China’s only G7 member appears poised to withdraw from the Belt and Road initiative, with its defense minister condemning the decision to join as an ‘atrocious act’.
China's only G7 member appears poised to withdraw from the Belt and Road initiative, with its defense minister condemning the decision to join as an 'atrocious act'.
Italy Considers Walking Back from the Belt and Road Initiative
Italy is at the crossroads of a decision regarding its involvement in the Chinese infrastructure investment scheme known as the Belt and Road Initiative. The country’s Defense Minister, Guido Crosetto, recently expressed his dissatisfaction with Italy’s participation, calling it an “improvised and atrocious act.” The choice to join the initiative, made by then-Prime Minister Giuseppe Conte in 2019, has now put Italy in a delicate position. Prime Minister Giorgia Meloni has until December to decide whether to continue Italy’s involvement or let the agreement expire by March 2024.
While Meloni has not yet publicly stated her position, Crosetto’s comments offer a strong indication of Rome’s inclination. He emphasized the need to find a way to disengage from the Belt and Road Initiative without causing damage to bilateral relations. Italy’s membership in the initiative made it the largest economy, outside of China, and the sole G7 country to sign onto the program. However, Meloni has emphasized that strong economic ties with China do not necessarily require participation in the Belt and Road Initiative.
“The paradox of the Belt and Road Initiative is that we’re the only nation in… but we are not the nation that has the best trade with China,” Meloni pointed out in an interview with Fox News. This suggests that Italy can maintain good relations with China without being part of the initiative. Given Italy’s trade deficit with China, which has increased from $20.6 billion in 2019 to $45.7 billion in 2022, some officials have questioned the effectiveness of the Belt and Road Initiative in resolving Italy’s economic challenges.
Unveiling the Belt and Road Initiative
Launched by China in 2013, the Belt and Road Initiative aims to revive historical trading networks between China and Europe, such as the overland “Silk Road” and maritime routes. Approximately 150 governments have signed onto the initiative, according to China’s government. However, Western nations, particularly the United States, view the program as an attempt by Beijing to expand its economic influence globally. They warn that participating countries may find themselves trapped in debt.
Concerns over the initiative’s efficacy have arisen as well. Chinese banks were instructed to reduce lending for Belt and Road projects, as it became evident that many ventures were costly, behind schedule, and unlikely to generate sufficient returns. These challenges raise doubts about whether the Belt and Road Initiative has met China’s expectations.
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Italy’s Trade Deficit with China
Italy’s substantial trade deficit with China has become a focal point in the debate over the Belt and Road Initiative. Crosetto lamented that Italy’s involvement in the project had not resolved the trade imbalance, stating, “We exported a load of oranges to China; they tripled exports to Italy in three years.” In 2022, Italy’s trade deficit with China reached $45.7 billion, compared to $20.6 billion in 2019, according to ANBLE. Despite a global trade deficit of $34.2 billion for Italy last year, excluding energy, the country would have enjoyed an $88.4 billion trade surplus.
Curiously, the first three months of this year saw a surge in Italian exports to China, totaling $7.8 billion as opposed to $4.1 billion the previous year. Analysts initially sought to understand the cause behind this unexpected growth, with some speculating that Italy’s participation in the Belt and Road Initiative was finally yielding positive results.
However, the reality was even more peculiar. The surge in Italian exports to China was primarily driven by pharmaceuticals, specifically a drug used for treating liver disease and gallstones. Chinese consumers had turned to this medication as an alternative method for preventing COVID-19.
The Decision Looms
Italy’s decision regarding the Belt and Road Initiative carries significant implications. It not only affects the country’s economic ties with China but also bears geopolitical consequences. While Prime Minister Meloni has emphasized that close economic relations can be maintained without participating in the initiative, the debate surrounding Italy’s involvement reflects the complex balancing act the country faces.
As Italy weighs its options, it must carefully consider the long-term implications and the potential benefits or drawbacks. Ultimately, a decision on whether to walk back from the Belt and Road Initiative will shape Italy’s future relationship with China and its position in the global economic landscape.
