Is this the end of the road for Italy’s China gambit? 

In 2019, during Chinese President Xi Jinping’s visit to Rome, Italy shocked the United States and Europe by becoming the first Group of Seven country to join China’s Belt and Road Initiative, the largest ever global infrastructure undertaking. 

As we detailed in the Council on Foreign Relations-sponsored Independent Task Force report on the BRI, Chinese banks and companies have financed and built everything from power plants, railways, highways, and ports to telecommunications infrastructure, fiber-optic cables, and smart cities around the world. 

With its five-year memorandum of understanding up for renewal next year, Italy appears poised to withdraw from the BRI, a reflection of frustrations with the initiative’s unmet promises and the country’s strategic reassessment of China. 

It is not difficult to see why it enticed Italy. 

Having suffered through three recessions within a decade, the European Union nation was looking to attract investment and expand Italian exports’ access into China’s huge market. 

At the time, many Italians felt abandoned by Europe, while its populist government was skeptical of the EU and more than willing to turn to Beijing to fulfill its investment needs. Italy saw an opportunity to leverage its political weight to sign on to the BRI in hopes of beating out others for Chinese attention and investments. 

Economic ties

It soon became apparent, however, that the decision would not meet Italian hopes and expectations. 

Under the auspices of the BRI, Italy signed numerous institutional arrangements with China, covering everything from double taxation to recognition of certain sanitary requirements for pork exports, cultural property and heritage sites, and minor commercial agreements. 

But these arrangements failed to fundamentally change the trajectory of Italy-China economic ties. 

Since Italy joined the Belt and Road Initiative, its exports to China have increased from 14.5 billion euros (US$15.94 billion) to 18.5 billion euros, while Chinese exports to Italy have grown far more dramatically, from 33.5 billion euros to 50.9 billion euros. 

Chinese investment in non-BRI countries in Europe has far outstripped its investments in Italy. Chinese FDI in Italy dropped from $650 million in 2019 to just $33 million in 2021. 

Belt and Road Initiative

Another database reports that China has invested $24 billion in Italy since 2005, but only $1.83 billion of that was made following Rome’s decision to join the BRI. 

Italy’s experience demonstrates that joining the Belt and Road Initiative does not necessarily confer a country’s special status with Beijing or guarantee it more trade and investment with China than would occur without the BRI. 

As it became clear it would not be an economic panacea, the Italian government began to reassess whether it should continue membership. 

For the past year, Italian Prime Minister Giorgia Meloni has indicated that joining the project was a “big mistake” and that she intended to withdraw from the initiative. Meloni cited the lack of benefits, noting: 

Italy is the only G7 member that signed up to the accession memorandum to the Silk Road, but it is not the European or Western country with the strongest economic relations and trade flows with China.

Recently, Italian Defense Minister Guido Crosetto called Italy’s decision to join the BRI an “improvised and atrocious act.” 

Ukraine war

More fundamentally, Italy’s withdrawal from the BRI would reflect the growing transatlantic convergence on the challenge China poses. 

European countries increasingly view China as a rival rather than as a partner or competitor. 

President of the European Commission Ursula von der Leyen argued that “the Chinese Communist Party’s clear goal is a systemic change of the international order with China at its center,” pointing to the BRI as evidence. 

Beijing’s support for Russia in its war against Ukraine has led many European governments, including Italy’s, to shed their illusions about China’s policies. 

Central and Eastern European countries, which had traditionally sought closer ties to China through the “17+1” cooperation mechanism, have also made this shift. 

Reflecting this change in strategy, as a candidate Meloni stated that “there is no political will on my part to favor Chinese expansion into Italy or Europe.” 

Since taking office, she has been a staunch supporter of Ukraine.

During their recent meeting, Meloni and US President Joe Biden committed to “strengthen bilateral and multilateral consultations on the opportunities and challenges posed by the People’s Republic of China” and emphasized “the vital importance of maintaining peace and stability across the Taiwan Strait.”

Italy’s withdrawal would deal another blow to the BRI, which has already been scaled back as recipient countries grapple with debt distress. Chinese banks have also been seeking to reduce their exposure to risky loans as China tackles mounting domestic economic challenges. 

Geopolitical reality

European countries are increasingly focused on “de-risking” their economies and will be reluctant to increase their dependence on Beijing. That will make it unlikely that any major economy will soon join the BRI. 

Putin’s invasion of Ukraine and Beijing’s alignment with Moscow have also restored geopolitics to a preeminent position and made European countries more skeptical of China’s intentions.

Russian President Vladimir Putin’s plans to attend Beijing’s upcoming Belt and Road Forum have also made clear the geopolitical nature of the BRI. 

Italy’s reversal should therefore be seen as driven less by economic considerations and more by the new geopolitical reality facing Europe. 

David Sacks is a fellow for Asia studies at the Council on Foreign Relations, where his work focuses on US-China relations, US-Taiwan relations, Chinese foreign policy, and cross-Strait relations.

This article first appeared as a blog post on the Council on Foreign Relations website on August 3 under a Creative Commons License. Read the original here.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy of China Factor.