Italy in BRI bag, China scores big

The Belt and Road Initiative (BRI) has reached an important milestone with Italy getting on board this ambitious, Chinese economic and geopolitical venture. Italy is the 124th country in the world and the 13th from the European Union to join BRI. More importantly, it is the first member of the G-7 group of industrialised countries to be drawn into BRI’s ambit. During Chinese President Xi Jinping’s recent visit to Rome, the two sides signed a memorandum of understanding under which Italy agreed to participate in BRI. The two sides signed 29 separate deals for projects worth $2.8 billion. These projects envisage co-operation in the banking, energy and infrastructure sectors. Developing Italy’s infrastructure is “a priority for the two countries”. China is investing in developing port infrastructure at Trieste, Genoa and Palermo. Italy is among the world’s top 10 largest economies but its infrastructure is crumbling. In addition to boosting Sino-Italian trade and Chinese investment in Italy, BRI offers Rome an opportunity to jumpstart its sluggish economy. For China, BRI opens up yet another market. More important is its symbolic value; China has managed to draw a G-7 member into an embrace. This is no small achievement given the rising hostility and apprehension of G-7 members, especially the United States, towards China.

However, there are formidable challenges that Italy must prepare to face in the coming years. Already burdened by a huge public debt — among the largest in the eurozone —Italy’s economy went into recession late last year. Will it be in a position to pay back massive loans to China? Asian participants in BRI such as Sri Lanka and Myanmar have cautionary tales to offer Italy. Besides, rifts within Italy’s fragile coalition government are in danger of coming to the fore. Italy’s right-wing League Party is said to be strongly opposed to the Chinese initiative and in a show of this displeasure, its leader Matteo Salvini, who is also the Minister of Interior and Deputy Prime Minister, stayed away from all official BRI-related ceremonies.

Italy’s participation in BRI has raised hackles in several Western capitals. EU member-states and the US are concerned over Chinese investment in critical sectors such as ports and energy in Italy. They have warned Italy against allowing Chinese firms to develop telecom networks as this would make European and American communications vulnerable to Chinese disruption and spying. Will Italy be the only G-7 member to join BRI or will others follow its lead? Despite American opposition, the UK became a founding member of the China-led Asian Infrastructure Investment Bank in 2015. Soon, France, Germany and Italy followed London into the AIIB. This could be the G-7’s experience with BRI.