China on Saturday inked a memorandum of understanding to bring Italy on board with its vaunted Belt and Road infrastructure initiative, a major diplomatic win that gives it a firmer foothold within a wary European Union.
The pact signed in Rome by Chinese President Xi Jinping and Italian Prime Minister Giuseppe Conte includes nearly 30 agreements worth at least 7 billion euros ($7.93 billion), according to Italian newspaper.
The deals, which involve both private enterprises and public-sector institutions, span fields including energy and transportation.Beijing also agreed to let Italian companies issue yuan-denominated bonds in mainland China, known as panda bonds, according to Il Sole.
Drawing a core EU member that is also part of the elite G-7 group into the ambitious initiative is a coup for Beijing. In an op-ed published in Italy’s Corriere della Sera newspaper before his visit, Xi said that China will “continue to expand its openness” with steps that “enable the sharing of the great opportunities presented by the Chinese market with the rest of the world, including Italy.
Beijing envisions Italy as a terminus of a new maritime Silk Road running across the Indian Ocean and through the Middle East. To this end, it plans to work with Rome in a wide range of areas, including infrastructure construction, logistics, energy and chemicals. Among the agreements are deals between China Communications Construction and the ports of Trieste, in the Adrantic Sea, and Genoa, Italy’s biggest seaport.
At Trieste port, a strategic link between the Mediterranean and landlocked East European countries, the Chinese state-owned enterprise will invest in expanding terminal and warehouse facilities.
Beijing plans to participate in operating the port, whose location near central Europe offers a strong strategic position from which China can work to expand its economic influence on the continent. In a meeting Friday with Italian President Sergio Mattarella, President Xi called for the two countries to “jointly build the Belt and Road.”
Italy’s participation comes at a time when many see the initiative starting to lose its lustre. The U.S. and Europe have criticised the Belt and Road as ensnaring countries in “debt traps” since Sri Lanka, unable to repay debts incurred from the Chinese-led development of Hambantota, signed a 99-year lease in 2017 handing over control of the port to a Chinese enterprise.
Other countries, including Malaysia, have begun distancing themselves from Belt and Road projects.Beijing likely sought to head off such criticism in its negotiations with Rome by promising openness, transparency and regard for the country’s fiscal health. With the Sino-U.S. trade war still underway, China will look to present Italy as a model for cooperation at a Belt and Road forum next month.
The economically troubled Italy was a relatively easy target for China, luring it in to its camp with a promise of financial rewards. Deputy Prime Minister Luigi Di Maio visited China twice over the past several months to carefully lay the groundwork for the country’s participation in the Belt and Road Initiative.
Italy is also heavily dependent on China economically. The country is Italy’s largest customer in Asia and its 9th largest in the world, with exports totalling 13.1 billion euros in 2018, up roughly 25% from 2014.
According to Reuters, Italy aims to leverage the latest memorandum of understanding to boost exports to China by 7 billion euros. By increasing shipments of cars and other goods, Rome hopes to shrink its 17.7 billion-euro trade deficit with Beijing.
Other EU members were quick to denounce Italy’s move, however. EU leaders at a meeting in Brussels on Friday called for an end to “naivety” in their approach to China, expressing frustration with Beijing’s protection of its own industries. Speaking to reporters after the meeting, French President Emmanuel Macron ruled out his country’s participation in the project.