Risk of the Chinese trade integration for the Italian trade specialisation

The move towards export-oriented development strategies by China has increased concerns about the ability of Italian manifactures to effectively face price competition from emerging economies. This paper explores the hypothesis that the superior quality of Italian goods could support Italian competitiveness, using Spain as a benchmark. The data confirm that, although Italian and Chinese specialisation patterns are very similar, there is no widespread overlapping at the product level, and when there is, Italian goods show a higher quality level. Nonetheless, during the last decade, trade overlap increased and quality gap narrowed, suggesting that China is putting increasing competitive pressures on Italian manufacturing. In order to maintain its qualitative advantage, there is urgent need in Italy for an increase in investment in product upgrading and innovation.