Chinese President Xi Jinping did a state visit to European capitals between 26 and 26 March. One of the highlights of the visit was the signing of a Memorandum of Understanding (MoU) on the Belt and Road Initiative (BRI) with Italy. Italy is not the first European Union (EU) country to sign an MoU with China but is the first G7 nation to sign an MoU on the much-contested Belt and Road Initiative (BRI).
The announcement by Giuseppe Conte, Italy’s Prime Minister, that Italy signed the MoU on the Belt and Road Initiative (BRI) — China’s massive infrastructure and connectivity project — has caused alarm in Washington and uneasiness in Brussels, Berlin and Paris. Italy’s endorsement of China’s signature foreign policy initiative indeed undermines EU’s efforts towards finding a common stance vis-à-vis Beijing while gearing up for EU-China Summit set to take place on 9 April in Brussels. It also weakens the position of the United States in its tug-of-war with China over trade and global leadership. Considering such implications, Rome eventually smoothened up the text of the agreement, which does not include enforcement clauses.
Italy’s endorsement of China’s signature foreign policy initiative indeed undermines EU’s efforts towards finding a common stance vis-à-vis Beijing while gearing up for EU-China Summit set to take place on 9 April in Brussels.
Bilateral agreements
Both Italian and French businesses benefited from deals with China. Through its new MoU with Beijing, Italy seeks more market access in China for Italian companies and “Made in Italy” products, as well as more Chinese investments in Italy under the new framework. Di Maio, Italian deputy premier, said the potential value of those business accords with the Chinese is as much as €20 billion, giving the economy a much-needed boost. The business deals involve firms including energy giant Eni SpA, gas pipeline operator Snam SpA, engineering company Ansaldo Energia SpA, and bank Intesa Sanpaolo SpA. They also include an agreement between the ports of Trieste and Genova and the China Communications Construction Co.
Similarly, during Xi’s visit to Paris, Macron and the Chinese President announced a number of deals between their respective countries totaling around €40 billion, including deals to buy 300 Airbus aircraft for a reported €30 billion while French energy company EDF signed a €1 billion-contract with the China Energy Investment Corporation to develop an offshore wind farm. Energy equipment manufacturer Schneider Electric, banking giant BNP Paribas and shipbuilder CMA CGM also signed deals with Chinese companies worth some €8 billion collectively.
China-EU relations
Holding bilateral relations with the member states over Brussels is the preferred option by third countries such as China, but also by Russia, US, India etc. However, conscious that EU leaders are stronger together and aware of the importance of bringing the EU in the picture, French President Macron invited to Paris the German Chancellor Merkel and the EU Commission President, Jean-Claude Juncker to meet with Xi Jinping. Gearing up for the Brussels summit, the EU has issued a new EU–China strategic outlook this month, and further discussed EU stand vis á vis China, at a European Council meeting this past week. “China today for us is a competitor, a partner, a rival,” Jean-Claude Juncker, head of the European Commission, told reporters after a summit with EU leaders. “We can’t construct something stable on the basis of persistent imbalances.”
Gearing up for the Brussels summit, the EU has issued a new EU–China strategic outlook this month.
Against this context, EU Commissioner Günther Oettinger proposed to give the European Commission a veto over any Chinese investments in the EU, incentivising coordination amongst the member states when dealing with China. Moreover, last month, the EU voted in new methods for screening foreign investments in Europe which will limit China's ability to buy firms in the strategic technology and infrastructure sectors.
“A strong EU-China relationship could have profound benefits for all involved. It is in Europe’s interest to strengthen the rules-based international order, not least by working with China to open up its economy, improve its human-rights record, and eliminate unfair trade practices. If there is one thing EU leaders can agree on, it is that cooperation with China must prevail over confrontation,” proclaimed Guy Verhofstadt, leader of the Liberals in the European Parliament.
Italy-China relations
“Beijing now accounts for about 2.7 per cent of Italy’s exports, valued at just over €11 billion,” highlights Nicola Casarini, Senior Fellow at the Istituto Affari Internazionali (IAI) and Visiting Professor at the Graduate Institute in Geneva. This makes China the eighth largest export market for Rome. By comparison, Italy exports about €4 billion worth of products to India. Imports from Beijing are worth more than €27 billion (Italy imports almost 6 billion euro from India), which corresponds to 1.3 per cent of the Chinese export market. In terms of rankings, Italy is China’s 19th largest export market. Over the last two decades, Chinese companies and financial institutions have invested in more than 600 Italian enterprises, for a total value of €13.7 billion, according to the Italy-China Foundation.
The Italian signing of the MoU on BRI sparked strong criticism not only from peer European neighbours but also internally within Italy.
A stronger partnership with China could attract the additional capital inflows that Italy sorely needs, given constrained lending by its banks. Whereas Italy has received about €14 billion in Chinese investment since 2000, Chinese firms invested €10.5 billion in 55 BRI countries in the first ten months of 2018 alone, and have signed contracts for BRI projects worth more than $80 billion,. states Paola Subacchi in an article for Project Syndicate. In 2017-2018 Chinese investments in Italy increased by more than 1.6%, the same as Germany, however, much less than in the UK (+ 4.7%).
However, the Italian signing of the MoU on BRI sparked strong criticism not only from peer European neighbours but also internally within Italy, including from one of the two parties in government (notably the one supported by the industrial north). The width of implementation of this MoU remains to be grasped because no enforcement measure is foreseen, and because the government who signed it does not carry a vision or a strategy going beyond the immediate return of market access. Given the fluctuation within the current Italian government and the fact that Europe managed to put its act together as a reaction to this regional deviation, a positive twist could be perceived to the European visit of Xi Jinping. However, the real test for EU - China relations is set for an important stress test at the Brussels summit.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.