In 2019, during Chinese President Xi Jinping’s visit to Rome, Italy shocked the United States and Europe by becoming the first Group of Seven (G7) country to join China’s Belt and Road Initiative (BRI), the largest ever global infrastructure undertaking. As we detailed in our CFR-sponsored Independent Task Force report on the BRI, under the auspices of this initiative, Chinese banks and companies have financed and built everything from power plants, railways, highways, and ports to telecommunications infrastructure, fiber-optic cables, and smart cities around the world. With its five-year memorandum of understanding up for renewal in March 2024, Italy appears poised to withdraw from the BRI, a reflection of frustrations with the initiative’s unmet promises and the country’s strategic reassessment of China.
It is not difficult to see why the BRI enticed Italy. Having suffered through three recessions within a decade, Italy was looking to attract investment and expand Italian exports’ access into China’s huge market. At the time, many Italians felt abandoned by Europe, while its populist government was skeptical of the European Union (EU) and more than willing to turn to China to fulfill its investment needs. Italy saw an opportunity to leverage its political weight to sign on to the BRI in hopes of beating out others for Chinese attention and investments.
Xi had his own reasons for courting Italy. The country served as a major terminus along the ancient Silk Road, and Italy’s inclusion in the BRI helped Xi link his signature foreign policy initiative to a golden era of Chinese prosperity and influence. There are also enduring connections between the two countries: Italy is home to the largest Chinese population in Europe, while the countries share deep trade linkages in the production of fabrics, leather goods, and more. As China looked to increase its influence in Europe, drive a wedge in the EU, and sow divisions between Washington and Brussels, Italy appeared as a weak point it could press.
It soon became apparent, however, that the BRI would not meet Italian hopes and expectations. Under the auspices of the BRI, Italy signed numerous institutional arrangements with China, covering everything from double taxation to recognition of certain sanitary requirements for pork exports, cultural property and heritage sites, and minor commercial agreements. But these arrangements failed to fundamentally change the trajectory of Italy-China economic ties. Since Italy joined the BRI, its exports to China have increased from 14.5 billion euros to 18.5 billion euros, while Chinese exports to Italy have grown far more dramatically, from 33.5 billion euros to 50.9 billion euros.
Chinese investment in non-BRI countries in Europe has far outstripped its investments in Italy, with Chinese FDI in Italy dropping from $650 million in 2019 to just $33 million in 2021. Another database reports that China has invested $24 billion in Italy since 2005, but only $1.83 billion of that was made following Italy’s decision to join the BRI. Italy’s experience demonstrates that joining the BRI does not necessarily confer a country’s special status with China or guarantee it more trade and investment with China than would occur absent BRI.
As it became clear that the BRI would not be an economic panacea, the Italian government began to reassess whether it should continue its membership. For the past year, Italian Prime Minister Giorgia Meloni has indicated that joining the BRI was a “big mistake” that she intended to correct by withdrawing from the initiative. Meloni cited the lack of benefits that accrued to Italy after joining the BRI, noting that “Italy is the only G7 member that signed up to the accession memorandum to the Silk Road, but it is not the European or Western country with the strongest economic relations and trade flows with China.” Most recently, Italian Defense Minister Guido Crosetto called Italy’s decision to join the BRI an “improvised and atrocious act.”
More fundamentally, Italian withdrawal from the BRI would reflect the growing transatlantic convergence on the challenge China poses. European countries increasingly view China as a rival rather than as a partner or competitor, while President of the European Commission Ursula von der Leyen recently argued that “the Chinese Communist Party's clear goal is a systemic change of the international order with China at its center,” pointing to the BRI as evidence. Beijing’s support for Russia in its war against Ukraine has led many European governments, including Italy’s, to shed their illusions about China. Central and Eastern European countries, which had traditionally sought closer ties to China through the “17+1” cooperation mechanism, have also made this shift.
Reflecting this change in strategy toward China, as a candidate Meloni stated that “there is no political will on my part to favor Chinese expansion into Italy or Europe.” Since taking office, she has been a staunch supporter of Ukraine, while during their recent meeting Meloni and U.S. President Joe Biden committed to “strengthen bilateral and multilateral consultations on the opportunities and challenges posed by the People’s Republic of China” and emphasized “the vital importance of maintaining peace and stability across the Taiwan Strait.”
Italy’s withdrawal would deal another blow to the BRI, which has already been scaled back as recipient countries grapple with debt distress, Chinese banks seek to reduce their exposure to risky loans, and China grapples with mounting domestic economic challenges. European countries are increasingly focused on “de-risking” their economies and will be reluctant to increase their economic dependence on China, making it unlikely that any major economy will soon join the BRI.
Putin’s invasion of Ukraine and Beijing’s alignment with Moscow have also restored geopolitics to a preeminent position and made European countries more skeptical of Beijing’s intentions. Russian President Vladimir Putin’s plans to attend Beijing’s upcoming Belt and Road Forum have also made clear the geopolitical nature of the BRI. Italy’s reversal on the BRI should therefore be seen as driven less by economic considerations and more by the new geopolitical reality facing Europe.