An eye-witness report by two investigative journalists on the ground in Prato, Italy. Santo Beijing is home to thousands of fast-fashion factories, where every day, thousands of undocumented migrants work 12 hours a day, seven days a week, in confined conditions for their overlords with the sole purpose of producing clothes that will eventually be thrown away. It is a money laundering, tax evasion haven within a 100 billion euro industry situated in the heart of Tuscany, Italy. This is the dark side of Prato’s Chinatown.
***Pre-pandemic,
China had its sights on Italy as a potential partner in its controversial Belt
and Road Initiative (BRI). The Chinese and Italian leaders, Xi Jinping and
Giuseppe Conte, signed an Memorandum of Understanding (MoU) in March 2019 on
furthering China’s ambitious BRI into Europe via Italy. Greece and Italy were
the only two European countries to sign the agreement, much to the concern of
other European and Atlantic partners.
Flash
forward a year, and Italy was dealing with a catastrophic wave of COVID-19,
which saw the largest death toll in the country since World War II. Some
observers questioned whether the Chinese-operated textile factories in the
Tuscany region triggered the devastating outbreak.
The
China-Italy entrepreneurial partnership came under increasing suspicion, and a
change in government that brought Mario Draghi to the prime ministership saw
steps to derail the MoU and revert to Italy’s traditional transatlantic
partnerships.
The
newly elected Prime Minister Giorgia Meloni’s cabinet appears to be following
this trend of formal push-backs against China; however, it is more than likely
that Italy will still renew the MoU this year.
It is unclear how many agreements there are under the MoU framework or
their exact content.
China-Italy
Historical Ties
Since
former Prime Minister Romano Prodi organized a trade mission to China in 1997,
all administrations, except Silvo Berlusconi’s, have shown a particular
interest in maintaining good trade relations with China.
When
Chinese shipping company COSCO took control of Greece’s Piraeus terminals in
2016 and Greece joined the BRI in 2018, it established a set of almost
obligatory choices, an aspirational pathway toward growth, for countries in
desperate economic woe.
According
to a 2016 University of Bologna study on the impact of the “New Silk Road”
inside the EU market, 13 percent of Chinese trade passed through Greece. The
study suggested that the shift in trade through Greece could increase even more
if Piraeus was rail-linked to Central Europe. One of the goals of the Italian
government was to mitigate such a possibility through soft power that leveraged
Italian ports already connected to Central Europe. It was in that spirit that
Italy joined the BRI in 2019.
At the
same time, leaders in the EU and the United States worried about having a G-7
country join the BRI. Undoubtedly, China is today’s number one U.S. rival, and
a massive geopolitical project such as joining the BRI could put Italy’s
national security at risk. In addition, there has been a lack of transparency
and proper consultation on the BRI by both Chinese and Italian counterparts,
which may lead to a whole host of exploitative problems.
The EU
and the U.S. have expressed concerns that the BRI in Italy could lead to a
“debt trap,” such as that witnessed in developing countries like Sri Lanka.
Struggling to pay debts, some BRI participant countries have been forced by
circumstances to concede power over ports and other infrastructure to Chinese
interests.
Moreover,
China analysts think that the BRI could lead to increased competition for EU
companies and potential lost jobs and market share. Other issues raised are the
lack of compliance with these projects in meeting strict EU standards and
regulations, most importantly, adhering to workers’ rights.
The
potential implications of the BRI will also impact the EU member states’
democracy and their independence from any form of foreign influence.
China
and Italy’s Textiles Cooperation Today
Known as
the Manchester of Italy, Prato has been one of the country’s primary
manufacturing hubs since the 1960s economic boom in Italy and has played a key
role in exporting the Italian fashion industry worldwide. Located just 20
kilometers from Florence, Prato’s prominent textile industry has long been a
preferred destination for Italian domestic workers.
In 2019,
pre-pandemic, the Italian Textile and Fashion Federation — Sistema Moda Italia
(SMI) — estimated that Italy’s textile and fashion industry was worth
approximately 56 billion euros in total. Today, the Italian industrial
association Confindustria Moda expects the industry to be worth roughly 107
billion euros.
In the
last century, Prato’s population grew from 50,000 in 1901 to 180,000 in 2001.
At the same time, migration attracted at least 30,000 overseas Chinese
residents (mainly from Zhejiang and Fujian provinces); however, some
authorities suggest it is double or three times higher when considering the
number of undocumented immigrants. Italian police told The Diplomat that they
estimate that there are around 50, 000 undocumented workers in Prato.
In 2009
Dongke Mo from the Italian Chinese Association in Prato was quoted as saying,
“In America, you absorb immigrants. In Italy, the Chinese are looked on as
labor.”
Integration
of the Chinese community into Italy is still fraught, with a multitude of
problems today. In Prato, The Diplomat spoke with Captain Lorenzo Marzioli at
the Finance Police’s headquarters. “The Chinese community in Prato simply wants
to make money and establish itself in the global market. There are now Chinese
accountants and notaries working for Chinese companies inside Italy,” said
Marzioli.
The
“Made in Italy” label is something Chinese entrepreneurs and their consumers
highly value.
Counterfeiting,
Managed by Supranational Organized Crime
After
Milan, Prato has the second highest level of money laundering in Italy. The
role of organized crime has led to a qualitative leap in the production of
counterfeit goods by transnational criminal organizations, which have been
working on a global scale to counterfeit market goods and maximize economic
returns.
Collusion
between Italian and Chinese organized crime such as counterfeiting luxury
brands like Gucci, Fendi, Prada, and Dolce & Gabbana, was highlighted in
the 2018 arrest of Chinese national Zhang Naizhong in Italy.
“The
role of the Guardia di Finanza (Italian finance police) is to study these
[criminal] phenomena and to curb them,” Marzioli said.
The
member states of the EU that decided to open up to the markets of China allowed
the entry of a wide range of products, including not genuine ones, which in
turn can lead to money laundering. It’s something the authorities find
difficult to track.
According
to Marzioli, “It is a highly structured organized crime system of money
laundering aimed to evade EU taxes.”
“The
difficulty lies in the nature of the national customs system, which, although
systematized, does not yet function as a perfectly working machine,” he
said.
When
goods enter the EU, only import customs duties must be paid. At that time, the
product’s circulation is under suspension of Value Added Taxes (VAT); however,
it must be paid later in the country of destination. By simulating the purchase
directly from a manufacturer in China, nothing is actually converted into real
funds. This is one way that organized crime groups conduct money laundering.
The raw
materials should arrive in Prato’s department stores. Nevertheless, “often and
willingly, we have reverse billings that bring back funds to China and appear
as though they come as legitimate transfers,” Marzioli explained. Inevitably,
this happens in other parts of Europe, “for example, in Paris too,” he added.
The
Diplomat’s On-the-Ground Investigation in Prato
Two
international journalists, one from Italy and the other from Australia,
recently investigated the current situation on the ground in Prato’s Chinatown,
better known as Santo Beijing.
While
walking in the city center, they approached a Pakistani man, Ali*, in his early
30s, who wished to remain anonymous. He said he works in a Chinese textile
factory in Prato, seven days a week, 12 hours per day. He gets paid 1,200 euros
a month, while he has to pay 200 euros monthly rent. There are no sick days. If
he misses a day, 50 euros are deducted from his salary.
He said
that Chinese employees are working alongside him. They are paid 1,700 euros
monthly and receive free accommodation, food, and cigarettes.
Before
nightfall, Ali knocks at the factory door and then starts working in silence.
The bosses don’t talk to him. He is forbidden from even going to the toilet
during work hours.
He
referred to himself as a modern slave. “I have no dignity at all.”
But he
accepts it, saying that this is what Allah has chosen for him, so it must be
this way.
We asked
him multiple times whether he wanted to share his story under his real name on
record, but he said it was not safe. He said no amount of media coverage could
make a difference, and he thinks the mindset of his Chinese “laoban” (the
Mandarin term for “boss”) won’t change.
Ali is
undocumented. Chinese employers generally tend to hire only undocumented
workers as a way to keep them in “debt bondage.” As part of their “deal,” Ali
thinks that his boss will provide him with the necessary documents later this
year.
We
contacted SI Cobas an Italian working union, multiple times for comment on this
issue, but received no response.
In
recent years, police have raided hundreds of crowded workshops where Chinese
live, work, and sleep. The majority of the workers earn far below the standard
wage and live in confined spaces, yet they produce goods that are reportedly
sold in high-end designer shops.
There
have been multiple fires inside Chinese workshops in Prato, with two blazes
occurring last year alone. One was caused by arsonists back in September 2022;
eight workshops housing 15 companies were destroyed.
While in
Santo Beijing, we met a few people of Chinese heritage drinking beer on a bench
on Pistoiese street. They told us they had been living in Italy for 20 years,
which was echoed by many Chinese people we spoke to. “I never saw
Brunelleschi’s Dome,” one of the men said, referring to the fact that he had
never been to the center of Florence, only 20 kilometers from Prato.
“Italy
is no good, there is no work, there is no money here… Germany is better,” said
one middle-aged Chinese man from Xiamen.
Chinese
residents have their hotpot restaurants, supermarkets, schooling, dentistries,
medical centers, legal firms, and CCTV cameras, all within the bubble of Prato.
So few residents would ever feel the need to leave Chinatown.
Embedded
with the Italian Finance Police
The
Diplomat also spent a day embedded with the Italian Finance Police in Prato.
We visited
Macrolotto 1, escorted by two patrol cars. The police, armed with machine guns,
showed us the enormity of the area occupied by Chinese-run fast-fashion firms.
According to a 2017 Chamber of Commerce report, the Chinese own 5,676 textile
companies in Prato.
The
Italian police appeared somewhat apprehensive and wanted us to keep a safe
distance from the Chinese-run workshops while we took photos.
Security
is also a high priority amongst the Chinese inside Prato. “There have been
recent Italian retaliatory measures against the Chinese community,” an unnamed
police officer told us.
Macrolotto
1 is an industrial area occupied by Chinese fast-fashion firms. Since the
beginning of Chinese migration, there has been an ongoing relationship between
Italian and Chinese entrepreneurs. “For example, some leading [Italian] brands
ask Chinese entrepreneurs to work for them,” said the police. Although the
pandemic has caused a slowdown in production, Prato-made fast-fashion goods are
sold across Europe.
One of
the main changes in the post-pandemic fast-fashion era is with the production
line. Finding a warehouse full of illegal goods is difficult. To increase
profits and avoid controls, once a truck full of raw materials arrives in
Prato, it only takes a couple of working nights to assemble the final product
and send it out.
“If
rules were to be respected, the payment of allowances, the maturation of
compulsory rest periods… Things incompatible with the production methods of
fast fashion would be addressed,” Captain Marzioli emphasized.
Through
economic controls, the finance police get an index of where to start; through
their investigations, they probe and monitor production activities. The
officers used an Italian metaphor, “Our territory is an ocean to be fished,”
meaning the territory is an ocean where they find the little fish first, which
then leads them to the big fish.
“When we
operate in Prato, even in the ordinary controls of the territory, that is, with
the patrol, even at a simple census, there are plenty of people hiding in the
shadows,” Marzioli said. This proof, together with the high presence of forged
residency papers, makes it clear to him “that there are symptoms of potential
human trafficking being conducted here.”
Chinese
entrepreneurs are just one group taking advantage of the system. In 2020, after
three years, the finance police completed an investigation under the code name
“Golden Wood,” which uncovered the laundering of approximately 39 million euros
involving about 33 enterprises connected to the Cosa Nostra (an Italian
organized crime group).
Between
2016 and 2019, Italy and China used to hold joint police patrols for tourism
purposes and more minor issues, but the patrols were suspended during the
pandemic.
In the
latter part of 2022, human rights NGO Safeguard Defenders reported the presence
of illegal Chinese police stations in Prato, Milan, Rome, and Florence headed
by the authorities in Fuzhou province, China.
In their
“Patrol and Persuade” report, Italy stands out as a “pilot” project where
Chinese authorities use threats, intimidation, harassment, and even kidnappings
against targets abroad to “persuade them to return” home. As open source
evidence from PRC authorities or its state/party media repeatedly iterates,
bilateral police cooperation agreements seek to co-opt political, media, and
business figures to align policies and narratives with the CCP’s preferences.
We asked
the finance police back in August 2022 whether they had any prior knowledge
about secret Chinese police stations in Prato. They said they didn’t and could
not share further details.
The
Diplomat contacted Laura Harth, campaign director at Safeguard Defenders, to
get her line on the overall situation. For her, the Italian police not knowing
about secret Chinese police stations appears “highly unlikely.”
“Open
source evidence shows how Italian police officials partook in the ‘unveiling’
of a similar center in Rome in 2018. Additionally, some comments made by
authorities following the release of our investigations are contradictory when
they state they were ‘monitoring’ the situation.
This
implies they were aware of their existence. Counter to the vast majority of
democratic allies, Italy has still not clearly stated that it considers these
centers illegal and a violation of territorial sovereignty,” she said.
In terms
of the BRI, Harth thinks that Italy renewing its agreement with China is a
risk: “We urgently need a comprehensive review of existing agreements across
departments, evaluate their appropriateness today and repercussions, and come
up with an informed and coordinated approach to bolster Italy’s future
resilience and safeguard national security.”
“I
continue to hope Italy’s government will move beyond the easy symbolic act to
appease allied nations and take the necessary – and sometimes difficult – steps
to recognize and address the multiple threats to its national security and
interests.”
Among
the Italian business community, influence and coercion are exercised on
policymakers. “Italy is far less dependent on the Chinese market than it
sometimes seems to think itself,” she said, but it is not an Italy-specific
issue. All democratic nations need to confront this together to build clean and
resilient markets.
China and other authoritarian actors do not abide
by the international rules-based order and are engaged in hybrid warfare aimed
at weakening democracies and dividing democratic alliances. In this hybrid
warfare, they use all tools at their disposal, including the influence and
interference operations such as with the “overseas police service centers,”
co-option and coercion of business communities, media manipulation and
disinformation campaigns, and so forth.
“Unless
we resolutely recognize and address these issues in a whole-of-society approach
and coordination with allied nations, the risks (and difficulties to address
them down the line) will continue to increase.”
***
*names
have been changed to protect people’s identities.
**This
investigation was sponsored by Free Press Unlimited and Transitions through a
European Union fund.
*AUTHORS
*GUEST
AUTHOR
Leonardo
Delfanti
Leonardo
Delfanti is a Greece-based Italian freelance journalist who covers conflict,
fake news, and organized crime.
*GUEST
AUTHOR
Hugh
Bohane
Hugh
Bohane is an Australian freelance journalist who covers human interest stories,
conflict and geopolitics.
https://thediplomat.com/2023/02/chinas-transnational-repression-and-modern-slavery-in-italy/