How Covid-19 could reshape the Italy-China relationship

In March 2019, when Italy became the first G7 country to sign a Memorandum of Understanding (MoU) to join China’s Belt and Road Initiative (BRI), the bilateral relationship with China entered a new phase and brought in high expectations for supporters and critiques alike in terms of financial, economic and cultural fallout. However, a year later, the dynamics shaping the Sino-Italian relationship are not as one-sided as could be expected due to domestic and international tectonic forces ripping Italy apart on this China case.

Firstly, the Italian political landscape was completely redefined in August 2019, when a crisis hit the Five Star Movement / Northern League coalition that was leading the country then. Secondly, the relationship between Rome and Brussels – and more generally the friendship with Washington – were put under stress by the rapprochement with Beijing. Even if these factors were already constituting a well-known challenge, their complexity and relevance are being felt even more sharply following the outbreak of Covid-19.

The successive Italian governments’ take on China

On August 2019, leader of the Northern League Matteo Salvini decided that the moment was right to call for general elections in Italy, in an attempt to break the deadlock in which the coalition government that his party had formed with the Five Star Movement had been stuck in. Specifically, the Former Deputy Prime Minister and Minister of the Interior officially presented a motion of no-confidence against Prime Minister Giuseppe Conte, opening a critical juncture under the hot sun of the Italian political landscape. Even though Salvini aimed at getting a chance to shape the new government, he underestimated the will of the leaders of the Five Star Movement and the Democratic Party to overcome their ideological differences and to form a new majority, allowing for the birth of a second Conte-led government.

The seriousness of this political earthquake inevitably resulted in the reshuffling of the government, and the redistribution of all political offices and functions. The resulting new balance of power forced a closer political attention to domestic issues and a shift in focus away from relations with foreign partners, especially with China.

In addition, it should be noted that key figures, such as former Undersecretary of State to the Ministry of Economic Development, International Trade and Investment Michele Geraci, an MIT-trained economist and China scholar who played a decisive role in the rapprochement between Beijing and Rome, are missing from the new government. A particularly noticeable absence, Geraci supported the creation of a fertile environment for the signing of the BRI MoU and was instrumental to the adoption of several major trade agreements: Rome would offer technological know-how and top quality “Made in Italy” products in exchange for Chinese investments in infrastructure projects (such as ports and railways), thus providing China with an additional gateway into Europe in virtue of Italy’s strategic position in the Mediterranean Sea.

However, even if new leaders obviously imply new priorities, it was not until the spread of the Covid-19 virus that the divergent positions on China emerging from within the Italian government began to get noticed by analysts and commentators. In fact, heated debates arose in relation to the implications for Italy of China’s“mask diplomacy”.

Starting in March 2020, when the sanitary emergency became serious in Italy, and while members of the European Union initially imposed restrictions on masks exports to Rome, 30 tons of medical equipment were delivered by the Chinese Red Cross, a task-force of doctors arrived from China, and several companies such as ZTE and Huawei contributed to the fight against the Covid-19 epidemic. Respectively, while the former offered 2,000 masks to the city of L’Aquila, where one of its 5G centers is located, the latter offered to provide cloud computing services to Italian hospitals in order to link them to specialists in Wuhan. Even Alibaba did not miss the chance to provide 1 million masks and 100,000 test kits, these being only a few examples to be considered along with assistance offered by local administrative entities and smaller organizations from China in solidarity with Italy’s plight.

In this context, Italian Foreign Minister Luigi Di Maio showed gratitude and satisfaction with the Sino-Italian friendship rooted in the Belt and Road Initiative, but his enthusiasm has not been shared across the political spectrum, with many Democratic Party members openly criticizing China’s use of health assistance to divide the West as well as Di Maio’s perceived naiveté about it. The Democratic Party line was further emphasized by the words of Senator Alessandro Alfieri, who argued that Italy’s geopolitical compass should remain firmly pointed towards the European Union and the Atlantic Alliance. 

Alfieri’s words echo those of many of his Democratic Party’s colleagues in affirming the belief that China has two main goals:

1. propping up its soft power through health diplomacy, to counter the negative impact on its image in Europe of the fact that the outbreak originated in China ;
2. regaining momentum for BRI-linked projects, which have not been fully developed yet. To mention a few examples, the ports of Genova and Trieste could be crucial nodes in the Maritime Silk Road, while the rolling-out of 5G in the country would give new impetus to the Digital Silk Road.

In a word, the dominating opinion within the Democratic Party, which has largely been opposed to China’s influence, is perfectly aligned with that of Brussels and Washington. Which should not come as a surprise to Italians, who have been ruled by Democrats over the recent decades and have expressed their discontent over Brussels and Washington’s excessive influence over the destiny of European nations.

Rome stuck in the middle of polarized narratives

In addition to diverging opinions on China within the coalition government formed by the Five Star Movement and the Democratic Party, another important factor posing a serious challenge to further developing bilateral relations between Beijing and Rome remains Italy’s status as a founding member of the EU.

The country continues to be placed at a crossroad of polarized narratives which deploy themselves in the wider context of the US-China rivalry. The EU, which has been for years the preferred battleground for this rivalry, has looked with skepticism at Italy’s decision to join the BRI in 2019, and is now condemning some of the Chinese approaches made during the Covid-19 crisis.

Moreover, the European Commission issued on March 25 a new set of guidelines to coordinate member states’ approach to foreign direct investments in order to protect strategic assets from “predatory behavior”, particularly in the light of collapsing stock markets and hence companies’ valuations. On April 8, the Italian government amended the “Golden Power Law” with a decree, in order to adhere to the European guidelines and to further control transactions – in particular those which can be considered a threat to the independence of the energy, transportation, communication and technology sectors. The move was made parallel to discussions to negotiate aid with Europe, highlighting Brussels’ long-standing wish (but so far largely ineffective) to define every member state’s position towards China, especially with regards to the hot topic of 5G. As argued in a previous article, the new World Order which will emerge from the Covid-19 pandemic will create a greater need for digital infrastructures and technologies which, at the moment, can only be met by the likes of Huawei which, in turn, could drive technological breakthroughs and wider adoption along the Digital Silk Road.

Nevertheless, as much as Italy could benefit prior to the outbreak of Covid-19 from a greater financial and commercial convergence with China to regain ground in the international arena, after the virus emergency, it could become essential to establish strategic partnerships in order to speed up economic recovery. Ratings agency Fitch indeed cut the country’s credit rating to BBB-minus and estimated that the shutdown of the national economy may cause an 8% contraction in GDP and the public debt to climb to 156% of GDP in 2020.

To overcome these turbulent times, Italy will need to equip itself with stronger and more effective political capabilities to formulate an independent and accurate vision to embrace the future, an Italian future, and will also need to put in place partnerships which can support turning that vision into actual plans. Faced with the lack of a credible alternative in Europe or across the Atlantic, Rome may not have any choice but to look East and seriously consider furthering its ties with China.

Picture credits: Galileo Galilei Italian Institute