Is the China-Italy Romance Fading?

The People’s Republic of China and Italy celebrated 50 years of formal diplomatic relations in 2020. And yet, while such anniversaries typically come with some added oomph and attention to push the relationship forward, the past year or so has been more of a rollercoaster of highs and lows, casting some doubt on the strength of ties between Beijing and Rome.

It is impossible to speculate about what might have been in 2020 if the coronavirus had not emerged and spread, resulting in a global pandemic. This crisis and the public diplomacy surrounding different national responses, coupled with Beijing’s more assertive policies toward Hong Kong and Xinjiang, have challenged China’s efforts to present itself as an ambassador of goodwill internationally. The unfolding of the public health crisis in Italy and the Mediterranean country’s ties to China help shed light on the limitations of Beijing’s spin efforts, as well as the political and economic tradeoffs a country can face in the conduct of its foreign policy.

Beijing’s machinations have not all been for naught, however. A year ago in 2019, China and Italy seemed to be on a high-profile, rosy trajectory. In March 2019, Chinese leader Xi Jinping traveled to Italy where he oversaw the signing of a non-binding memorandum of understanding marking Italy’s endorsement of the sweeping Belt and Road Initiative (BRI). This move made Italy the first and to date only G-7 country to back the BRI. As Giovanna De Maio wrote in a May 2020 Brookings report, Italian leaders “hoped to leverage Italy’s political weight in endorsing the BRI in order to acquire more diplomatic leeway with Beijing for potential business deals and to gain a competitive advantage over other European countries exporting to China.”

For all the symbolism of the agreement, the deepening of ties between Beijing and Rome had been years in the making and to some extent was the product of convenient circumstances. Italy’s economy was hit hard after the financial crisis of the late 2000s and the Eurozone crisis in the early 2010s. In 2009, Italy’s economy contracted by more than 5 percent. Regional disparities between Italy’s north and south deepened. Although the youth unemployment rate has dipped from its peak of more than 40 percent in 2014, financial independence is still a struggle for young Italians. The economy on the whole has stagnated over the past decade and the country’s GDP has barely notched growth since 2015. It only grew by 0.3 percent last year, according to World Bank data.

Against this backdrop, increasing economic partnerships with China appeared to be a much needed boost. Since 2013, Chinese firms have invested in and acquired Italian firms from a wide range of sectors including domestic fashion brands, motorcycle producers, luxury yachts, tire manufacturing, and home appliances. Chinese business interests have also invested in some of Italy’s highly visible assets, including popular football clubs such as AC Milan and Inter Milan. Chinese companies have also taken on sizable stakes in electric energy firms. Following Italy’s BRI MOU, there was much speculation about swift Chinese-backed development at the ports of Trieste and Genoa on the Adriatic Sea and the Mediterranean, respectively. There were concerns that Italian ports might follow in the footsteps of Greece’s Piraeus port. Chinese shipping firm COSCO purchased a majority stake in the Greek commercial port in 2016 and announced a year ago that the company would be investing an additional 600 million euros.

While much attention has been paid to Chinese acquisitions of Italian firms, Chinese investments in Italy rank third in the EU, after Germany and France. And yet, Chinese investments in Europe are on the whole trending down, dropping to 2013 levels in 2019, in part due to heightened EU screening and tightened approvals for outbound investments from China.

Nevertheless, Italy’s perceived chumminess with China has still been met with frustration in other leading European states and across the Atlantic in the United States. The Trump administration has been particularly vocal in warning against growing Chinese influence, notably in Europe. For example, during a joint press conference with U.S. Secretary of State Mike Pompeo and Italian Foreign Minister Luigi Di Maio in September 2020, Pompeo shared that the two had discussed U.S. “concerns that the Chinese Communist Party is trying to leverage its economic presence in Italy to serve its own strategic purposes.” Meanwhile, the United States and the European Union launched a new bilateral dialogue in October between the State Department and the EU External Action Service to discuss a full slate of issues related to China.

Pressures from Western partners, domestic economic challenges, and meager dividends from signing onto China’s BRI may be a cause for a reassessment of Italy’s disposition toward China. The unfolding of the coronavirus exposed underlying cracks in the China-Italy relationship.

In the early months of the pandemic in spring 2020, China made a concerted effort to brand itself as a generous partner to countries hit hard by the coronavirus — Italy among them. There were high levels of publicity in traditional media surrounding the medical supplies Beijing sent to Rome amid frustration over the lack of support and coordination from European counterparts. The publicity was also paired with Chinese active propaganda campaigns across social media networks. This constructed narrative of China as a “savior” or lifeline belies agreements made between Red Cross branches and the Italian purchase of Chinese medical equipment.

Initially, the information campaign seemed to work in China’s favor among the Italian public. Results from an SWG survey from April revealed that 52 percent of the Italian public considered China a “friend,” followed by Russia in second place with 32 percent, and the United States third with 17 percent. Data from a year earlier indicated significant gains for both Beijing and Moscow. The survey also found that 36 percent of Italians would turn to China compared to 30 percent to the United States to develop the country’s international alliances outside of Europe. But this finding may have only captured a temporary moment in time. Polls conducted by the Pew Research Center have tracked the favorable and unfavorable views of China over the years.

In Italy, unfavorable views have remained steady over the past five to ten years, hovering in the low 60s, but favorability toward China has increased from 27 percent in the mid 2000s to 38 percent in 2020. Still, a lack of confidence in Chinese leader Xi Jinping to do the right thing in international affairs reached record highs, up to 75 percent in Italy in 2020, jumping from 54 percent a year earlier.

In addition to changes in the Mediterranean country’s ruling coalition, Italian leaders may be responding to their public or may have recalibrated strategically when it comes to China. In July, Italy’s anti-corruption body removed the president of the Trieste Port Authority from his role, finding that he was in breach of conflict of interest rules, thereby seeming to void development deals for the port that featured in China’s BRI ambitions in Italy. Then in late October 2020, the Italian government used its vetting powers to veto a deal between Fastweb and China’s Huawei to develop Italy’s 5G network. The decision came after the U.K. announced it had banned the Chinese telecom giant from its telecoms upgrade. These political decisions present new stumbling blocks for China’s inroads in Italy.

Analysts have suggested that Italy’s own domestic political instability, coupled with the absence of a unified European response, are likely to hinder its bargaining position vis-a-vis China. “Italy will be better served by aligning with the rest of Europe instead of splitting it further. The country’s short-term economic motives provide a valid rationale for seeking a beneficial partnership with Beijing, but unity in the bloc is the best way to deliver this,” wrote Philippe Le Corre and Carlotta Alfonsi for The Diplomat.

Yet, with the likelihood of more economic pains ahead from the shocks of the pandemic, will Italy continue to harden on China or will short-term incentives outweigh longer term geopolitical risks?