History

In 2019, the international stage witnessed a seismic shift as Italy, during Chinese President Xi Jinping’s visit to Rome, shocked both the United States and Europe by becoming the pioneering Group of Seven (G7) nation to embrace China’s expansive Belt and Road Initiative—an unparalleled global infrastructure undertaking. Under the aegis of this monumental initiative, Chinese financial institutions and corporations orchestrated the construction of a diverse array of critical infrastructure, including power facilities, transportation networks, and advanced telecommunications systems, threading the world together. As the five-year memorandum of understanding governing Italy’s involvement is poised for renewal in March 2024, the emerging discourse suggests Italy’s deliberation on withdrawing from the BRI, emblematic of mounting discontent with unfulfilled promises and a broader realignment of strategic priorities vis-à-vis China.

Italy’s initial overture to the BRI stems from its economic necessities. Weathering the tumultuous winds of three recessions within a single decade, Italy set its sights on revitalizing the economy by courting investment and expanding the horizons of its exports within China’s expansive market. Amid a backdrop of perceived estrangement from Europe, Italy’s populist government, skeptical of the European Union’s (EU) efficacy, displayed a pronounced willingness to embrace China as an investment partner. Consequently, Italy discerned an avenue to deploy its political heft in securing a position within the BRI to gain an edge in attracting Chinese attention and investments, thus outmaneuvering its potential contenders.

Given its singular status as a major Western economy within this expansive initiative, the United States and the EU critiqued Italy’s decision to collaborate with the BRI. The BRI, encompassing an unprecedented global infrastructure blueprint, has been subjected to critical examination, with detractors positing that China seeks to extend its influence and create financial dependency among smaller nations. 

Italy’s aspirations to access the Chinese market are emblematic of broader trends. The pursuit of improved market access within China transcends Italy; French Finance Minister Bruno Le Maire articulated France’s aspiration for balanced trade relations rather than a complete severance, echoing the need to overcome legislative barriers and foster unobstructed access to the Chinese markets.

President Xi’s courtship of Italy was not devoid of strategic intent. Italy’s historical role as a significant terminus along the Silk Road provided the foundation for Xi to align his flagship foreign policy with a narrative of enduring Chinese prosperity and influence. The two countries share a tapestry of connections: Italy hosts the largest Chinese population in Europe, while intertwined trade linkages extend to industries like fabric and leather goods production. In this context, Italy’s vulnerability vis-à-vis the European Union and its unique position within the BRI presented China with a strategic opportunity to sow discord between Europe and the United States.

In this shifting landscape, China’s official media, Global Times, disparaged the Italian prime minister’s sentiments, attributing them to mounting pressure from the United States and the European Union and Italy’s domestic political dynamics. Professor Wang Yiwei from China’s Renmin University contextualized Italy’s decision within its pro-U.S. orientation while acknowledging that while it remains their prerogative, China expresses regret over Italy’s choice.

Beyond economic considerations, Italy’s contemplation of a BRI exit mirrors the emergent transatlantic consensus on the challenges China represents. European nations increasingly perceive China not merely as a partner or competitor but as a strategic rival. European Commission President Ursula von der Leyen posited that the Chinese Communist Party aspires to overhaul the global order, evident through the BRI. 

Concurrently, China’s refusal to condemn Russia’s role in the Ukraine conflict disabused many European governments, including Italy, of any illusions they held about China’s intentions. This shift in perspective is not confined to Italy; even Central and Eastern European nations, traditionally inclined towards China through the “17+1” mechanism, have recalibrated their approach.

During her tenure, Meloni demonstrated staunch support for Ukraine and consulted with US President Joe Biden to address the multifaceted challenges and opportunities posed by China. A joint commitment to maintaining peace and stability across the Taiwan Strait highlights her alignment with US interests in the region. Italy’s prospective exit from the BRI could substantially blow the initiative. The BRI has already experienced retrenchment, as countries that once eagerly embraced it grapple with mounting debt while Chinese financial institutions seek to mitigate exposure to riskier loans. Additionally, China contends with domestic economic pressures. Against this backdrop, European countries are pivoting toward “de-risking” their economies and are reluctant to deepen economic dependence on China. This reality diminishes the likelihood of significant economies aligning with the BRI soon. Putin’s actions in Ukraine and China’s implicit alignment with Russia have engendered skepticism about China’s intentions. 

In tandem, Italy endeavors to consolidate support within NATO and back Ukraine while aligning itself with US interests vis-à-vis Taiwan. The joint statement following her meeting with Biden reaffirms the significance of peace across the Taiwan Strait for regional and global security. Italy’s establishment of a second Taiwanese Representative Office and its senators’ unofficial visits to Taipei are a testament to its desire to strengthen ties with Taiwan.

Beyond Rome, Beijing’s loans bear an unmistakable imprint of its unyielding profit-driven motives. The purported altruism of development is but a smokescreen for an unscrupulous wealth-generation mechanism tailored to fill China’s coffers. Over the course of four years, 135 people associated with AidData scoured public records around the world to assemble documentation on 13,427 Chinese development projects in 165 countries. The researchers reviewed $843 billion in Chinese government loans to low-to-medium-income countries (LMICs). Of the 165 countries where China has made development loans since 2000, the study finds that 42 now carry debt to China equal to or greater than 10% of gross domestic product.

As December approaches, Italy’s decision regarding the renewal of its pact with Beijing looms. Senior researcher Francesco Sisci posits that Italy’s withdrawal from the BRI signifies a pivotal shift in the Western approach to China, transcending mere diplomacy. This reconsideration amplifies the broader discourse about Italy’s foreign policy trajectory as it navigates the complex interplay between geopolitics, economics, and international alignments.

In this evolving landscape, Italy’s contemplation of withdrawing from the BRI encapsulates a multifaceted narrative. It underscores the allure of economic opportunity that initially drew Italy towards the initiative and the subsequent disillusionment as these prospects failed to materialize as envisioned. The world watches with keen interest as Italy, a microcosm of broader international strife, grapples with the complexities of global geopolitics, economic imperatives, and the enduring pursuit of strategic anchorage.

A. Current Stances

Internal

Giorgia Meloni is carefully balancing Italy’s interests between major power players China and the U.S. As a founder and member of the conservative “Brothers of Italy” political party, Meloni emphasizes nationalism and right-wing populism. Her leadership starkly contrasts with the left-leaning administration under former Prime Minister Giuseppe Conte, who signed onto China’s Belt and Road Initiative four years ago. The US disapproved of Italy’s membership of the BR. However, Conte claimed, “With all the necessary precautions, Italy’s accession to a new silk route represents an opportunity for our country.” At the time, Italy’s decision to endorse China’s controversial Belt and Road Initiative resulted from Italy’s historical openness and trade relations with China. China agreed to allocate $2.8 billion toward infrastructure projects across Italy, promising an economic boom for the economically struggling country. However, Meloni’s administration has noted China’s increasingly predatory practices. Crosetto slammed China for failing to deliver promised economic benefits. He highlighted Italy and China’s negative trade balance: Italy has only marginally increased exports to China while China retains the upper hand, tripling its exports to Italy. Wary of China’s intentions, Italy has wielded its newly-instated “Golden Power Law” against China to review foreign investments and limit technology transfers strategically, most recently this June. At the same time, trade between the United States and Italy has doubled over the last decade. Unlike China, Italy has a positive trade balance with the US. 

Additionally, Italian foreign direct investment in the United States is almost four times its investment in China. Meloni has reinforced and supported these relations, presenting a considerable shift from pro-China to pro-U.S. She has stated that “there is no political will on my part to favor Chinese expansion into Italy or Europe.” Apart from trade, Italy met with Biden in July 2023 to reaffirm a joint interest in human rights and combating authoritarian governments. Specifically, Meloni and Biden condemned Russia’s war on Ukraine and China’s support of the invasion, China’s military expansion across the Taiwan Strait, as well as China’s inhumane treatment of Uyghurs. 

Despite Biden and Meloni’s historical disagreement on issues such as LGBTQ+ and migration, these issues were left majorly undiscussed in the meeting as the two formed a united front against China. Despite this shift, Meloni avoids taking decisive action against China for fear of economic backlash. Italy’s debt is 145% of economic output, making it more than possible that Chinese retaliation would disrupt trade and devastate some 2,000 Italian businesses currently operating in China. This situation would be a hellscape for Meloni, whose economic policy is highly contingent on reviving the post-pandemic economy. 

As a result, her public statements have been elusive and ambiguous. For example, she has said that Italy can still have good relations with China without being part of the Belt and Road Initiative. While her course of action is incredibly unclear, many anonymous officials are lobbying the Meloni government to delay her decision to continue the Belt and Road Initiative. They claim that an Italian exit from the program now would not give businesses enough time to reduce dependence on the Chinese market. According to Il Foglio, which cites Italian government sources, Italy’s exit will not be officialized until late September and early October. She has stated that she will slowly transition away from China to avoid backlash and hopes that the extra time will give Beijing time to improve its practices.

International

Italy’s ideological and cooperative shift to the US is a focal concern for China. It has tried to extend the BRI into Europe to expand its economic footprint and project soft power in the region. However, Italy was one of the only European countries influenced by Chinese rhetoric promising lessened poverty and increased growth. This was a significant win for China, as the program allowed them to export industrial overcapacity and project geopolitical power across the West. Given its economic superiority in the region, China frequently threatens the West with economic retaliation. 

Last month, China responded to Western export controls with restrictions on rare earth metals that are imperative to chipmaking. These tensions have caused Europe to be incredibly wary of China, forcing them to calculate their actions carefully. For China, losing Italy’s support could be a massive blow to the success of the BRI, as a pull-out would signal a lack of confidence in China’s project. In response to Italy’s increasing caution about Chinese cooperation, China has taken an offensive position, disapproving of Italy’s eroding relations. China blamed “some forces” within the Italian government for politicizing the Belt and Road Initiative, showing disdain at a possible pullout.

The Chinese Foreign  Ministry also claimed that criticism of Italy’s membership in BRI was to “disrupt cooperation and create division.” The government even warned that the “malicious hype” created by Italy “goes against the trend of history and will hurt others without benefiting oneself.” China is desperately crafting a strategy to compel Italy to renew the deal, including dispatching a diplomat to Italy to persuade the government that the BRI has benefited Italy. However, as Italy has pointed out, China’s most significant investments are in non-BRI European countries like Germany, France, the UK, and the Netherlands—not Italy. As Meloni pointed out, “Italy is the only G7 member that signed up to the accession memorandum to the [BRI], but it is not the European or Western country with the strongest economic relations and trade flows with China.” 

Italy’s pivot to the US, in tandem with its relations with China eroding, comes with cooperation on many issues. While Biden initially disapproved of Meloni’s leadership, calling her win “a warning for democrats,” the leaders committed to bilateral cooperation to counter China’s power projection in the Taiwan Strait. Italy has taken action to strengthen ties with Taiwan by opening a second Taiwanese Representative Office in the country. By becoming closer to the US, Italy also pushes to have a more significant voice in policymaking in conversations between the US and European Union member nations. For example, while Biden discussed the Wagner crisis in Russia with France, Germany, and Britain, Italy was not invited to make a separate call. By establishing common ground with the US, Italy is aiming to earn a place as a close US ally.

B. Tried Policy

In 2019, under Conte, Italy signed a memorandum of understanding (MOU) with China to participate in a trade project under China’s BRI. The MOU was a non-binding agreement, meaning there are no legal ramifications for Italy or China if either chooses to withdraw from the project. The MOU is set to expire in March 2024. In addition to the BRI, China and Italy signed ten more deals in various sectors, such as port management, energy, steel, and gas. In the end, Italy and China signed 29 agreements for $2.8 billion. 

Italy’s deals with China were met with much criticism and concerns. One critique was that the BRI project has faced scrutiny for employing “debt diplomacy,” as seen in Sri Lanka in 2017, where an entire port had to be handed over to China because Sri Lanka could not repay its loans. A similar situation almost occurred in Malaysia over the BRI project. However, Prime Minister Mahathir Mohamad canceled the $22 million infrastructure project when the Malaysian government realized the projects would bankrupt the country. Malaysia and China eventually negotiated the cancellation of the projects without much issue. 

Another criticism was that the BRI deals between Italy and China strained its relations with partner states and within its government. On the international level, Italy has strained its relationship with the European Union. Teresa Coratella, a program manager of the European CFR, stated that the EU had been trying to create bilateral relationships between the EU and Beijing rather than having 28 nations forming their relationships with China. In addition, Rory Green, a China and North Asia economist, stated that the China-Italy relationship showed that Italy was “willing to turn to an outside backer,” which could be “used to show the EU, and France and Germany in particular, that they have other friends they are willing to turn to.” In other words, Italy’s willingness to work with China outside of the EU demonstrated that Italy was willing to work independently of the EU, even going as far as going against the agenda of the EU.

On the domestic level, the decision to further Sino-Italian cooperation created further tension in the Italian coalition government. While the Five Star Movement party, which Prime Minister Conte led, favored closer trade ties with Beijing, the Northern League party opposed the MOU as they feared foreign powers “colonizing Italy.” Despite this, the Five Star Movement party continued with the deal. Their justification was an increasing frustration that Chinese exports into Italy exceeded Italian exports into China. As Lugio di Maio, Italy’s minister of economic development and a member of the Five Star Movement in 2019, stated, “There is a lot of ‘Made in China’ coming into Italy and too little ‘Made in Italy’ that goes into China.” Italy hoped the negotiations would result in a “substantial and gradual increase of exports to “balance out the trade imbalances.”

Policy Problem

A. Stakeholders

Italy’s exit from China’s BRI sparks discussion on the efficacy of the global infrastructure program. For the past year, Meloni indicated that joining the BRI was a mistake. At the same time, Italy is the only G7 nation to sign on to the initiative; it is not the European or Western country with the most extensive economic relationship with China. Economic ties between China and Italy have barely seen any improvement. Since Italy joined, only a slight increase in exports has been realized, and Italy has fallen into a large trade deficit. Furthermore, China’s foreign direct investment (FDI) in Italy has drastically declined, signaling that China’s pledges to Italy have not manifested in benefits. Italy’s situation raises questions internationally about China’s ability to follow through on promises, especially in terms of BRI.

This coincides with reports of China’s FDI going elsewhere in Europe. Germany, France, and the Benelux countries are the leading destinations for China’s foreign direct investment; crucially, none are BRI members. Germany also exports more to China than Italy, underscoring the increasing skepticism about the necessity of signing onto the BRI to access ties with China. Considering the geopolitical context and Italy’s improving relationship with the United States, it would be reckless for Meloni to renew the agreement. Instead, withdrawing from the BRI would put Meloni’s pro-U.S. and pro-NATO rhetoric in action, signaling to the international community that in the future, Meloni will likely stay true to her promises.

B. Nonpartisan Reasoning

In terms of economics, the members of the BRI generally reap benefits with increased trade and investment; however, Italy could not acquire what was expected. As a result, Italy may look toward strengthening relations with Taiwan, specifically for help with semiconductors. By withdrawing from the BRI, Italy will signal its steps away from risks and overdependence on China. At the same time, Italy must find other ways to align with China or shift its cooperation from the national level to the EU level. Economically, China has become increasingly confident in coercing smaller democratic countries into compliance with its economic power. Seeing democracy as a fundamental principle, Italy’s relationship with China was founded on a value discrepancy. As a result, if Italy wants to maintain its position as a democratic power on the international stage to preserve strong relationships with other democratic countries, it must promote economic cooperation and collaboration with the likes of the G7 and the EU.

 Meloni’s new government is pro-U.S. and, therefore, must seek bilateral or trilateral dialogue opportunities when making decisions conflicting with the West and East. In doing so, Italy will be placed in a precarious position, forced to consider the political and economic value of maintaining ties with one or both sides. The new government’s stance on Euro-skepticism will play a significant role in paving the way for exiting or keeping membership in BRI. When Italy joined the BRI, the government was led by a coalition in the name of political discontinuity, an ideology that rejected traditional beliefs. 

Many analysts recognize Meloni as a pioneer of a new form of Euro-skepticism, one flooded with complexities that make it difficult to predict the new government’s future decisions regarding alignment. Unlike the prior government administration that rejected the European Union, Meloni must weigh Italy’s options and determine if traditional democracy or pure Euro-skepticism is in Italy’s future. Considering how the war on Ukraine has brought back NATO alliances and solidified US involvement across the globe, strengthening those current ties will remain essential should Italy decide to arrange more trade agreements in place of China.

Policy Options

The Meloni government is in an awkward position following its intention to withdraw from China’s Belt and Road Initiative. On the one hand, rejecting the BRI means opting out of a US$43 billion project, representing numerous trade, investment, tourism, and infrastructural opportunities to re-inject dynamism and employment opportunities to Italy’s sloppy economy desperately in need of external support as it regains its ground emerging out of COVID-19 and three recessions in a decade. Rashing exiting the BRI would not only represent significant losses of obtainable economic benefits. 

Still, it would also jeopardize potential cooperation with China and hurt Italy’s international business reputation and credibility. On the other hand, the war in Ukraine had increased European dependence on Washington, and it would be impossible for Meloni to ignore the United States’ geopolitical interests and its concerns for its European allies to maintain strong partnerships with Beijing, its geostrategic archrival. Hence, Meloni should pursue a prudent and independent policy to strike a delicate balance between the two giants. According to the Diplomat, Italian cities, municipalities, and local authorities enjoyed a “high degree of autonomy” and have “quite significant roles” to play in Italy’s BRI membership. Thus, Meloni could try to exit the project on the national level to appeal to growing US pressure and lobbying while maintaining close commercial ties with China on local and municipal levels. 

Chinese President Xi Jinping also called for BRI investors to focus on “small but beautiful projects,” implying the significance of local connections and implementations of BRI agreements. Hence, Meloni could symbolically declare an exit from the BRI at a national level while still obtaining benefits from cooperating with China for local disposal. The Meloni government, hence, could strike a fine line between preserving US defense support and not rashly rejecting the massive Chinese market.