In recent days, a large and unexpected increase in Italian exports to China in recent months has gained a lot of attention: They have reached the 3 billion euros in February, 62 percent more than in February 2022 and almost double compared to December 2022. Such a sudden increase of this size, which in the graphs is represented by a practically vertical peak, surprised the analysts, who have begun to investigate the causes.
Breaking down the data, i.e. looking sector by sector, it can be seen that the large increase is mainly due to Italian drug exports. Some analysts have put forward rather surprising reasons: the increase would be due to a massive purchase of a drug for liver disease, which according to some studies would also have the effect of to prevent the coronavirus infection. However, this hypothesis is decidedly unlikely, since the companies involved in the production and sale of the drug deny having had large increases in orders.
The active ingredient of this drug is called UDCA and is produced worldwide by the ICE Pharma company, based in Reggio Emilia. The Post contacted ICE Pharma and the company replied that in recent months it had not recorded increases in orders of such dimensions as to justify by themselves the enormous growth in Italian exports to China. However, it must be considered that ICE Pharma only sells the active ingredient of the drug, and does not have direct control over where the finished drug is then sold. For this the Post he also heard from four Italian companies that sell drugs containing the active ingredient UDCA: they too have no evidence of this alleged increase in sales in China.
It is therefore rather unlikely that the enormous increase in Italian exports to China is wholly or largely attributable to UDCA: if indeed drug sales had increased so exceptionally, even those who produce the active ingredient such as ICE Pharma or those who sell the drug which contains this active ingredient should have seen a corresponding increase in sales, which according to those directly involved did not occur.
The hypothesis had circulated a lot in the press and on social media and had been deemed plausible, given that the strict Chinese restrictions are over but the immunization of the population has not been very successful because Chinese vaccines – the only ones authorized by the government – have a good efficacy but not at the level of Western mRNA vaccines, such as those of Pfizer and Moderna companies.
However, it was only one of many possible explanations, which however found a large following. Robin Brooks, president of the Institute of International Finance and former economist of the International Monetary Fund, was the first to give this interpretation: since the increase is driven solely by drug exports, according to him it must have been the drug UDCA, which Chinese doctors would be prescribing to patients who fear contagion, after China abandoned its policy of very harsh restrictions, the so-called “zero Covid” policy.
Italy’s export surge to China
1. Last week we flagged a big rise in Italian exports to China. Here’s the story. Without western vaccines, China’s consumers are buying a generic liver drug made in Italy that’s rumored to prevent COVID. Big thanks to @bancaditalia and @p_ceretti… pic.twitter.com/mlHnJXF6tL— Robin Brooks (@RobinBrooksIIF) May 9, 2023
However, that of the increase in sales of UDCA was only one of the many possible interpretations, albeit the one that circulated the most.
Peter Ceretti, an analyst at the international consultancy firm Eurasia Group and an expert on Italian macroeconomic dynamics who speaks in a personal capacity, said that the point in favor of this theory was certainly given by the timing: the peak of new cases of coronavirus was around late last autumn and drug exports from Italy to China began to increase in December. According to Ceretti “there is this coincidence, but it is not entirely clear whether the main product sold is the drug UDCA”.
In fact, there may also be other dynamics that explain this sudden increase in exports: «Most of the exports in January were re-exports [ossia merci importate dall’Italia e poi esportate in Cina, una pratica piuttosto comune nelle aziende multinazionali, ndr], about 44 percent, while the remainder are direct exports», says Ceretti. Therefore, they could also be only partially exported by the company that produces the drug UDCA (but it is not known to what extent) and according to Ceretti “the re-exports could be linked to the transfer of goods of the pharmaceutical multinationals”.
Italy’s re-exports of pharma products to China were small through much of 2022, but then rose sharply in Jan., to EUR 620m, about 44% of the €1.4bn total Italian pharma exports to China that month. 8 pic.twitter.com/4064JwojMJ
— Peter Ceretti (@p_ceretti) May 11, 2023
Another clue in this direction is given by the fact that “from the Eurostat data it can be seen that since mid-2022 there has been a considerable increase in Italian imports from Germany of medicines packaged for retail sale”. Therefore, according to Ceretti, it is probable that there have been movements of German pharmaceutical multinationals that also have branches in Italy, such as Pfizer or Novartis for example (however, there is no precise data on either of these two companies).
In general, however, these are always hypotheses and there is no certainty of any of these dynamics. According to Ceretti, the most probable answer to why Italian exports to China have increased so much is therefore a combination of factors: «It is possible that the drug UDCA played an important role, but it is more plausible that a set of reasons», such as that linked to the movement of goods by multinationals.
There is also another type of caution to have with this data: although the data provided by STATE and Eurostat are reliable, there is no evidence of this increase in the data on Chinese importswhich on the contrary report a trend in line with the past.
According to Ceretti «it may happen that the Chinese data are not entirely comparable with those of other countries. When there are discrepancies in values, there can be various reasons: the slowness in registering orders by importing companies, the fact that these orders may have been registered in various currencies, in euros, dollars or renbinbi [la valuta cinese, ndr], and finally a different type of classification of goods between Italy and China. However, each of these three factors does not explain such a large difference, which is actually very strange. Maybe in the coming months there will be some corrections to the Chinese data, which happens quite often», says Ceretti.