23 giugno 2018

2018 World Small and Medium Enterprises Conference

Intervento di Massimo D'Alema - Beijing, China

Ladies and gentlemen, dear friends,
It is a great pleasure and honour for me to participate to this World Convention of Small and Medium Enterprises and have the opportunity to take the floor. Let me tell you that, first and foremost, I came here to listen and learn. For someone like me that held government responsibilities in Italy, it is natural to develop an interest for the small and medium enterprises’ situation. In fact, enterprises with less than fifteen employees represent the backbone of Italian economy. There are 4.5 million of such companies in my country, which represent 99% of Italian businesses. They hire 81% of Italy’s employed people and produce two thirds of the Italian GDP. Doubtlessly Italy is one of the countries of the world that better represents the fundamental role of small enterprises. In Italy, these have their roots in the long tradition of Italian craftsmanship, which has flourished since the Renaissance, and of the family businesses, which descends from the rural world. Far from being a leftover from the past, small enterprises have shown great dynamism, adjusting to the increasingly stronger competition of global economy, producing innovation, showing resilience to the crisis, thanks to their greater flexibility compared to bigger businesses.

In the Italian experience, the main successes have occurred in those regions or geographical areas where small enterprises have been capable of building proper manufacturing districts, sharing services and infrastructures, and producing economies of scale and competitive benefits, without the rigidities of the great industry. I believe that this experience could be useful to others and that from the exchange of experiences with other countries, aimed at learning from each other, one could improve and grow even further. 

Chinese SME’s reality is also remarkable and holds a great weight in your country as well. Reading the interesting book “Demystifying the Chinese Economy” by Chinese economist Justin Yifu, I realised that in China like in Italy the small enterprises must face common problems and challenges. Such as the difficult access to credit, also as a result of the centralisation and concentration of the bank system; or the need to keep up with an on-going and sustained technological innovation, when there is shortage of capital investments with deferred revenues. From this point of view, it is essential the presence of effective public policies capable of sustaining the small and medium enterprises, supporting access to financial markets, transferring innovation and promoting forms of organisation or association, that can contribute to the reduction of cost while fostering quality and competitiveness at global level. 

I am more than interested to understand how these problems are tackled in China, that is, in an economy characterised by the existence of great business and, in particular, of large public enterprises, which have definitively a leading role.
This Convention is also an important opportunity for a careful observer who wishes to understand China’s development, to grasp the role of private initiatives within the Chinese model, therefore within Socialism with Chinese characteristics. I believe that in the last thirty years China has been able to develop a truly original model, which has produced a successful economy while modernising society. This model stemmed from the need to avoid the sclerosis and the bureaucratisation of the Soviet-style statism, while preventing the contradictions and the unbalances that derive from an unregulated market economy, as the one we experience in most of the West. 

The Chinese model recognises, going beyond dogmatism, the social role played by private property and the dynamism and openness that private businesses bring to economy. Meanwhile, it underlines the leading role of political institutions and the importance of the State within economy. Beyond the theoretical model, such balance between State and market needs to be constantly searched for and re-built. It is a mobile boundary and not “a once and for all” defined scheme. Besides, in the last few years a revision of the Chinese economic policy has taken place, which today seems to be less focused on an accelerated industrial growth and massive production of low value-added goods, and more focused on investments in innovation, the quality of the productive system, protection of the environment, social investments aimed at reducing the unbalances, particularly between urban and rural areas. These are complex challenges that affect the question of the relationship between public and private in the Chinese economy. It is interesting to understand how such trends are experienced by SME’s and to what extent businesspeople manage to play a key role in shaping innovative solutions, and in facing technological and production challenges. 

In my long friendship with your country, I have been a witness of the impetuous and outstanding development that China has gone through in the last forty years. I still hold the clear memories of the 1970s: when Beijing was filled with flows of bikes; when in Shanghai from the Bund you could see swamps and not the Pudong skyscrapers. The leap forward that you have made is simply extraordinary. Something of which the Chinese people should be proud of. I believe that China is going to be, in a few years, the largest world economy. 

Obviously such growth engenders admiration, as well as fear and hostility. 

We are going through a difficult stage in international relations. The big 2008 economic and financial crisis left its mark. The mood of optimism and openness that characterised the economic globalisation in the 1990s and at the beginning of the 2000s has been replaced by fear and closure. The Trump Administration’s choices are particularly worrisome. The return to an aggressive protectionism, the imposition of custom duties are feeding serious international tensions and risk to weaken the international economic recovery. 

The European Union and China must react to these dangers and the starting point for their action should be, in my opinion, their convergent vision on the need to strengthen multilateralism, on the governance of global economy and the concept of an harmonious growth, able to reduce unbalances and contradictions. Against this backdrop, I would like to draw your attention on the relations between China and EU, mostly in economy and trade. Let me remind you that some figures can illustrate the state of these relations much better than my own words. 

As two of the three biggest economies and leading traders in the world, the EU and China have a deep and comprehensive partnership. 

Today, the EU is China’s biggest trading partner, while China is the EU’s second-largest trading partner (EU’s second-largest export market and main source of imports) after the United States. Trade in goods between the EU and China is worth well over €1.5 billion a day, with EU exports amounting to €198 billion and imports to €374 billion in 2017. 

The EU’s and China’s GDPs (€14.72 trillion and €9.75 trillion, respectively, in 2015) rank number two and number three in the world, behind the United States (€16.64 trillion). They are two of the most externally-integrated economies in the world. Today, China is significantly more open than either Japan or South Korea was at a similar stage of development. The EU’s total trade with partners outside of the EU was €5 trillion in 2015, slightly higher than China’s international trade. Their annual bilateral trade in goods and services stood at €580 billion in 2015, with each being the other’s largest source of imports and second-largest export destination.

Trade in goods has been the driving force in the EU–China economic relationship. Bilateral trade in goods grew by an average of 14.4% each year between 2001 and 2011, and, although the growth rate declined to 3.6% between 2011 and 2016, trade in goods has rebounded since the beginning of 2017. 

The EU has a substantial trade deficit in goods with China, though its relative size will reduce after Brexit given the UK’s disproportionate contribution to the deficit. According to EU statistics, the EU’s annual trade deficit increased from €109 billion to €180 billion from 2005 to 2015, falling slightly to €175 billion in 2016; in 2015, China exported €350 billion worth of goods to the EU against €170 billion in imports. Chinese statistics showed a smaller surplus, but one which still increased from $70 billion to $147 billion from 2005 to 2015, falling slightly to $131 billion (€110 billion) in 2016.

By contrast, bilateral EU–China trade in services is only about one-eighth of the trade in goods. According to EU statistics, in 2016 the EU exported €38 billion of services to China, while China exported €27 billion to the EU. The importance of services relative to goods trade is very different for the two partners: bilaterally, EU exports to China of services are equivalent to 22% of its goods exports, but that proportion is only 8% for Chinese exports to the EU.32 Chinese imports of services grew at an average annual rate of more than 25% between 2010 and 2015, and the EU’s trade surplus in services with China has been growing at an average annual rate of 37%since 2010, reaching €11 billion in 2015. As such, there exists substantial potential for China and the EU to develop services trade in the future, dependent in particular on the extent of China’s market opening to foreign competition.

As you can see this is a very significant partnership, even if much remains to be done. Market opening and a better intellectual property protection are the main conditions for a stronger and more balanced relation between China and Europe. 

It is up to China to show that the growth of its economy represents an opportunity – as I believe – and not a threat for the rest of the world.

If we want to defend the freedom of trade and economic cooperation we must favour the mutual collaboration and strengthen the multilateral governance against any form of unfair competition and in favour of the balance between the different parts of the world. We are paying for globalisation and competition without rules. But the answer cannot be a return to aggressive nationalism and protectionism. We must work towards greater integration and cooperation for better and more effective global governance. From this point of view, I believe that the Belt and Road Initiative, promoted by president Xi Jinping, is positive and important. It is a great opportunity to strengthen the economic ties and the bonds of friendship, both on the political and cultural level, between East and West. I strongly believe that Italy will be able to play its role and will not miss this opportunity. It is not a case that Italians have been the first among Europeans to comprehend the importance of China and to build ties with your great country. For this reason I am sure that today’s Italian will be able to retrace successfully the paths that, many centuries ago, were travelled by Marco Polo and Matteo Ricci.