When in Rome, do as the Chinese do | Business | Economy and finance news from a German perspective | DW | 09.03.2019

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When in Rome, do as the Chinese do

If it goes ahead, Rome's recognition of China's Belt and Road Initiative would expose the depth of the cracks in EU unity. It comes ahead of a meeting to decide on the bloc's stance on China under US pressure.

The Italian government is on the verge of endorsing China's Belt and Road Initiative (BRI), the cornerstone policy of President Xi Jinping. Italian Prime Minister Giuseppe Conte confirmed late Friday that his government is working on a nonbinding deal with China.

Michele Geraci, an official in Italy's Economic Development Ministry, told The Financial Times this week that the deal could be completed in time for Xi's visit to Italy on March 22, a day after an EU meeting in Brussels during which EU member states will debate a common approach to Chinese investments in the 28-member bloc.

Why is this important?

Italy would be the first member of the G7 group of advanced economies to officially back the initiative. Other smaller European member states such as Greece and Portugal have embraced various Chinese initiatives, as have some southeastern European EU pretenders such as Serbia. But with Rome's belligerent government thumbing its nose at EU budget rules, any such move would signal a serious shift in the core EU member states.

Germany has for some time accused Beijing of interfering in the EU, in particular in Greece and Hungary, and in the West Balkans. The bloc is pushing for a European investment screening process to better control foreign investment in strategic areas.

"It is difficult to understand the security implications of Italy joining China's Belt and Road Initiative without knowing the terms of the agreement," Nicholas Eftimiades, a former senior US defense official, told DW.

"However, there are strong security consequences for Italy and the EU if the agreement involves giving access to critical infrastructure or 5G telecom networks. In any case, Italy joining China's BRI divides and weakens the EU politically and furthers Beijing's 'divide and conquer' strategy," Eftimiades added.

It would be welcomed by Beijing at a time when even some BRI member countries, such as Malaysia, have doubts about the benefits.

Marco Polo

The merchant and explorer Marco Polo is perhaps the man most associated with strong Italy-China links

"China has been looking for validation from a major developed economy on the BRI for some time. They have just been validated! But this is all symbolic. It does little to fill in the gaps about what the BRI actually is," Kerry Brown, professor of Chinese Studies at King's College London's Lau China Institute, told DW.

Italy's decision also coincides with a debate in Europe over the role Chinese Huawei should play in the introduction of new high-speed 5G networks.

Ancient silk ties that bind

Italy formed a China Task Force last October to explore economic opportunities in China, including the possibility of endorsing the BRI.

"Italy and China were linked by the ancient Silk Road in the past. We expect the task force to help strengthen the two countries' cooperation under the Belt and Road Initiative and contribute to a closer EU-China relationship," China's ambassador to Italy, Li Ruiyi, said, according to state-run news agency Xinhua.

What is the BRI?

The BRI is a huge trade and infrastructure project designed to link China to Europe, Africa and Asia through a series of Beijing-funded ports, railroads and roads along land and sea trade corridors. The plan aims to finance and build infrastructure in more than 80 countries in Eurasia, the Middle East and Africa.

Several central and eastern European countries, as well as some states in Asia, the Middle East and Africa, have agreed to sign bilateral memorandums in areas including trade and infrastructure projects. 

Zhang Yesui, National People's Congress spokesman, said this week that 67 countries had signed up to the BRI in the past year, bringing the total number of countries or international organizations that have formal endorsements to 152.

Critics fear Chinese influence

Critics say BRI projects impose debt on developing countries but provide little economic benefit. 

Some critics claim that China is using the project to expand its military and political sphere of influence. 

The US, Japan and the UK are all reluctant to participate. India has also been reluctant, but some regional partners such as Pakistan and, until recently, Malaysia have joined in, along with dozens of other countries. 

"We view BRI as a 'made by China, for China' initiative," Garrett Marquis, White House National Security Council spokesman, told The Financial Times.

"We are skeptical that the Italian government's endorsement will bring any sustained economic benefits to the Italian people, and it may end up harming Italy's global reputation in the long run."

Quadriga - The New Silk Road: China’s Route to Europe?

Brussels up in arms 

Chinese investments have also become contentious in the EU. Diplomats in Brussels and western European capitals have long worried the 16+1 grouping of China and central and eastern European states, including 11 EU members, is a Trojan horse to divide the bloc.

An EU spokesperson on Wednesday said all member states needed to "ensure consistency with EU law rules and policies and to respect EU unity in implementing EU policies." 

Chinese investments in the European Union fell sharply for the second consecutive year in 2018, a report by the Berlin-based Mercator Institute for China Studies (MERICS) and US consulting firm Rhodium Group showed this week.

Chinese companies completed foreign direct investment deals worth €17.3 billion ($19.6 billion) last year, down 40 percent from 2017 levels and way below the record €37.2 billion investment seen in 2016.

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