Italian officials were in Beijing two weeks ago to meet the Chinese government agencies that manage the bulk of China’s $3,200bn foreign exchange reserves. Last week, Italian Minister of Economy and Finance, Giulio Tremonti, met a Chinese delegation led by the chairman of China Investment Corp, Lou Jiwei. According to a recent article published by the Financial Times, Italy has turned to the Chinese government in the hope that it will help rescue the Italian economy from the financial crisis. China is asked to make "significant" purchases of Italian bonds and investments in strategic companies such as Enel, the Italian power utility, and Eni, the oil and gas multinational. According to Italian officials interviewed by the Financial Times, China already holds 4% of Italy's debt.
Italy is under pressure as markets understand the ECB help will not be indefinite and do not see the Italian Government developing an effective strategy to deal with the financial crisis, therefore demand increasingly high yields to buy Italian public sector debt, projected to reach 120 per cent of GDP this year, a ratio second only to Greece in the eurozone.
If confirmed and successful, what will this move mean for Italy? Will Italy become the entry way for Chinese business in Western Europe?