Italy’s deal with China: Much ado about nothing much

Italy became the first G7 country to participate in the Belt and Silk Road initiative, and President Xi met the Italian government in Rome. Macron, Merkel and Junker criticized the Italian initiative, while Washington spoke of "Chinese predatory approach". A totally unjustified controversy.

Xi-Jinping, General Secretary of China’s Communist Party since 2012 and President of China since 2013, made a state visit to Italy 21-24 March, accompanied hand in hand by his charming wife, Peng Liyuan, and a retinue of about 500 staff, officials, and businessmen. President Xi received a royal welcome. On 23 March, Italy became the first G7 country, a NATO and EU founder, to sign a Memorandum of Understanding (Memorandum d’Intesa) for participation in the Belt and Silk Road Initiative (BRI). Launched by President Xi in 2013, the BRI is an extremely ambitious project to open new land and sea routes to Europe, Africa, and intermediate Asian countries; to promote Chinese trade and investment; and the globalisation drive always supported by Xi.

A Memorandum of Understanding (MoU), unlike a treaty, contract or a law, is purely a non-binding statement of intention. But this particular MoU was accompanied by the signing of 29 accords – 19 institutional and 10 commercial – involving, among other things: cooperation in the banking sector; a partnership between a Chinese construction company and Italian ports; and the promotion of Italian exports in agrobusiness and food processing, gas turbines and steel plants, and luxury goods. A boost in Italian demand is estimated at €2.5bn rising to 20bn when multiplier effects are included.

Italy is technically in a recession, with a GDP hovering around zero – only a couple tenths of 1% below or above zero in estimates from the IMF, OECD, and European Commission. So, there is naturally an immense attraction to a deal that will bring greater access to an export market that is equivalent to 15% of world trade, 1.4 billion increasingly affluent consumers, and even a tiny share of a BRI-related infrastructural investment around several trillion euros. Not to mention, as part of the deal Italy will have access to financing from China’s AIIB (Asian Infrastructure Investment Bank, of which Italy has a 2.6% share).

Still, the Italian government’s approach to the signing of the MoU is considerably ambiguous. While talking to the Chinese delegation, Premier Conte praised the ‘strategic partnership’, while reassuring the EU and the US by treating the deal as a mere formality. And to his electorate, Conte boasted of the positive impact on growth and employment that the partnership would bring. The Italian government was visibly split. The Lega leader and Vice Premier Matteo Salvini loudly opposed what he sees as an opaque deal with a “non-market and undemocratic country”, and pointedly did not take part in any of the meetings. The 5-Star leader and other Vice Premier Luigi Di Maio dismissed their rift by saying that Salvini was free to speak, but in his capacity as Minister of Labour and Economic Development, he had the duty to act. This double act by the Italian government was probably more deeply rooted than the preoccupation to reassure EU and US partners, as well as the pre-electoral attempt at party differentiation. The rift was amplified by all other non-government parties, alleging the risk of ‘Chinese colonisation’. Intriguingly, one year ago, the Lega Undersecretary of State for Economic Development Michele Geraci – who lived and taught in China and is credited with brokering the deal – accused China of “using the weaker countries… [like Hungary and Greece]… to pursue its own interests” (M. Gramellini, Corriere della Sera, 31/03/2019).

In truth, the Memorandum did not include telecommunications, the introduction of 5G technology or the adoption of Huawei. Establishing closer links with China had been pursued by previous Italian governments, from Prodi to Monti, from Letta to Renzi and Gentiloni. Italy is the 14th European country to sign an MoU with China, and China already has access to and controlling shareholdings in many Italian and European ports. Germany and France have not signed an MoU but have a much higher volume of investment and trade with China. Indeed Macron, Merkel, and Juncker hijacked the Italian initiative and immediately after his Italian visit organised a two-day meeting in Paris with President Xi, excluding Italy.

Emmanuel Macron has an irritating habit of repeatedly criticising Italy for not conforming to the rules that he spectacularly fails to observe (regarding immigrants, interference in politics outside national borders, fiscal policy, competition, the high-speed Turin-Lyon rail link).  However, he signed telecommunications deals, as well as a €30 billion contract for the export of 300 Airbus planes, benefiting mostly France and Germany, plus a €1.2 billion contract for the construction of 10 container ships and a wind energy plant in Dogtai. This is topped off by cooperation in energy saving in emerging countries, banking cooperation between BNP Paribas and Bank of China, and aerospace (satellite images).

The German government, which is are also exceptionally good at failing to observe European rules (regarding trade surplus limits, policy coordination, Russian sanctions), is developing Duisberg as a BRI destination. The Belgians are developing the port of Zeebrugge and rail links with other BRI locations. On 12 March, the European Commission issued a China Strategy Decalogue, which recommended the exclusion of telecommunications from negotiations with China, a provision violated by France and not by Italy. After the Italian deal, the EC did assert its power to rule on the legitimacy of any foreign direct investment in Europe by non-EU members, which will apply also to China. But it has not been invoked on any past deals.

On the eve of the Italy-China MoU the White House National Security Council tweeted that “Italy is a major global economy and a great investment destination. Endorsing BRI lends legitimacy to China’s predatory approach to investment and will bring no benefits to the Italian people”, though benefits are undeniable. A spokesman for the American Chamber of Commerce in Italy wrote in Il Corriere della Sera that with the MoU Italy had taken “a foreign policy decision that jeopardised US investments in Italy”.  Yet the MoU did not violate any of the trade restrictions currently imposed by the US on trade with China.

Even the Vatican decided to implement a détente with China: last November, Pope Bergoglio (Francis) lifted the excommunication previously inflicted on the bishops appointed by the Chinese government. See the book La Chiesa in Cina – un futuro da scrivere by Father Antonio Spadaro, Director of the Jesuit monthly Civilta’ Cattolica, which was presented on 25 March in Rome at a meeting with the author by Premier Conte, Monsignor Carlo Maria Celli (who has been trying to organise a visit by Pope Bergoglio to Beijing), and Father Arturo Sosa (Superior General of the Society of Jesus, evoking the long standing friendship between the Jesuits and the Chinese).

In this wider perspective, the Italian government’s involvement with China is a wise and sound economic policy measure, fairly modest in size, and harmless in its composition. These factors do not impinge on Italy’s potential to comply with EU and US or NATO restrictions if and when they might be imposed – that is, if Italy decide to comply with them. The controversy surrounding the Italy-China deal is totally unjustified.


This article has been publshed by DOC Research Institute -

Domenico Mario Nuti

Professor Emeritus, Sapienza University of Rome. Member of the Editorial Board of INSIGHT -
Blog “Transition”:

Insight - Free thinking for global social progress

Free thinking for global social progress
Articles & Opinions
Antonio Lettieri
Un nuovo governo di destra nella crisi dell’eurozona
Håkan Bengtsson
Svezia: meno speciale di quanto non sembrasse
Mario Rusciano
Antonio Baylos
Carlo Clericetti
Regole Ue, la Germania guarda indietro
Claudio Salone
Thomas Palley
Flirtare con Armageddon: Stati Uniti e Ucraina