec. 8, 2017.[Photo: AP/Burhan Ozbilici]

Gino Sorbillo, center, one of best known Neapolitan 'pizzaiuoli' (pizza makers) is flanked by friends as they celebrate UNESCO's recognition outside their restaurant in Naples, Italy, Friday, Dec. 8, 2017.[Photo: AP/Burhan Ozbilici]

China no longer can be labeled as the ‘world’s factory’. The future of China’s economy will rely on indigenous innovation: we are witnessing an epochal transformation from an investment-driven model emphasizing quantitative output of cheap goods, to one focused on domestic consumption, quality, sustainability, and Chinese ideas. In this intermediate phase, however, acquisition of the most advanced foreign technologies is still strategic to secure the necessary know-how. Italy, where the government also released a plan to stimulate R&D expenditure, industry 4.0 and digital economy, has a lot to offer.

Italy boasts a network of export-oriented small and medium enterprises (SME) which, while posing challenges of scale, also has advantages when it comes to quickly adapting to new technologies. According to the president of the Italian Trade Agency, cited in the MIT Technology Review, 40 percent of Italian manufacturers use 3-D printers for fast prototyping, and 25 percent use robots. China still lags far behind world average in density of robots applied to the manufacturing process, and it aims to catch up by 2020. Italy’s know-how in industrial machinery and flexible manufacturing technologies – of which it is among world leaders – has a lot to teach to a ‘made in China’ that aims to be more tech, and also greener. 

Another field of excellence are technologies for application in the medical and pharmaceutical industries, which China is eyeing as it attempts to reform and modernize its healthcare system. This month, a consortium of Chinese investors including Jack Ma’s Shanghai Yunfeng Xinchuang acquired the Italian Esaote, one of the world’s top ten players in ultrasounds and diagnostic systems. In fact, health is among the strategic sectors identified in the bilateral cooperation between Italy and China.

Investing in Italian technology is also cost effective. Shortage of capital in Southern European economies has two advantages for Chinese investors according to Francesco Lorenzini, co-founder of Techsilu, a pioneer organization working to integrate the Chinese and Italian startup ecosystems. ‘The first,’ says Lorenzini, ‘is that even the best technologies are less valued compared to, say, Silicon Valley, so investing in equity can guarantee larger shares at reduced costs. The second is the profit-oriented nature of Italian firms, which makes them a stable, reliable target for pragmatic Chinese investors.’ 

China has plenty of capital: in 2016, 45 billion dollars were invested in venture capital in the country, where foreign start-up companies are positively welcomed. And startups are the forerunners of innovation. In Lorenzini’s view, Chinese industrial funds and large VCs still need to be educated about the offer of Italian tech, they first look at Germany, the UK, Israel; but once they realize the offer matches their needs, the ball starts rolling.

Institutional endorsement is key. Cooperation in the field of science and technology is arguably among the most solid and institutionalized China has with a European country, following an agreement between Italy’s Ministry of Education, University and Research, and China’s Ministry of Science and Technology. Environment and clean energy, agriculture and food safety, sustainable urbanization, pharma and healthcare, aviation, aerospace, infrastructure, and transportation are prioritized areas of cooperation. Among the milestones, multiple synergies between the two countries’ universities and hi-tech zones, such as a Sino-Italian Innovation Base Camp inaugurated in Chongqing earlier this year. And the annual China-Italy Science Technology and Innovation Week is a promising platform for sharing innovation. 

Developing concrete business matchmakings, however, is not always easy. To overcome this barrier, Techsilu, together with the China-Italy Chamber of Commerce and ThinkIN China, launched ISIC2017, a groundbreaking project to connect the best of Italian tech to key Chinese stakeholders, endorsed by the Italian Embassy. Three disruptive scaleups were brought to Beijing to meet interested investors and industrial partners: D-Orbit, a satellite manufacturer with a brave plan to clean up space from debris, Xnext, creator of a brand-new x-ray detector for real-time quality control across a variety of industries, from food to pharma, and TokTV, the fastest growing sports social network. ISIC2017 was the only Italian initiative to be part of Zhongguancun’s Mass Entrepreneurship and Innovation Week.

Challenges remain on both sides. Italy still has to build a resilient ecosystem that fosters innovation. Industry 4.0 strategy, Lorenzini notes, is much less ambitious compared to the Chinese plan, as it focuses on tax incentives for innovators, instead of combining them with deeper structural reforms. He is just right. Milan, Italy’s tech hub, lacks the competitiveness and dynamism of other European cities, and few Italian research centers are well-connected to the productive system. Artificial intelligence, Internet of Things, virtual reality and other new frontiers need talents, and Italy should invest much more in its human resources. 

On China’s side, structural reforms are equally needed: like Italy, China has a debt problem to deal with, which in Beijing’s case requires tackling opposition to economic reforms and restructuring SOEs. Besides, traditional industries should also be prepared to deal with the automation revolution, at a time when the leadership is trying to reduce social disparities. If both countries continue to work together to share knowledge in a win-win way, while nurturing their innovation ecosystems, the future will surely be interesting to see.

(Rebecca Arcesati is a Robin Li Scholar at Yenching Academy of Peking University, and an Associate at the Beijing-based intellectual community ThinkIN China. She holds a BA in Cross-Cultural Communication and an MA in International Affairs, both focused on China. Her interests range from Chinese foreign policy, diplomacy and Sino-EU relations, to domestic politics, ideology and social issues in China.)

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