While Italy openly welcomes Xi Jinping, is Europe closing the door on China?

Italy is buying into China’s belt and road plan and making a deal that neither the US nor the EU welcomes
As the case of Greece shows, pledging billions to a European Union country with financial needs seems to buy China protection from EU criticism

David Zweig

Published: 11:00pm, 22 Mar 2019

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President Xi Jinping’s trip to Italy is a major political and economic coup. Italy is the first Group of 7 country to buy into the “Belt and Road Initiative”, a main piece of the current Chinese leadership’s foreign policy strategy that clearly demonstrates the power of China’s purse.

Italy needs money for infrastructure upgrading and Xi has pockets full of cash that he is willing to use. In return, Italy is, to a certain extent, turning its back on the United States and the European Union.

Xi is expected to sign a memorandum of understanding with Italian Prime Minister Giuseppe Conte which should lead to increased Chinese participation in the historic port city of Trieste and perhaps three other harbours, including Genoa and Palermo.

The proponent of this strategic shift to Beijing, junior economic development minister Michele Geraci, is a native of the Sicilian city of Palermo.

Trieste, situated at the northern tip of the Adriatic Sea, would give China access to a duty-free port in Europe and allow Chinese goods easy access to European markets.

And perhaps Italy believes that Chinese enterprises will assemble Chinese products around Trieste, so that the firms can put the “Made in Italy” label on the goods but also bring jobs to the region.

A deal with China would fly in the face of US efforts to contain China’s expanding influence, particularly with regard to strategic infrastructure projects such as harbours, airports and 5G networks.

In fact, the White House’s National Security Council has criticised Italy: “Endorsing BRI lends legitimacy to China’s predatory approach to investment and will bring no benefits to the Italian people,” it said.

No doubt, the Italians disagree, in part because interest rates on Chinese loans are not excessive for viable governments.

The historic port city of Trieste, situated at the northern tip of the Adriatic Sea, would give China access to a duty-free port in Europe. Photo: Shutterstock

The Trump administration has seen some victories – and defeats – in its effort to mobilise allies against Chinese technology giant Huawei.

While British intelligence has said it can manage threats posed by Huawei and does not see a need to ban the company, the Italians are reportedly removing mentions of data sharing and telecoms networks from the memorandum with the Chinese. Still, their decision to give China access to another European port may not sit well with the White House.

The EU is also unlikely to welcome the deal, at a time when it is doubling down on efforts to challenge China’s search for influence. Sure, the EU and China do see eye to eye on several international issues such as the Iran nuclear deal and the Paris climate accord, two pacts the US has pulled out of.

However, under German and French pressure, the EU might move to restrict Chinese access to public tenders and strategic projects, such as telecoms.

The Europeans have expressed serious concerns about China’s rise, having recently declared Beijing a “systemic rival” – which is not to be confused with the US’ description of China as a “strategic rival”.

Whereas the Europeans see the Chinese as a threat to their industries, the US also sees China as a regional, if not global, military threat.

Still, in trade and investment, the Europeans and Americans have similar concerns: lack of access to the Chinese market, subsidies to Chinese state-owned enterprises that are buying European companies, forced technology transfer and exclusion from major Chinese projects.

The EU’s trade deficit with China in 2017 was €176 billion (US$200 billion), or 30.7 per cent of total trade in goods between the two sides. Thus, the EU is likely to benefit from the ongoing US-China trade negotiations and may be quietly rooting for the US from the sidelines.

Meanwhile, China’s hope for more European endorsement of the belt and road strategy also appears to be an effort to undermine European resistance to Chinese influence. On foreign policy, the EU operates on the principle of unanimity.

But as we have seen in the case of Greece, where China has invested heavily in the port of Piraeus, pledges of billions to EU countries with financial needs buys China political protection from criticism of its human rights record under Xi.

In 2012, China forged a 16+1 group with 16 relatively poor countries in central and eastern Europe. Chinese investment has been pledged for projects in countries including Hungary and Poland.

These countries provide excellent opportunities to promote Chinese trade and investment and to increase Chinese soft power through cultural and educational exchanges. This bloc is also a testing ground for the Belt and Road Initiative.

On his latest trip to Europe, Xi can expect an easy time in Italy and even Monaco, but things may be a little tougher in France, where he will meet President Emmanuel Macron.

Macron thinks the EU needs a coordinated policy on China. Clearly, he will not see Italy as a supporter of his – and the EU’s – efforts to find such a strategy for dealing with China’s rise.

David Zweig is chair professor of social science at the Hong Kong University of Science and Technology and managing director of Transnational China Consulting Limited

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