Italy Signs on to the Belt and Road Initiative
In late March 2019, Chinese President Xi Jinping traveled to Rome, where he met with Prime Minister Giuseppe Conte, who signed a memorandum of understanding pursuant to which Italy signed on to China’s Belt and Road Initiative (BRI), making it the first Group-7 country to do so. The incentive for the Conte government is straightforward: China is seeking to create a massive trans-Eurasian project to link East Asian and European markets and Rome wants to be part of it. In particular, Italy needs initiatives that will augment economic growth, reduce unemployment, and upgrade its infrastructure, including key areas such as transportation. Unfortunately for Italy, its economy once again slid into recession in the second half of 2018 and the Organization for Economic Cooperation and Development forecasts a contraction of -0.2 percent in 2019. For its part, the European Union (EU) has deep reservations about China’s push into its southern belly. Brussels is anxious that Chinese loans may drive EU members to build up higher levels of debt, inflows of cheaper Chinese goods will undermine local production, and China’s increased greater economic clout will boost Beijing’s influence in a world that is increasingly divided along the lines of non-liberal versus liberal states. Indeed, in a recent paper the European Commission called China an “economic competitor” in critical industrial fields and a “systemic rival” politically. The EU also criticized China for its failure to open its markets and public procurement to external competition, providing subsidies to national champions, and pushing hard to dominate new technologies like 5G (think Huawei). In a global economy that has become much more sharp-elbowed and protectionist, the BRI has become a new weapon, disrupting old alignments and creating new ones. All roads may not lead to Rome, but the BRI appears to have found one that does.