Why would Italy endorse China’s Belt and Road Initiative?

Financial Times

Why would Italy endorse China’s Belt and Road Initiative?

Potential move by Rome has caused allies and EU to flag serious concerns Italy’s prime minister Giuseppe Conte, left, has hailed closer ties with China, paving the way for a state visit by China’s president Xi Jinping, right, to Italy

Miles Johnson in Rome

Italy is expected to mark a high-profile state visit by Chinese President Xi Jinping starting on Friday by becoming the first member of the G7 group of big industrialised countries to officially endorse Beijing’s Belt and Road Initiative. Rome’s move to support BRI — a grand global project involving hundreds of billions in funding — has caused consternation among the country’s traditional allies, most notably the US, which is locked in a trade dispute with China. At a time when a populist Italian coalition government has clashed with the EU, and Brussels has recently labelled Beijing “a systemic rival”, the visit of Mr Xi to Rome raises questions about the EU’s ability to forge a unified stance towards China.

What will Xi Jinping do in Italy?

Mr Xi arrives in Rome on Thursday evening on the first part of a European trip that will also see him visit France. He will spend Friday in Rome meeting senior political figures, including Sergio Mattarella, Italy’s president. On Saturday, China and Italy are scheduled to sign a memorandum of understanding which will see Rome formally endorse the Belt and Road programme. Later on Saturday the Chinese president will travel to Sicily. Italian president Sergio Mattarella © AFP While the memorandum of understanding Italy is expected to sign with China on BRI is largely symbolic, the Chinese president’s visit is also likely to yield a string of deals in areas ranging from Italy’s access to renminbi-denominated debt markets to collaboration between Italian and Chinese football teams. In an editorial published ahead of his trip, Mr Xi said he hoped the two countries would be able to collaborate on areas including ports, shipping, telecoms and pharmaceuticals for “mutual benefit”. While the final details of new investments are yet to be finalised it is highly likely that Mr Xi’s trip will result in a greater Chinese presence in assets that the EU considers strategic, most notably Italian ports, at a time when Brussels is becoming increasingly involved in vetting investment into the EU. These include deals to increase Chinese participation in the ports of Trieste and Genoa, as well as deals involving leading Italian banks and industrial companies. Why has Belt and Road been contentious? China’s Belt and Road Initiative, an ambitious programme of economic diplomacy, has become symbolic of a more assertive Chinese foreign policy under president Xi. The sprawling programme of investment and infrastructure development has raised concerns across the world for the amount of influence and control it could give Beijing over crucial infrastructure such as ports and telecoms. Vast lending programmes to developing countries have also led to some critics arguing that China will be able to exert political influence through becoming a large creditor to poorer countries. Matteo Salvini © AFP Why is Italy getting involved? Previous Italian governments have attempted to foster closer relations with China but none dared to break ranks with other G7 countries by endorsing BRI. But Rome’s populist coalition government, comprised of the anti-establishment Five Star Movement under Luigi Di Maio and the anti-migrant League party of Matteo Salvini, has adopted a different approach to international diplomacy since taking office last year. The leaders of both ruling parties have repeatedly demonstrated their willingness to ignore standard diplomatic conventions and risk upsetting Italy’s allies. Italy’s clash with the European Commission over the coalition’s budget last year has also solidified their resolve to seek new sources of investment and financing. Signing a deal with China plays to both parties’ brand of economic nationalism by helping promote so-called “made in Italy” products. China is recognised as one of the most important markets globally for industries such as fashion and luxury goods that Italy has historically excelled in, as well as products such as food. Ahead of his visit, Mr Xi cited China’s love of Italian products as one of the key cultural connections between the two nations. “Made in Italy has become synonymous with high-quality products, Italian fashion and furniture completely match the tastes of Chinese consumers, young Chinese people like pizza and tiramisu,” he said. Recommended FT Podcast China’s Belt and Road Initiative goes to Italy Why are allies worried? Mr Xi’s trip comes at a sensitive moment in China-EU relations. EU member states are becoming increasingly preoccupied by what strategy to adopt towards Beijing. Even as Mr Xi starts his trip, an EU summit on Thursday and Friday is due to hold a high-level discussion of the bloc’s relationship with China. Ahead of the summit, the European Commission this month released a report branding China a “systemic rival” and calling on Beijing to stop treating European companies unfairly. “There is a growing appreciation in Europe that the balance of challenges and opportunities presented by China has shifted,” the report said. Areas of particular focus are how Europe should react to Chinese industrial and trade policy, as well as Chinese investment in sensitive and strategic European assets and cyber security. Mr Xi’s pledge to launch a large programme of investment into Italy will be seen by some as a direct challenge to a unified European response. Is the Italian government united about moving closer to China? No. While Italy’s prime minister Giuseppe Conte and Mr Di Maio have hailed closer ties as a big win for their government, Mr Salvini has been more circumspect. Since news broke that Italy planned to endorse BRI, Mr Salvini has repeatedly warned that the country’s strategically sensitive industries must be protected. “The data of the Italians must remain in Italy, be checked by Italian institutions. I don’t want my mobile phone data to go through Beijing. Security comes before all the economic reasoning that can be done,” he said this month. Mr Salvini has also been put in an awkward position because of his desire to build a close relationship with Donald Trump. The US president warned on Wednesday that while negotiations to resolve the US trade dispute with China were “coming along nicely”, tariffs on Chinese goods would remain until Beijing’s adherence to their terms of any deal were enforceable.

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