Italian Horse

Italy is playing with fire when it comes to China

• Italy is to be the first major European economy to join China’s Belt and Road Initiative
• The move exacerbates tensions between Italy and its neighbors.
• France wants a coordinated, united approach to China.

By Holly Ellyatt

Italian Premier Giuseppe Conte meets Chinese dictator Xi Jinping before to sign trade agreements on Belt and Road Initiative, on March 23, 2019 in Rome, Italy.

Italy’s decision to be the first major European economy to join China’s massive investment and infrastructure project, the Belt and Road Initiative (BRI), can only exacerbate tensions between Italy and its neighbors.
On Saturday, Xi Jinping and the Italian government signed a non-binding agreement for Italy to join China’s trade route and inked a total of 29 deals worth 2.5 billion euros ($2.8 billion) across an array of sectors. Italy hopes the project will boost its sluggish economy but the deal raised more than just eyebrows in Europe and the U.S. with officials criticizing the move.
The BRI is something of a 21st century Silk Road with the sea and land route stretching from Asia, the Middle East, Africa and now into Europe — with Italy being the first Group of Seven (G-7) country to sign up to the global infrastructure and development project.
China sees the BRI as a way to export more of its goods to lucrative markets; its critics see the initiative as a vanity project that increases indebtedness among its participating countries. 

The BRI gives Chinese companies unfettered access to other markets and economies, but that its own is still largely closed to foreign investment.
At the heart of concerns is that the BRI is seen as a way for China to spread its geopolitical influence — an acute concern for a Europe increasingly uncertain of its place in the world.
As such, Italy’s latest move has been seen as undermining Europe’s ability to compete with China’s economic might. 

Italy’s bilateral deal with China also came a day after French President Emmanuel Macron called for a coordinated European approach to the superpower.
Italy’s anti-establishment coalition government has already clashed with Brussels over immigration and its spending plans. 

Its deal with China is likely to be another source of tension.
“It’s clear that this does undermine Europe’s and the West’s ability to stand up to China,” Federico Santi, senior Europe analyst at Eurasia Group, told CNBC Tuesday. 

“This will be another source of friction between Italy and Europe which, ultimately, will be to the detriment of Italy itself,” he added, although he noted that the terms of the agreement between Italy and China remained to be seen.
Italy and China have played down concerns. 

Italy’s Deputy Prime Minister Luigi Di Maio told CNBC that the accord was “nothing to worry about” and Xi tried to assuage concerns in Europe too, saying on Tuesday during a visit to France that “cooperation is bigger than competition between China and Europe.”
Other EU leaders like French President Emmanuel Macron are keen for the EU to have a tougher approach to China and stress the need for reciprocal commercial ties. 

On Tuesday, Macron said while he wants the EU to deepen its ties with China, there must be a united European front when it comes to the superpower.
To emphasize this point, he invited German Chancellor Angela Merkel and European Commission President Jean-Claude Juncker for talks with Xi in Paris on Tuesday. 

There, Macron urged China to “respect the unity of the European Union and the values it carries in the world.” 

Juncker stressed that European companies should find “the same degree of openness in the China market as Chinese ones find in Europe.”
Merkel, for her part, said that Europeans wanted to take part in the Belt and Road Initiative but that “must lead to a certain reciprocity, and we are still wrangling over that bit.”
As Macron said in Brussels last week, “the time of European naïveté is ended” as he called for the EU. For many years we had an uncoordinated approach and China took advantage of our divisions.”
With Italy pursuing its own deal with China regardless of its neighbors’ concerns, China could be able to make the most of those divisions again.

Italian Horse

Italy takes a shine to China's New Silk Road
BBC News

China has bought up a majority stake in the Greek port of Piraeus - and Italy might be next

China's president lands in Rome on Thursday, where he is expected to sign a landmark infrastructure deal that has raised eyebrows among Italy's Western allies.
Xi Jinping's project is a New Silk Road which, just like the ancient trade route, aims to link China to Europe.
The upside for Italy is a potential flood of investment and greater access to Chinese markets and raw materials.
But amid China's growing influence and questions over its intentions, Italy's Western allies in the European Union and United States have concerns.

By land and by sea
The New Silk Road has another name -- the Belt and Road Initiative (BRI) -- and it involves a wave of Chinese funding for major infrastructure projects around the world, in a bid to speed Chinese goods to markets further afield.
It has already funded trains, roads, and ports, with Chinese construction firms given lucrative contracts to connect ports and cities -- funded by loans from Chinese banks.
The levels of debt owed by African nations to China have raised concerns in the West -- but roads and railways have been built that would not exist otherwise:

• In Uganda, Chinese millions built a 50km (30 mile) road to the international airport
• In Tanzania, a small coastal town may become the continent's largest port
• In Europe too, Chinese firms managed to buy 51% of the port authority in Piraeus port near Athens in 2016, after years of economic crisis in Greece

Italy, however, will be the first top-tier global power -- a member of the G7 -- to take the money offered by China.
It is one of the world's top 10 largest economies -- yet Rome finds itself in a curious situation.

The collapse of the Genoa bridge in August killed dozens of people and made Italy's crumbling infrastructure a major political issue for the first time in decades.
And Italy's economy is far from booming.
The country slipped into recession at the end of 2018, and its national debt levels are among the highest in the eurozone.
Italy's populist government came to power in June 2018 with high-spending plans but had to peg them back after a stand-off with the EU.
It is in this context that China's deal is being offered -- funding that could rejuvenate Italy's grand old port cities along the Maritime Silk Road.
Italian Prime Minister Giuseppe Conte has mentioned the cities of Trieste and Genoa as likely candidates.
"The way we see it, it is an opportunity for our companies to take the opportunity of China's growing importance in the world," said Italy's undersecretary of state for trade and investment, Michele Geraci.
"We feel that amongst our European partners, Italy has been left out. We have wasted a little bit of time," he told the BBC.
So what's in it for China?
Italy's move is "largely symbolic", according to Peter Frankopan, professor of Global History at Oxford University and a writer on The Silk Roads.
But even Rome admitting the BRI is worth exploring "has a value for Beijing", he said.
"It adds gloss to the existing scheme and also shows that China has an important global role."

"The seemingly innocuous move comes at a sensitive time for Europe and the European Union, where there is suddenly a great deal of trepidation not only about China, but about working out how Europe or the EU should adapt and react to a changing world," Prof Frankopan told the BBC.
"But there is more at stake here too," he added.
"If investment does not come from China to build ports, refineries, railway lines and so on, then where will it come from?"
Ahead of his arrival, Xi declared that the "friendship" between the two nations was "rooted in a rich historical legacy".
"Made in Italy has become synonymous with high quality products. Italian fashion and furnishings fully meet the taste of Chinese consumers; pizza and tiramisu are liked by young Chinese people," he wrote in an article published by Corriere della Sera.Explorer Marco Polo's travels along the Silk Road were immortalised in the "Book of Marvels"

That "made in Italy" label carries a reputation for quality worldwide, and is legally protected for products items processed "mainly" in Italy.
In recent years, Chinese factories based in Italy using Chinese labour have been challenging that mark of quality.
Better connections for cheap raw materials from China -- and the return of finished products from Italy -- could exaggerate that practice.

Predatory investment
The non-binding deal being signed by the two countries on Thursday comes amid questions over whether Chinese firm Huawei should be permitted to build essential communications networks -- after the United States expressed concern they could help Beijing spy on the West.
That is not part of the current negotiations in Italy.
But a little over a week before the deal was due to be signed, the European Commission released a joint statement on "China's growing economic power and political influence" and the need to "review" relations.
As Xi tours Rome, EU leaders in Brussels will be considering 10 points for relations with China.
While they include deepening engagement, they also involve plans to "address the distortive effects of foreign state ownership" as well as "security risks posed by foreign investment in critical assets, technologies and infrastructure".
In March, US National Security Council spokesman Garrett Marquis pointed out that Italy was a major economy and did not need to "lend legitimacy to China's vanity infrastructure project".

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Italy is a major global economy and a great investment destination. Endorsing BRI lends legitimacy to China’s predatory approach to investment and will bring no benefits to the Italian people.
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Members of Italy's ruling right-wing League party have their owns concerns about national security
Interior Minister Matteo Salvini warned that he did not want to see foreign businesses "colonising" Italy.
"Before allowing someone to invest in the ports of Trieste or Genoa, I would think about it not once but a hundred times," Salvini warned.

Setting the scene
Italian officials are keen to point out that the deal being signed is not an international treaty, and is non-binding.
"There are no specific projects," Mr Geraci said.
"It is more of an accord that sets the scene."
Other European nations already accept Chinese investment through something called the Asian Infrastructure Investment Bank, he said -- something the UK was the first to sign up to.

"And then one by one, France, Germany, Italy and everyone else also followed suit," Mr Geraci said.
Similarly, he believes Italy's neighbours will soon follow it into the Belt and Road initiative.
"I do believe that this time Italy is actually leading Europe -- which I understand may be a surprise to most," he added.

Italian Horse

A Forgotten Port Could Become a Chinese Gateway to Europe
By Jason Horowitz

Tourists in Trieste, Italy, this month. A brand-new cruise ship, built in nearby shipyards expressly for Chinese passengers, is docked in the central waterfront piazza, preparing to set sail on Marco Polo’s path to the Far East.

TRIESTE, Italy — For centuries, this cosmopolitan port city at the northern tip of Italy’s Adriatic coast acted as a geographic pivot point between empires.
Then, for nearly 70 years, Trieste’s geopolitical star dimmed and its old world mishmash of central European cultures grew stale, like an old strudel in one of its elegant cafes.
Now, courtesy of a rising China, Trieste appears ready to return to the center of a realigning world.
This week, Xi Jinping arrives in Rome for a state visit in which Italy is expected to become the first Group of 7 nation to participate in China’s vast One Belt, One Road infrastructure project.
The symbolism is striking — a powerful China drives a crack in the economic alliance that once dominated the globe and delivers a major blow to a Trump administration that has been critical of the Belt and Road Initiative.
For Italy, the deal would open the country to greater Chinese infrastructure investment, particularly in ports like Trieste.
Officials here say they expect Beijing-backed conglomerates, such as the China Communications Construction Company, to bid hundreds of millions of euros for infrastructure concessions.

The old port in Trieste. 

For China, having a toehold in one of Europe’s historic ports would bring favorable customs conditions, a faster trade route to the heart of the Continent and direct access to railroads for moving its goods into the European Union.
“Fundamentally, what’s happening is that the port of Trieste is returning to the logistical role for Europe that it had for the old Austro-Hungarian empire,” said Zeno D’Agostino, the president of the Trieste port authority, whose office is sprinkled with gifts from Chinese delegations and a book about European-Chinese cultural relations.
To walk through Trieste is to witness how the city has already opened to China.
Chinese tourists shop for the city’s trademark Illy coffee and take pictures with their Huawei phones of the elegant Caffè Degli Specchi.
A brand-new cruise ship, built in nearby shipyards expressly for Chinese passengers, is docked in the central waterfront piazza, preparing to set sail on Marco Polo’s path to the Far East.
Most significant, construction workers in scuba gear have been laying foundations near the site where a new pier is expected to become China’s home in the industrial port.
In the years after World War II, the Americans held great sway in Trieste, and Washington has now sought, so far unsuccessfully, to stop Italy’s deal with Xi, characterizing the Belt and Road Initiative as an economic and potentially military threat.
While other members of the European Union, including France and Germany, have also expressed reservations about the deal with China, supporters in Italy say that there is nothing to worry about and that the critics are merely upset that Trieste — and other Italian ports, like Genoa and Palermo — are going to cut in on their business.
They reject comparisons to the port of Piraeus in Greece, which China essentially bought, and say Italian law makes such an acquisition or the laying of Chinese debt traps impossible.

Construction on a platform at the Trieste port, one of the projects that could benefit from a Chinese-Italian economic accord.

Michele Geraci, an Italian economic development minister who is running the negotiations with Beijing, said in an interview that Chinese ships carrying materials from home or its vast network of interests in Africa through the Suez Canal simply needed to get their goods to central European markets as quickly as possible.
“Trieste meets that requirement swiftly,” he said.
Italian officials say their American counterparts initially seemed disinterested in the deal.
Deputy Prime Minister Luigi Di Maio, the leader of the Five Star Movement, has made several trips to China in recent months, nearly signing the accord during a November visit to Beijing, they said. After the fact, American diplomats began making their case, but the Italians said the deal was noticeably not on the American radar during recent high-level meetings in Washington.
But this month, Garrett Marquis, spokesman for the American national security adviser, John R. Bolton, sharply attacked the deal in a Twitter post and in several interviews, while the National Security Council’s official Twitter account also issued a reproach on March 9.
“Endorsing BRI lends legitimacy to China’s predatory approach to investment and will bring no benefits to the Italian people,” the tweet stated, referring to the Belt and Road Initiative.
The Americans have also tried to pressure leaders of the nationalist League party, which is part of the governing coalition in Italy.
This month, Trump administration officials and, separately, the former White House official Stephen K. Bannon, met with party leaders; Mr. Bannon said that he had warned his Italian allies in the League against what he called China’s “British East India Company model of predatory capitalism.”

The Piazza Unità d’Italia, the main square in Trieste. Participating in Beijing’s vast Belt and Road Initiative would open Italy to greater Chinese infrastructure investment.

Awakened to the growing Chinese influence, American officials have had more success pushing Italy to avoid using the new 5G networks of the Chinese electronics giant Huawei, which Washington warns could be used by Beijing to disrupt and spy on communications networks.
In recent days, the Italians have excised any mention of technology and communications from the Belt and Road agreement, people familiar with the negotiations said.
In Trieste, city leaders are focused on the economic benefits to the port.
Beyond its convenient location, the city on Monday celebrated the 300th anniversary of Emperor Charles VI of Austria declaring it a “free port.”
That status still confers special privileges, with no customs charges or time limits on storage for goods.
If the deal goes through, proponents say they envision Chinese companies working with Italian counterparts, hiring local laborers to assemble imported goods before putting them on trains to the rest of Europe or on ships back to China.
If the amount of work and components used measure up to customs requirements, those products could be labeled Made in Italy.
But some business leaders say that fully embracing the Belt and Road program would bring risks and could complicate efforts to bring other investment to Trieste.
Vittorio Petrucco, chairman of I.CO.P, a construction company doing work in the port, said he and a former Microsoft consultant in Trieste, which has a vibrant research sector, had begun exploring his “dream” of building an underwater data center that would cool the servers of American tech giants.

A warehouse in Trieste. Michele Geraci, an Italian economic development minister, said Chinese ships needed to get their goods to central European markets as quickly as possible. “Trieste meets that requirement swiftly,” he said.

“I prefer to look West instead of East,” Mr. Petrucco said of his project, planned for an area near an old ironworks factory that looms above the pier envisioned for use by the Chinese.
He added that both projects would take years to build and worried that all the American opposition and controversy surrounding the Belt and Road agreement would poison the waters for his proposal.
“It’s sad,” he said, “but there’s nothing I can do about it.”
Roberto Dipiazza, the mayor of Trieste, said that the United States could scuttle the deal if it really wanted to.
He said that his city had much to gain from closer ties to China, but that the Chinese had even more to gain from his port’s deep harbors, customs benefits and rail yards.
“We will find a point of agreement between China and the U.S.,” he said, showing off a Make America Great Again cap signed by President Trump that he had received as a gift.
Italy, he noted, was caught “in the middle.”
Some of Trieste’s most entrenched political players think Italy is compromised by such a position.
Giulio Camber, a veteran lawmaker considered by many to be the political boss of Trieste, said he no longer had any interests in the port, and that his opposition to the deal was motivated by his distrust of what he called China’s Communist dictatorship.
As light sliced in through the closed curtains of his office, illuminating his cigarette smoke, gilded furniture and oil paintings, Mr. Camber said the Chinese were behind many of the Turkish businesses exporting goods into the port. 
Beijing, he said, would feast on the Italians just as they did on the Greeks before them.
“They are the weakest,” he said of the Mediterranean countries.
Mr. Camber dismissed the local and national assurances about Chinese expansion, saying that Beijing would easily outmaneuver officials in Rome.
“It’s like the world champion in chess playing with a couple of guys who play for fun at the Caffè Degli Specchi,” he said, referring to the famous cafe in Trieste’s main square, the Piazza Unità d’Italia.
“You can’t imagine what the world’s best chess player is up to.”