Tough choice looms for Italy on China Belt and Road deal – DW – 05/18/2023

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The lukewarm feelings of Giorgia Meloni, Italy’s far-right prime minister, toward China are no secret. Shortly before the election that propelled her to the head of a right-wing coalition last September, Meloni described Rome’s 2019 entry into the Belt and Road Initiative with a $2.5-billion (€2.31-billion) investment deal as “a big mistake.”

Beijing’s massive global infrastructure investment drive kicked off in 2013 with the aim of better connecting intercontinental trade infrastructure — and enhancing Chinese influence abroad. Rome’s nonbinding Memorandum of Understanding (MoU) with Beijing was inked just as many Western allies were hardening their stance on China.

Destination: Europe – China’s Belt & Road Project

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Now that archconservative Meloni is in office and facing a decision about whether to renew it, she is keeping her cards a little closer to her chest. No decision on renewal or withdrawal has been made yet, she indicated ahead of this week’s G-7 summit in Japan.

The nonbinding infrastructure deal, which comprised dozens of cooperation agreements but failed to translate into a serious spending spree, is set to automatically renew for a further four years in March 2024, unless Meloni ends it.

With tensions between Beijing and the leaders of Taiwan on the rise, and Washington keen to have its close allies follow a strict line on China, there are more than a few who would like Meloni to let the agreement expire.

Personal politics vs. political pragmatism

The Italian premier faces a delicate balancing act, stuck between Western diplomatic allies and a major trading partner.

“Meloni has always been a firm opponent of some of China’s behaviors,” Enrico Fardella, a China expert from the University of Naples, told DW via email. Even as sports minister during the 2008 Beijing Olympics, she criticized Beijing’s human rights record, especially in Tibet.

But her opposition also happens to be politically salient, Fardella added. Meloni’s coalition contains two parties — the League and Forza Italia, led by Matteo Salvini and billionaire Silvio Berlusconi respectively — that have been accused of inappropriate proximity to Russia in the wake of the war on Ukraine.

“Meloni’s position on China helps to balance her allies’ controversial positions on Russia, converge the coalition on a joint critical stance toward some of China’s global and domestic stances and [lend] an image of reliability over the new government in the eyes of Italy’s main allies,” Fardella concluded.

Meloni, whose Brothers of Italy party has neo-fascist roots, is keen to show she is a prime minister like any other, capable of working smoothly with partners on the world stage.

How we got here

So why did Italy sign up in the first place? It all started under Prime Minister Matteo Conte. In economic terms, the government was motivated by a desire not to miss out on a “piece of the pie,” as Federiga Bindi, then a fellow at the Carnegie Endowment for Peace, wrote at the time.

Chinese President Xi Jinping talks to a small crowed as he visits the Piraeus Port in Greece. Next to him on the right stands Greek Prime Minister Kyriakos Mitsotakis. In the background are cranes and shipping containers.
President Xi Jinping personally visited the Greek port of Piraeus, a hot spot for Chinese investmentImage: Li Xueren/Xinhua/picture alliance

Italy saw heavy Chinese investment in northern European infrastructure, but also in the Greek port of Piraeus, and wanted in. Part of the Italian deal foresaw investment in the key ports of Trieste and Genoa.

Back then, signing made sense politically for the two parties in the governing coalition. In fact, close trade ties between China go all the way back to the government of Romano Prodi in the 1980s, Bindi, now at the Rome Tor Vergata University, wrote.

However, the 2019 memorandum was a risky move in terms of Italy’s relations with traditional allies in the EU and NATO. Unfortunately, the gamble didn’t pay off, according to Fardella. The pandemic happened, and the foreseen investments didn’t really materialize.

An infographic map showing key points in China's Belt and Road Initiative.
The Belt and Road Initiative aims to beef up global trade infrastructure.

Stuck in the global middle

The question is what Italy should do now.

The EU is divided over how closely to align with US President Joe Biden’s hard line on China. The Baltic states are strongly transatlantic but France and Germany are more ambivalent. French President Emmanuel Macron recently caused controversy by implying that the EU need not get too involved in escalating tensions between China and Taiwan.

Fardella sees two options for Rome: renew the deal, but push Beijing for economic incentives or political concessions like a clear statement siding with Ukraine; or withdraw in a managed way. The first could well annoy Washington, the latter Beijing.

Many are expecting Meloni to give her allies a signal of her thinking on the matter at this week’s G-7 gathering in Hiroshima. Both Bloomberg and the Financial Times reported in recent days that the government was planning to withdraw.

“If it were uniquely up to her, Meloni would probably not renew,” Francesca Ghiretti, an analyst at the Mercator Institute for China Studies in Berlin, told DW in an email. But coalitions can be tricky. “The plan was to have a decision by this G-7 summit, but it remains unclear whether internal differences have been solved,” she said. 

A risky rupture with Beijing

A nonrenewal could be embarrassing for China, given that the deal was an important political signal back in 2019. Italy was the first G-7 country to sign up. “The MoU was and still is mostly about political and diplomatic symbolism with very little substance,” Ghiretti said.

If Italy withdraws on bad terms, Beijing could retaliate, although it didn’t do so when members pulled out of another cooperation agreement, the 16+1 format involving Central and Eastern European states.

Still, Fardella sees danger ahead. “If the Italian decision will turn into a loss of face for Beijing a retaliation may occur. It could probably affect the export to Italy of those strategic components that are needed for the Italian industry,” he warned.

The EU might then side with Rome and retaliate by further accelerating its “derisking” initiatives — reducing or more closely controlling Chinese investment in key local industries.

“The timing and the form of this decision will be crucial,” he continued. “A sudden and shortsighted decision taken by Italy over the MoU could further contribute to this dangerous paranoia that is setting China and the West [on] two divergent and conflictual courses.”

Edited by: Tim Rooks

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