The Memorandum of Understanding (MoU) concluded at the end of March between China and Italy drove the global community into a frenzy of excitement. Indeed, Italy was the first amongst the Group of Seven industrialized nations (G7) and the founders of the European Union (EU) to commit to China’s infrastructure projects in the context of the Belt and Road Initiative (BRI).
On the sidelines of the visit to Rome of Chinese President Xi Jinping, 30 contracts were signed between 10 Italian companies, ministries and public organizations for a value that the Minister of Economic Development, Labor and Social Policies Luigi Di Maio estimates to amount to 2.5 billion euros. As declared by the Undersecretary of State Michele Geraci, the Italian government seeks to deepen economic ties with China in an effort to re-launch Italy’s economy. China is Italy’s eighth export market, accounting for only 2.7% of Italy’s total exports, roughly worth 11 billion euros, but it lags behind other large European countries, notably France and Germany, and there could be a substantial untapped amount of potential exports from Italy.
The MoU is a political success for President Xi Jinping, as his political legitimacy has a direct connection with the BRI. In October 2017, at the 19th National Congress of the Communist Party of China, Xi’s political doctrine entered the Constitution of the Communist Party of China (CPC) alongside the BRI. Xi’s doctrine thus joined Marxism-Leninism, Mao Zedong Thought and Deng Xiaoping Theory as a “guide to action” for the CPC. On the same occasion, Xi failed to designate a successor, as his predecessors had previously done at the end of their first mandates. Five months later, the National People’s Congress (NPC), China’s legislative body, abolished the presidential term limit of two mandates on the basis that a vast project like the BRI required leadership continuity. Even to the untrained eye, Xi’s power grab is evident, as is the impact of the BRI on his legitimacy to rule.
Nonetheless, the BRI is losing momentum. On the one hand, the elections of new political elites in partner countries and the episodes of political violence and terrorism against Chinese personnel employed in BRI projects abroad strongly emphasized the uncalculated political implications of foreign investments. On the other, accusations of debt-trap diplomacy resonated high and wide amongst China’s BRI partners to the extent that some South and Southeast Asian countries started to rethink their involvement in the project. Above all, the BRI is expensive. Analysts estimate the BRI to be worth between one to eight trillion dollars: a discrepancy of values that is explained by the growth rate of the project. And China’s economic growth is not at its finest. According to the IMF, China’s real GDP growth (annual percent change) passed from 6.9% in 2017 to 6.6% at the end of 2018. A further decrease is expected in 2019 with a downscale to perhaps 6.2%; even lower than the planned “New Normal”. A MoU with Italy (i.e., a G7 power and EU founding member) has the potential to appease domestic concerns over the BRI and, at the same time, restore its status at the international level, thus relieving some pressure on Xi.
A deepening of trade relations is indeed beneficial for Italy and China, but it has a considerable impact on the European Union, whose attitude towards Beijing has become increasingly more assertive. The European Commission and the Office of the High Representative issued a joint statement prior to the European Council meetings of 21 and 22 March, which defined Beijing as “an economic competitor in the pursuit of technological leadership, and a systemic rival promoting alternative models of governance”. Additionally, in the same document, the EU reiterated that “neither the EU nor any of its Member States can effectively achieve their aims with China without full unity. In cooperating with China, all Member States, individually and within sub-regional cooperation frameworks, such as the 16+1 format, have a responsibility to ensure consistency with EU law, rules and policies”. A statement that undoubtedly made reference to Italy’s then-prospective MoU with Beijing.
On 9 April, the 21st EU-China summit will be hosted in Brussels by European Council President Donald Tusk and European Commission President Jean-Claude Juncker. High Representative Federica Mogherini is also expected to attend. The summit will take place in a context of deteriorated relations between Beijing and Brussels. Italy has the potential to act as a mediator. It is true that the MoU between Italy and China attracted fierce criticism, as it nullified the possibility of a multilateral response to China’s presence in Europe. Nonetheless, it gives Italy the upper hand in acting as a dialogue partner in the long run. Whether Italy will assume this role remains to be seen: a clear hint will be undoubtedly given by the unfolding of the summit this week and by the position that members of Italy’s Eurosceptic government will assume.