Italian Horse

Italy May Split With Allies and Open Its Ports to China’s Building Push

By Jason Horowitz and Jack Ewing

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.

ROME — 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.
A first step toward Italy’s cooperation on the Chinese initiative, One Belt, One Road, would be the signing of a memorandum of understanding when Xi Jinping visits Rome this month, Michele Geraci, Italy’s under secretary in the economic development ministry, said in an interview on Wednesday.
“We are not yet as of today 100 percent sure,” said Geraci, one of the lead negotiators on the agreement. 

“But I think there is a likely, good probability.”
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.
In recent months, top American diplomats in Italy have expressed concerns to leaders of Italy’s new government about the prospect of such a deal. 

Geraci said he and other Italian officials had considered those concerns carefully before deciding to proceed.
Asked on Wednesday about the potential agreement, an official at the United States Embassy in Rome referred to comments by Garrett Marquis, a National Security Council spokesman, in the Financial Times. 

In those remarks, Mr. Marquis said, “We are skeptical that the Italian government’s endorsement will bring any sustained economic benefits to the Italian people, and it may end up harming Italy’s global reputation in the long run.”
Geraci noted that there was currently very little Chinese investment in Italy compared with in the United States, and he sought to allay any concerns about predatory intentions by China.
“I know China very well, and we are more able than others to spot any risks,” he said.
He also said the estimated investments, a few hundred million euros in Italy’s ports, were essentially minuscule.
“We are in no way tilting the geopolitical axis,” Geraci said, emphasizing that nothing in the deal would shift Italy away from its alliance with the North Atlantic Treaty Organization or the European Union.
He argued that cooperating with China on the infrastructure push would allow Italy, which is saddled with enormous debts and stuck at about zero growth, to export fashion, machinery, food, chemical and other goods to China in greater numbers. 

He said Italy’s current exports to China paled next to those of Germany and France. 

France, he said, sells seven times as much wine to China, and even Ireland exports more food and beverages there.
Those countries have been aggressive in pursuing trade with China, but they have also been wary of One Belt, One Road investment in their nations.
Germany and other countries have erected obstacles to foreign investment after Chinese companies, with close ties to Beijing, bought big stakes in the carmaker Daimler, Deutsche Bank and Kuka, a German maker of industrial robots.
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.
Michele Geraci, Italy’s under secretary in the economic development ministry. “It is a very fertile area for investment,” he said of the potential influx of money from China.

European leaders’ resistance to Chinese investment may have slowed, but it has not stopped. 

Direct investment by Chinese companies in the 28 countries of the European Union plunged 40 percent in 2018 to €17.3 billion, or $19.6 billion, according to a study published this week by the Rhodium Group, a consulting firm, and the Mercator Institute for China Studies in Berlin.
Much of the decline reflected the reduced buying power of Chinese companies because of slower economic growth. 

And Chinese investments in Germany still rose €400 million, to €2.1 billion, last year with the acquisitions of a pharmaceutical company and an auto industry supplier, the study found.
Money from China is still welcome in the poorer countries of Eastern Europe that are eager for investment. 

Chinese money is helping to finance improvements to the rail line between Budapest and Belgrade and Black Sea port facilities in Bulgaria.
Chinese investments in the relatively small economies of Eastern Europe fell last year to €2 billion from €3 billion, according to the study. 

Since 2000, Chinese investment in the region has been about €7 billion, or about a third of what has gone to Germany. 

Hungary attracted about €2.4 billion of that sum, much more than any other Eastern European country.
Italy has ports that are attractive to China in Trieste in the country’s northeastern region, in Genoa on the Ligurian coast and in Palermo, a Sicilian city close to Africa, where China has invested deeply.
“All of these ports have the benefit of being closest to Africa,” Geraci said. 

“Without being in Africa,”
For now, China’s most important port in Europe is the Piraeus port outside Athens, where the state-backed shipping conglomerate Cosco had taken control.
Italy wants in on the action.
Already this week, with the framework agreement pending, the port authority of Genoa is proceeding with a deal to create a new company with the China Communications Construction Company, Geraci said.
“One way for us to increase trade values is to first increase investment” from China, he said.
“This is done by these memorandums, One Belt and One Road. It is a very fertile area for investment.”
The office of President Sergio Mattarella confirmed on Wednesday that Xi Jinping will meet with him in Rome on March 22 and be honored with a state dinner that evening.
Xi is also scheduled to meet with Prime Minister Giuseppe Conte.
Geraci said China’s leader had also expressed a desire to visit Palermo.
Geraci spent a decade in China teaching economics and writing financial columns before being called back to Italy in 2018 by Deputy Prime Minister Matteo Salvini, the populist leader, to work in the government with a concentration on China.
During his time there, other Italian officials seemed to warm up to the country.
In May 2017, the Italian prime minister at the time, Paolo Gentiloni of the Democratic Party, was one of the few Western leaders to attend the One Belt, One Road conference in Beijing.
“Italy can be a protagonist in this great operation that China cares about so much,” Gentiloni said at the time.
“It is a great opportunity for us, and my presence here speaks to how important we consider it.”
But Gentiloni, a supporter of the European Union who believed in keeping a united European front, did not ultimately sign on for Italy to cooperate in the infrastructure initiative.
The populists now in control of Italy’s government ran against Brussels and seem less interested in maintaining such unity.
“The big change,” Geraci said, “is wanting to do things.”