Almost a year after Italy broke with its U.S. and European partners to sign up to China’s influence-extending Belt & Road Initiative, relations between Rome and Beijing risk deteriorating rather than getting closer.
The anticipated economic boost for Italy has yet to materialise, with its trade deficit with China widening further last year. And if Rome’s intention was to generate goodwill with Beijing, the government undermined that effort with its decision to halt flights to China over worries about the spread of the coronavirus.
As Italy endures its own deadly outbreak, President Sergio Mattarella has made a show of reaching out to Chinese nationals in an attempt to quash anti-foreigner sentiment earning praise from President Xi Jinping and easing some political tensions.
But in economic terms, the Belt & Road memorandum’s vagueness and a change of government since Italy signed it has cooled the drive for more integration.
Investments have disappointed, while Italy has hardened its stance on China’s human rights record and on restricting Huawei Technologies Co. access to fifth-generation data networks.
“The Covid-19 crisis has resulted in quite a bit of discrimination against Chinese nationals or ethnic Chinese residing in Europe that’s not unique to Italy,” said Jan Weidenfeld, a researcher at the Mercator Institute for China Studies in Berlin.
However, recent Italian criticism of China over Hong Kong and the real possibility of a partial ban on Huawei “were much more detrimental to the relationship from a Chinese perspective.”
When Italy became the only Group of Seven nation to sign a Belt & Road accord last March, it drew criticism for choosing Beijing at the expense of its western allies.
German Foreign Minister Heiko Maas warned at the time that if some countries “think they can do clever deals with the Chinese, they will come down to earth with a bump.”
Italy’s government has learned that lesson the hard way. The country signed up to Belt & Road for “commercial reasons” and “economic advantages,” Foreign Minister Luigi Di Maio said during a panel discussion at this month’s Munich Security Conference, acknowledging that adjustments needed to be made, such as ensuring that Chinese companies abide by European rules and standards.
A breakdown of Chinese investment as compiled by the RWR Belt & Road Monitor, which tracks Chinese investments globally, suggests Italy has failed to attract many concrete projects in the past year. Jetion Solar (China) Co.’s deal with Eni SpA to invest about $2.2 billion and develop new solar projects was a rare exception.
Others were less eye-catching. They include a railway technology centre in Turin to be built with Italy’s Blue Engineering, which is 80%-owned by China’s CRRC; an agreement between Italy’s UniCredit SpA and the Export-Import Bank of China; and a direct flight operated by Sichuan Airlines between Rome and Chengdu.
A Chinese plan to develop the port of Trieste has so far failed to happen.
More concrete progress was made in the area of mobile networks. In July, Huawei announced a $3.1 billion investment plan over three years that aimed to create at least 1,000 jobs in Italy. Five months later, Chinese provider ZTE Corp. completed a joint “5G ready” network rollout across Italy with Italian operator Wind Tre.
Those data projects remain controversial, however, with the U.S. warning against China tie-ups on security grounds. The Italian parliament’s intelligence and security committee recommended in December that the government “very seriously” consider banning Huawei and other Chinese equipment suppliers from 5G mobile networks.
Prime Minister Giuseppe Conte, who remained in office when the new government was sworn in last September says that existing screening procedures including so-called Golden Power rules to protect strategic assets are enough.
Alongside tepid investments, trade benefits have failed to accrue to the European country. Italian exports to China showed a 1% decline last year, even as overall foreign sales rose, according to preliminary figures released by statistics agency Istat in January.
With Chinese imports growing, Italy’s total trade deficit with China climbed to 18.7 billion euros ($20 billion).
Then came the coronavirus, which prompted Italy to halt flights to and from China, Hong Kong and Macau on Jan. 31 in an attempt to prevent the spread of the illness. It was the first European country to do so, earning a rebuke from the Ministry of Foreign Affairs in Beijing, which demanded Italy “refrain from taking excessive measures.”
Lies & Panic
Writing in Il Messaggero Newspaper on February 6, China’s ambassador to Italy, Li Junhua, fired a warning shot at “the lies, the panic generated by prejudices and discrimination,” saying that they “cause wounds and losses that are difficult to heal and compensate.”
Two weeks later, Li took a more soothing tone after Mattarella’s intervention.
In a television interview with broadcaster Rai, he played down discrimination against Chinese nationals, saying such incidents were not representative and stemmed from an understandable fear.
“The epidemic has definitely created some problems in the day-to-day relations between Italy and China, but as the Italian president said, the Italian people, in this moment of an epidemic, are close to the Chinese people,” said the Ambassador.
“We were moved by this, and we’ll remember it.”
China’s Belt & Road
Modern-day Silk Road aims to revive and extend the ancient routes.
By the same token, the Italian government’s more critical stance on policy matters will likely stick in the minds of the Chinese and cloud relations going forward, according to Weidenfeld at Merics.
Immediate tensions related to the virus “will blow over once Covid disappears,” he said. “But those more fundamental issues of reassessment of what doing business with China means, that is here to stay.”
Opposition League party leader Matteo Salvini, who engineered the collapse of the last administration, promises a far less accommodating approach to China should he return to government. For Salvini, whose party leads in polls, national security is paramount, meaning a hard-line approach on state-owned Huawei.
“Trade agreements, friendship and cultural relations are fine,” he said in an interview Wednesday. “But handing over the keys of our home to Chinese companies which depend on the state no.”