This could be a watershed moment for Italy’s China policy: Xi Jinping heads to Europe

_ Lucrezia Poggetti, research associate, Mercator Institute for China Studies (MERICS). Berlin, 19 March 2019. Published for debate.

Chinese President Xi Jinping is expected in Europe from March 21 to 26. He will first travel to Italy and then head to Monaco and France. His visit to Italy in particular (March 21 to 24) – the first Chinese state visit to that country in ten years – is causing a stir as the Italian government appears ready to make major concessions to China. According to media reports, the Italian government is set to endorse China’s Belt and Road Initiative (BRI), a move that would make Italy the first G7 state to join Xi Jinping’s key foreign policy project.

– The Italian government has sought closer ties with Beijing from the start. Do you consider it likely that Italy will join China’s Belt and Road Initiative (BRI) – and if so, what is Rome hoping to get out of such a move?

– The current Italian government has, indeed, adopted a very China-friendly line since it took office at the end of May 2018. This was spearheaded by the Undersecretary of State for Economic Development, Michele Geraci, who set up a “China Task Force” under the Ministry of Economic Development in August last year to seek closer political relations with China in the hope of getting economic opportunities in return.

Geraci argues that the signature of a Memorandum of Understanding (MoU) on BRI would help Italian companies increase exports to the Chinese market. In 2018, Italy registered a USD 12.13 billion trade deficit with China. However, the MoU is unlikely to change that. European countries whose trade relations with the Asian giant are more balanced, such as France and Germany, have not signed any BRI endorsements. Those EU member states that have signed up to the BRI in the past, such as Poland and other Eastern European countries, have complained that Beijing’s promises of economic opportunities have largely failed to materialize.

Yet despite heated debates within Italian politics, it is very likely that the Italian government will sign the controversial MoU. Prime Minister Giuseppe Conte confirmed on Friday March 15 the government’s plans to go ahead with the signature.

– How important would it be for Beijing if Italy were to sign the BRI MoU?

– Italy’s signature would give the BRI project a huge boost in legitimacy. Beyond the economics, an Italian endorsement would be politically symbolic for China. Italy would be the first G7 member state and the first EU founding country to sign up to BRI. An endorsement by the third largest economy in the Eurozone would allow Xi Jinping to show domestic audiences that his initiative enjoys a great reputation in Europe and the world, while in fact the BRI faces criticism that it has created debt traps, political dependencies and has failed to meet international standards.

– What are the implications for the Italian economy?

– The MoU, as far as we know, contains only vague reassurances but no concrete guarantees that Italian companies will contribute to infrastructure projects or that Italy will receive more investment from China. The vague language of the text appears to confirm rising concerns in Europe that many BRI projects mainly benefit Chinese companies. In February 2018, 27 European ambassadors to China, including the Italian ambassador, signed a report critical of BRI, arguing that the initiative almost exclusively promotes Chinese interests. In the light of these developments, signing up to BRI with the hope of gaining substantial economic opportunities is a bit naïve. If anything, Italian officials should use China’s appetite for a high-level endorsement of BRI to put concrete demands on the negotiating table.

So far, though, China has the upper hand. It has already said that if Italy doesn’t sign the MoU, all the commercial deals that are expected to be signed during Xi’s visits will be off the table. Those deals include major Chinese investment in Italian ports and agreements involving leading Italian banks and energy companies.

– Where would an Italian agreement with China on BRI put Italy for those EU partners currently working toward greater coordination on China policy?

– An MoU on BRI would harm Italy’s credibility as a reliable partner because Italy would break ranks with current efforts by the EU and its largest member states to better coordinate on China. The first signs of Italy’s China-friendly shift are already visible. For example, in February Italy abstained from a vote on an EU-wide investment screening mechanism to better protect Europe’s strategic sectors. Notably, the previous Italian government had been an important partner for Berlin and Paris to promote the establishment of such a mechanism.

– What are the alternatives for the Italian government?

The Italian government would be well advised to devote more resources to devising a more balanced China strategy that takes into account not just economic interests but EU unity, geopolitical considerations and risk assessments. While Geraci’s “China Task Force” has promoted closer political and economic ties with Beijing, a more sophisticated approach would focus on strengthening Italy’s own industrial base and domestic competitiveness while nudging China towards greater market openness. It is also important to remember that as a bloc the EU has more economic and political negotiating power vis-à-vis China than any EU country has alone.

Devising a balanced China strategy would also require greater coordination and exchange of views among different ministries, such as foreign affairs, interior and defence. If anything, Xi Jinping’s visit has made many in Italy realize that, beyond economics, relations with China have wide ranging political implications. This could be a watershed moment for Italy’s China policy. Italy should make best use of the momentum created by Xi’s visit to fill the information gap about China’s rise and its impact on Italian interests.

– Xi’s trip to Europe comes as concerns about China are growing on the continent. Where does France stand in the China policy debate?

On his visit to France, Xi will certainly experience a tougher attitude than in Italy, with Paris having grown more sceptical about China’s activities. Commenting on BRI ahead of Xi’s visit, French President Emmanuel Macron said that China’s participation in other countries’ development should be done in “the spirit of equality, reciprocity” and “respecting the sovereignty of nations.” France – together with Germany – has also been a strong promoter of a more cohesive European China policy. Notably, after almost four full days in Italy, Xi will spend less than a day in Paris.

Source: https://www.merics.org/

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