Italy sends mixed signals on China port investment deal

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The port at Gioia Tauro, Italy. Italian officials are poised to take a first step toward accepting Chinese infrastructure investment as part of Beijing’s One Belt, One Road initiative.

Italy’s coalition government appears undecided over whether it will sign an agreement with China endorsing its “Belt and Road” infrastructure investment drive, amid pressure from the U.S. to stand down.

Guglielmo Picchi, undersecretary of state, said further reflection was needed before signing the proposed agreement. “As of today, I don’t think we should proceed with the signing,” he tweeted Wednesday.

Another undersecretary in the economic development ministry, Michele Geraci, told the Financial Times and the New York Times that while the negotiations aren’t over, it was possible that the deal could be signed when Chinese President Xi Jinping visits Italy later this month.

China’s trillion-dollar “Belt and Road” initiative aims to expand commerce by building ports, railways and other infrastructure across 65 countries from the South Pacific through Asia to Europe and Africa. Projects under the initiative have faced complaints that they leave host countries with too much debt, and with too little work going to local companies.

Italy fell into recession at the end of 2018 for the third time in a decade and the government is eager to find ways to boost the economy and revive the stalled construction sector.

So it’s not entirely shocking (at least from a historical perspective) that Italy might become the first major western economy to sign up to the Belt and Road initiative, the controversial Chinese infrastructure program aimed at improving the links between Asia, Europe and Africa, according to Bloomberg.

The trading relationship between Italy and China goes back a long time. In the 13th century, Marco Polo, a Venetian merchant and explorer, was the first European to leave a detailed chronicle of his experience in the Far East. For centuries, precious fabrics traveled on the Silk Road from China to the Italian cities of Venice and Lucca, where they were transformed into luxury garments.

It’s not clear yet how far any MOU with China would go. Italy’s foreign ministry wants to make sure the document complies with EU guidelines and strategy to appease European partners. China may go along with a vaguer document, such is the prize of getting a G-7 country on board.

The New York Times says, in a move certain to cause consternation among American officials and leaders of the European Union, Italy appears poised to help China extend its vast global infrastructure push deeper into Western Europe, part of Beijing’s sweeping plan to advance its economic interests and influence around the world.

If Italy takes such a step toward encouraging Chinese investment, it will be the first member of the Group of 7, the world’s richest economies, to actively participate in Beijing’s effort to build cargo hubs around the world to fuel its own economic growth.

Italy abstained this month when the European Union voted to approve a regulation giving countries more power to scrutinize and block foreign investment, especially when it is supported by a foreign government. But the regulation, clearly written with China in mind, allows countries to let foreign money in if they choose.

A number of European Union states have signed MOUs with China, including Croatia, Czech Republic, Hungary, Greece, Malta, Poland and Portugal. If Italy signs, it would be the first Group of Seven major industrialized nation to do so.

An EU spokesperson in Brussels said the EU was cooperating with Beijing on the initiative, but added that this was “on the basis of China fulfilling its declared aim of making it an open platform which adheres to market rules, EU and international requirements and standards”.

Source: Bloomberg/Reuters/The New York Times

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