China’s Belt & Road Initiative Reaches Italy: Breaching the G7 Western fortress

Yesterday President Xi Jinping concluded his week-long tour to Italy, Monaco and France. Coming on the eve of second summit of his pet project Belt and Road Initiative (BRI) next month, this seems to have made major inroads into the very sanctum sanctorum of the U.S.-led trans-Atlantic alliance involving world’s most industrialised economies namely, the G7. Italy became the first of the G7 to sign up to the BRI.

 For China’s BRI as well this marks a fundamental shift in its ever evolving character. BRI had so far been focused on building infrastructure projects only inside developing and least developed countries.  Italy is not just one of the most advanced economies, it the fourth largest economy in the European Union (EU) — after Germany, the United Kingdom and France — and eighth largest in the world. Its partnering with the BRI therefore has serious implications both for China’s ascendance as also for the sustenance of Western leadership of global governance.

 The angst inside Trump administration is palpable. Without doubt, Italy’s endorsement of the BRI threatens to undercut President Trump’s ‘maximum pressure’ strategy in upping the ante by raising tariffs on U.S. imports from China that had pushed China’s into its slowest growth rate in last four decades. In the longer run, this surfeit of finance and infrastructure building by Chinese companies in more than 80 countries across Europe, Eurasia, African and the Middle East, and now in Italy, poses a formidable challenge to over two-centuries of Western economic supremacy and to their singular control on global financial institutions.

This explains what made White house spokesperson Garrett Marquis tweet last week saying, “Italy is a major global economy and great investment destination. No need for Italian government to lend legitimacy to China’s infrastructure project,” Later, he was more circumspect when he told Financial Times that China’s investments must be “in line with accepted international standards and best practices.” Various American leaders have talked of “debt traps” and vice president Mike Pence has delivered series of sharp speeches criticising China’s style and substance. At stake remain the United States’ trillions of dollars of monetary and military investments around the world that have witnessed crisis of credibility with China’s unprecedented rise in last four decades.

Closer home, EU has also been feeling the heat of China’s BRI projects across Croatia, Czech republic, Hungary, Poland, Greece, Malta and Portugal. Europe’s 16+1 grouping — that include 11 EU members — have come to be the new locomotive of China’s cross-country projects across the central and eastern European states; each one reinforcing China’s expanding footprint and luring others who may be still sitting on the fence. Examples of Greece and Portugal, where China has invested billions dollars since their financial crisis, have become role models for other European states that urgently need revamping their ageing infrastructure to boost for their laggard economic growth and development. The BRI juggernaut has surely germinated anxieties amongst major European powers. European Parliament last September had warned of how China’s BRI “could create large debts” and last week European Commission called China “an economic competitor in pursuit of technological leadership and systemic rival promoting alternative models of governance.”

 Inside Italy as well, the last few weeks have witnessed some fire-fighting within various partners of ruling coalition. Its far-right partner League Party has publicly expressed need for “further reflection” in engaging China’s BRI.  Its Member of Parliament and undersecretary for foreign affairs, Guglielmo Picchi, recently said “Right now, I do not think we should proceed with the signature.” It is interesting to note that Italy’s Luigi Di Maio, the leader of the anti-establishment Five Star Movement — which is both anti-American as also Eurosceptic — has also been found supporting China’s BRI.

 In face of these fast changing kaleidoscopic crosscurrents within Italy’s domestic politics as also in face of strong opposition from the United States and criticism from various European countries, Italian leaders appear hopeful of signing at least a ‘non-binding’ MoU which would still imply Italy joining the BRI. These Italian leaders explain their joining China’s BRI as aimed at addressing the problem of their continuing trade deficit by securing more exports to China and accessing AIIB funds for Italian development projects. To begin with, taking the leap of faith using baby-steps in engaging BRI, Italy is expected to procure contracts for infrastructure projects worth few billion dollars. China is especially interested in engaging Italian ports turning these into its gateway to Central and Western Europe.

 Indeed, like Italy, each of the U.S. allies have been drifting gradually towards Beijing’s lure of high-speed mega projects. In what appears to be a defensive stance in anticipation of the likely outcome of Xi’s visit to Italy, French President Emmanuel Macron last week reiterated the urgent need for EU to evolve a “coordinated approach” towards China. “It’s a good thing that China is participating in the development of many countries, but I believe in the spirit of equality, reciprocity. The spirit of equality means respecting the sovereignty of nations.” Rather than assertion of traditional French pride, this sounded more like cry for help. No doubt, British Prime Ministers Theresa May had also refused to sign any endorsement of the BRI during her visit to Beijing last year.  But, that was driven more by her crisis at home making her position as national leader untenable. On the other hand, in spite of expressed concerns from the Obama administration, Prime Minister David Cameron had decided in favour of becoming the founding member of China’s Asian Infrastructure Investment Bank (AIIB) that will now be financing BRI projects in Italy.

 Slow growth rates across Europe indeed are very likely to continue making them vulnerable to Chinese offers of quick finance and turn-key projects. EU too has had its ambitious plans like its Trans-European Transport Network plan that seeks to connect Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine. But these projects to connect six ports and 11 logistic centres involve building of over 4,800 km of road and rail that require and estimated $15 billion. This again could potentially invite Chinese investments.

 But the pertinent question also is as to what does such a rapid outstretching imply for China’s future? There have also been contrarian voices audible inside China seeking audit and assessments of these investments abroad. So China has been constantly revisiting and reassessing BRI and it has equally been a hard learning process for China’s leaders as well. Spokesperson for China’s recently concluded National People’s Congress in Beijing could not have said this any better. While claiming how 152 countries and international organisations now have signed partnerships with BRI he qualified it by saying: “Of course, like any international cooperation, some problems and challenges may crop up. With experience it will improve.” China’s last forty years of reform and opening up had transformed it beyond disbelief for its founding fathers. World today seem to be moulding China’s rise in much deeper fashion than China’s moulding the community of shared human future.

(The author is professor, Jawaharlal Nehru University (New Delhi) and senior fellow, Institute for National Security Studies Sri Lanka (Colombo))

An edited version of this article had appeared in Ceylon Times. 

Aditi Bhaduri

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