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Italy seeks off-ramp from China's Belt and Road

Disappointing economic benefits fuel calls for withdrawing from 2019 deal

By TAKAYUKI TANAKA, Nikkei staff writer

August 4, 2023

Italian Prime Minister Giorgia Meloni and U.S. President Joe Biden speak at the White House on July 27. © Reuters

VIENNA -- Italy's government under Prime Minister Giorgia Meloni is looking for a way out of China's Belt and Road Initiative after a deal stuck with Beijing four years ago failed to produce much economic gain.

As the European country also hopes to avoid economic fallout from a breakup with the Asian powerhouse, Rome will try to maneuver a soft landing toward the end of the year, when an exit would have to be announced.

In 2019, Italy became the only Group of Seven country to sign a memorandum of understanding with China to cooperate on Belt and Road. The move was spurred by then-Prime Minister Giuseppe Conte, a skeptic of the European Union.

The MOU expires in March 2024 but automatically renews unless either side announces an intent to withdraw at least three months in advance.

Italy originally joined Belt and Road in hopes of drawing investments from China and boosting exports to the Asian power. But Italy logged only 16.4 billion euros ($17.9 billion) in exports to China in 2022 -- not much of an improvement from 13 billion euros in 2019.

In contrast, Chinese exports to Italy jumped to 57.5 billion euros from 31.7 billion euros during the same period. This has expanded Italy's trade deficit with China. Although France and Germany are not parties to Belt and Road, the two countries saw exports to China climb sharply.

Italian government officials are not happy. The decision to sign the memorandum was an "improvised and atrocious act," Defense Minister Guido Crosetto told an Italian newspaper in an interview published Sunday.

Italy has "not had many benefits" from Belt and Road, Foreign Minister Antonio Tajani said in June.

Through it all, Chinese plans to become involved in Italy's critical infrastructure have raised widespread concern in the EU. China Communications Construction, a state-owned enterprise now subject to U.S. sanctions, signed an MOU in 2019 regarding cooperation on developing the eastern Italian port of Trieste.

Wary of the rise of such authoritarian states as China and Russia, the G7 has been urging Italy to back away from Belt and Road. U.S. President Joe Biden and Meloni discussed the issue when they met in Washington on July 27. Biden is believed to have urged Italy to make a swift exit from the deal.

Italy will assume the G7 presidency 2024. As unity among democracies is seen as increasingly crucial, there are concerns in Meloni's government that Italy will be hamstrung in its international leadership role if the country remains linked to Belt and Road.

At the same time, Italy would rather avoid possible economic reprisals from China over quitting the deal. The Italian economy remains stagnant, with gross domestic product expanding just 0.6% from a year earlier in the second quarter. The manufacturing business confidence climate index has worsened for four straight months through July.

Meloni said in May that Italy "can have good relations" with China without being part of Belt and Road. In the U.S., she told a Fox News interview aired Sunday that "we'll take a decision before December" on renewing the deal.

For Chinese President Xi Jinping and his government, having Italy remain in the Belt and Road's orbit is a matter of prestige. In that light, Beijing has been busy trying to keep Italy in the fold.

Liu Jianchao, China's senior diplomat in charge of the ruling Communist Party's International Liaison Department, visited Italy in late June to speak with Tajani and business leaders. Liu lobbied strongly for both sides to continue with Belt and Road collaborations.


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