Italy has been suffering a case of Marco Polo Syndrome. Starting in the 1980s, Italian governments courted China. Its politicians hoped to cut debt through foreign investment. The diplomats fancied they could trade on the Venetian trader’s heritage to bridge east and west. Public sector firms, run by political appointees, thought they had a natural affinity with China’s state-owned enterprises.
The syndrome – a tale of imaginary rewards and harsh disillusion —reached its peak in 2019, when Italy joined China’s Belt and Road (BRI) initiative. President Xi Jinping visited Rome in splendor and described the agreement as “the natural order of the universe.” His host, Prime Minister Giuseppe Conte of the populist Five-Star movement, signed off on it. Italy was the only G7 country to join, leading the South China Morning Post, a daily in Hong Kong, to call it a diplomatic win for China. The tenor Andrea Bocelli sang at the celebrations.
Much like Marco Polo, the inexperienced populists were in a dreamscape. Italy has woken up. To general surprise, the right-wing coalition led by Giorgia Meloni will now review the Belt and Road deal, which is due for renewal in 2024. She has called it a “big mistake” and said she has “no political will” to help China expand into Europe. In a May 28 interview, she added that it was “possible to have good relations, also in important areas, with Beijing” without being part of BRI. The signs are that a “diplomatic win” may become a strategic reverse.
First, the numbers. Official figures show Italy is running a huge trade deficit with its partner. In 2022 Italian exports to China were worth €16.4bn ($17.6bn) against imports worth €57.5bn — a sum that has almost doubled since the signature year of 2019. No payoff there.
Next, security. A parliamentary committee in Rome identified 400 Chinese groups holding stakes in 760 Italian firms in sectors deemed highly profitable or strategic. Intelligence officials then realized how rapid and effective the Chinese investment drive has been. A pushback has started.
The Meloni government is taking a close look at Pirelli, one of Italy’s industrial titans, whose biggest shareholder is the Chinese firm Sinochem, which holds a 37% stake. Under a new corporate plan, Sinochem could end up nominating most of the board and picking the next CEO. Officials may invoke “golden power” investment rules to block it.
These special powers allow Italian governments to limit the exchange of sensitive information and to curb voting rights, among other regulatory measures. Firms under scrutiny include Vodafone Italia, which has a tie-up with Huawei, the Chinese telecoms company run by a former People’s Liberation Army officer.
Officials are also looking at the State Grid of China, a power behemoth, which holds shares in a range of Italian energy firms through an investment fund. They may ban security cameras made by Hikvision and Dahua, two firms key to China’s surveillance state.
The foreign minister, Antonio Tajani, a moderate figure on the Catholic, monarchist wing of Italian conservatism, told the Rome daily Il Messaggero that it was a matter of pragmatism.
“The rules must be equal for all. No to social and environmental dumping, no to unfair competition, and no to taking away know-how instead of long-term investment,” he said.
To be fair, the wake-up process began under the technocrat prime minister, Mario Draghi. His government blocked Shenzhen Investment Holdings, a vehicle for state-sponsored acquisitions, from buying a stake in LPE, an Italian firm making semiconductors with military uses.
Under Draghi’s tutelage, the debate began to change. Defense officials were concerned at China’s interest in buying a foothold in the port of Taranto, home to a historic naval base on NATO’s southern flank. Chinese ambitions also focused on Trieste, which is seen as a nodal point for the Belt and Road push into Europe.
Finally, there were the politics. As usual, China’s influence-building was clumsy. Beijing’s ambassador, Jia Guide, hinted at reprisals and said far-sighted leaders should stay on the right side of Beijing. Journalists at the leading financial daily, Il Sole-24 Ore, complained of paid propaganda in an advertorial supplement of news about the People’s Republic. China’s image is not helped by its problems with the Vatican and its dismal human rights record.
Meloni is likely to let the Belt and Road deal drop. It does not fit into her big picture. She wants Italy to line up with the United States, backs Ukraine, scorns Russia, and is committed to the NATO alliance and the European Union. Conveniently, that also puts some of her coalition partners on the back foot. Deputy premier Matteo Salvini, a longtime Putin admirer, is reduced to calling for “360 degrees trade.” Even Salvini knows authoritarian rule has lost its luster.
Perhaps it was Covid-19 that shook Italy out of its reverie. The country paid a high price but there was little, if any anti-Chinese racism. There was, however, a sense of shock. Few will forget the image of Andrea Bocelli, who had previously feted the BRI deal, standing alone in front of Milan Cathedral, to sing in homage to the suffering.
Michael Sheridan is the author of ‘The Gate to China: A new history of the People’s Republic and Hong Kong’ published by HarperCollins and Oxford University Press (USA). He was the Far East Correspondent of The Sunday Times for 20 years and was the Independent’s Rome Correspondent.
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.
