With Italy controversially signing up to China’s Belt & Road Initiative, some mainstream media have been suggesting the country will face a multitude of problems, ranging from “debt traps” to becoming a “Chinese colony”.
Concerning the first issue,there have been occasions where governments in South-East Asia have either misunderstood the terms on offer or deliberately allowed costs to overrun or been overcharged as as an aide to corruption.
In one case we are aware of, the then President of the country concerned complained that the Chinese interest on the loan was too low at 2%, and requested it be raised to 6%. The 4% balance to be collected by the Chinese to then be transferred to offshore accounts controlled by that Presidents family. That’s not a ‘debt trap’ that’s out and out corruption. An issue, we note, that Italy has some familiarity with.
By and large, the Chinese loans on offer we have been made privy too have been at below market rates, suggesting that “debt trap” claims are as a result of local regional, rather than Chinese corruption. Personally, I am also sure that the Chinese are aware of this and will facilitate such acts, essentially when required placing them in the position of accomplice. However it should be noted that the act itself tends to arise at the request of non-Chinese politicians.
The “Chinese Colony” remark, which was made by the Italian politician Matteo Salvini, has suggested the BRI risks “turning Italy into a Chinese colony” and will saddle it with more debt. He also has publicly indicated his security concerns about allowing the Chinese control of critical infrastructure, including major ports.
His is an important voice, Salvini, is head of the populist Lega party, which represents one-half of Italy’s coalition government. Interestingly, his opinions appeared in the US publication, Voice of America.
These two issues I see as unfounded. Handing the Chinese operational control of Italy’s Ports only works if the Nation State acquiesces. International laws that China is a signatory too also dictate that ultimate Port control lies with the Sovereign government, not any contracting entity. Besides, it would be extremely difficult for China to press home control of foreign Ports via military means.
Italy is also a member of NATO, with its “attack on one member is an attack on us all” policy. Salvini is misplaced in his concerns, unless of course he has no confidence in his own national military or NATO’s commitments.
Concerning labour, I have seen first hand the impact of Chinese labour operating in foreign countries. I have property in Sri Lanka, where the Chinese have built the North-South Expressway, as well as Hambantota Port and Airport. Chinese labour conducted much of that work, primarily as the locally available labour wasn’t up to the job.
The Chinese labourers themselves were treated much as those familiar with Chinese migrant labour in China will recognise: living in temporary constructed building, mostly onsite. The Chinese contractors keep them well away from any locals, and in any event, practically all of their pay is made to their families back in China.
Meals are cooked on site and a limited amount of tobacoo and beer is imported. Chinese workers overseas have practically no interaction with the locals unless they are at a senior managerial level. Once the project is completed, they all move on.
The fact that Italy does have an illegally working population of Chinese workers, essentially operating in its garments and leather industries is nothing to do with Belt & Road, and more to do with collusion between industry, local government and immigration. Any self-respecting Italian would rather lie on the beach and hang out than work in a shoe factory, as is the case for much of Europe.
Italy is also one of the few EU countries not to have a minimum wage. Who wouldn’t want to talk with pretty local girls and have a cold beer rather than stitch soles onto leather uppers at minimal return? The same applies to the dangers of “cheap, Chinese imported goods” putting Italian workers out on the streets that Salvini mentions. He forgets that this has already happened, and Italian companies have been importing Chinese-manufactured goods into Italy for the past two decades.
In fact, there may be some justification for concerns over inexpensive Chinese labour into the EU. There may also be some benefits for workers in certain EU member states, and especially in Eastern EU. To understand this, we can take a look at the average salary of a Chinese welder in Shanghai.
I choose welding as it is a common role in construction and similar in pay to many other semi-skilled professions within the infrastructure development industry, where much of Italy’s desire to buy into China’s Belt & Road seems to be focused. It is also pertinent to note that Shanghai is one of China’s more expensive cities:
Chinese Welder in Shanghai: €15,120 a year or €7.36 an hour. We can compare this with Italy. Interestingly, Italy, doesn’t have a legal minimum wage. But the average amount an Italian welder earns is €32,018 a year, or €15 an hour. That would suggest lots of Chinese workers could come to Italy to steal jobs. But they don’t. Why?
Firstly, because Italy as part of the EU immigration scheme employs the Schengen visa application protocols, and this makes it very difficult for non-EU labour to enter the country (unless this is done illegally or in collusion with the authorities). Secondly, a political issue currently exists where migrant workers are unwelcome in much of the EU and certainly Italy.
There are several EU nations however who national minimum wage is actually higher than that of a Chinese worker. These are Belgium, France, Germany, Ireland, Luxembourg, and the Netherlands. It would make no economic sense for Chinese workers to try and compete, and their own wage levels are at illegally low levels in these countries.
On the other hand, there are a number of EU countries whose minimum wage level is significantly lower than that of a Chinese worker. These include Bulgaria, the Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia and Slovenia.
Interestingly again, many of these nations make up the 16+1 CEEC grouping of China and Central and Eastern European Countries. Yet by and large, those Schengen visa rules still apply to Chinese workers. They will not be coming to work on EU infrastructure projects anytime soon unless specific agreements are reached as to the need to employ them over available EU labour. We can see the disparity between Chinese labour at €7.36 an hour and in eastern Europe, where the average is @€3.71 an hour.
And therein lies the truth. Italy will not become a “Chinese colony”,that’s just political scaremongering. But the infrastructure build countries like Italy need will be constructed by Chinese contractors and project managers. But the labour force will be Eastern European.
Because Chinese contractors will be hiring the next wave of workers for Chinese invested infrastructure projects into the EU from Eastern Europe’s labour pool.