Op/Ed by Joseph Percy
In March 2019, Italy became the first large economy to sign a Memorandum of Understanding (MoU) on China’s Belt and Road Initiative (BRI) – an infrastructure funding program to connect the trade routes of Asia with Africa and Europe.
The non-binding agreement, besides signaling other opportunities for investment, designates some of Italy’s ports to BRI trade routes, which could bring funding for infrastructure projects.
The signing is controversial because many believe the BRI is a political project to build global Chinese influence through foreign investment. For this reason, Italy’s pro-China stance has drawn wide criticism from other large Western economies, particularly those in the European Union (EU).
Strangely, however, polls of the four major EU economies – Italy, Germany, the United Kingdom, and France – show that the Italian public had the least favorable view of the Chinese in 2018 by a reasonable margin.
Given the controversial nature of the MoU signing, it seems odd that the views of the Italian public do not line up with the government’s actions.
According to data collected by the Pew Research Center, Italians have the least favorable view of China of the four countries by 10 points and the least amount of confidence in China’s president, Xi Jinping, by 12 points.
As the poll was conducted in 2018, it is possible that the public sees President Xi more favorably after his visit to Italy this year, during which the MoU was signed.
Nevertheless, the Pew Research Center believes that Beijing’s human rights record might explain unfavorable views towards China. Their analysis across 26 countries showed a correlation between the two views. But, there are often multiple factors that contribute to political opinions.
Despite the public’s unfavorable view of China, Italy’s newest government – formed in March 2018 by the Five Star Movement and the Lega Nord – is considerably more pro-China than the other four major EU economies.
Aside from supporting the BRI, the government stated early that they were ready to cooperate with Huawei to provide 5G network infrastructure in Italy, a move that the United States has discouraged its allies from pursuing over concerns that spyware could be placed in the network.
There are two reasons for Italy’s commitment to cooperation with China despite negative public opinion: growing dissatisfaction with the EU over economic issues and the view that Italy has been missing out on job-creating Chinese investment and trade.
Although not all Italians are skeptical of the EU, polling shows that only 20 percent of Italians approve of the EU’s handling of economic issues. And the Pew Research Center also found a negative view of the EU was correlated with support for the Five Star Movement.
These views recently materialized in the 2018 budget, which will break EU budgetary requirements if it leaves Italy with a deficit of 2.4 percent of GDP for the next three years.
Breaking these rules means that Italy will no longer have access to financial assistance under the European Central Bank.
Since the 2008 global financial crisis, the Italian economy has seen fluctuating positive and negative growth.
As Italy moves to break some of its economic and political ties with the EU, they see China as a needed alternative source of funding.
Historically, Italy has received the lowest amount of Chinese greenfield investment of the four large EU economies. Greenfield investment tends to create more jobs and growth than mergers and acquisitions because business are built from the ground up.
Italian exports to China have also been reportedly at the lowest among the four countries since 2002. In 2017, the Italians exported a mere EUR 13 billion (US$14.5 billion) compared to Germany’s EUR 94 billion (US$104.9 billion).
Spurred by economic under-performance and increased dissatisfaction with the EU, the MoU makes the Italian government the most pro-China of the four large EU economies.
The new government’s change of wind might bring more investment and perhaps a greater number of trade deals to Italy. But, it comes at the expense of cutting some of its ties with Europe.
China Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Dalian, Beijing, Shanghai, Guangzhou, Shenzhen, and Hong Kong. Readers may write to firstname.lastname@example.org for more support on doing business in China.
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