The Italian government is scrapping the previous Cabinet’s efforts to limit Chinese investment in strategic sectors in favor of fostering relations with Beijing by volunteering for a role in China’s vast global infrastructure program.
The two countries are drawing up a memorandum of understanding to extend the massive Belt and Road spending program to Italy in sectors including railways, airlines, space and culture, Italian Undersecretary for Economic Development Michele Geraci said in an interview at his Rome office.
“We are very different from the previous government on China,” said Geraci, 51, a Sicilian professor of finance who spent a decade teaching in the financial hub of Shanghai. “We are trying not to ignore China as has been done in the past.”
With its pivot to China, Italy’s populist coalition risks alienating EU allies, just as it has on migration, fiscal policy and its scorn for the EU itself.
Italy’s previous government, under former Italian prime minister Paolo Gentiloni, joined Germany and France at the forefront of EU-wide efforts to curb Chinese investment in critical infrastructure and strategic companies.
The new government in Rome has ditched that drive, Geraci said, adding that he does not want a common EU policy on screening outside investments.
“We have 28 different economies with 28 different interests,” he said.
Rather, Italy would push to do business with China “within the scope of our existing alliances with the EU, with NATO,” he said.
Italy’s ruling coalition, of the anti-establishment Five Star Movement and the anti-migrant League, is betting on investment from China as it struggles with markets, and EU debt and deficit limits.
Armando Siri, economic adviser to Italian Deputy Prime Minister and League leader Matteo Salvini, said in an interview that the government could only lower its deficit target in 2020 and 2021 if the economy grows faster.
“We are trying to see how Italy can be the leading European Union partner in the Belt and Road Initiative,” said Geraci, who had a small pile of Chinese banknotes from his latest trip under his pen holder. “Italy’s position in the Mediterranean is quite crucial for that, China is keen to have a big European country as a partner.”
The two-page memorandum, due to be signed by year-end, might involve Italy’s troubled airline Alitalia, said Geraci, who declined to give details.
He said he also wants to work with China on its payments technology, including through Tencent Holdings Ltd’s (騰訊) WeChat (微信) service, and on joint ventures in Africa.
Italy has stepped up the pace of official visits to China. Italian Minister of Economy and Finances Giovanni Tria flew there in August, and Deputy Premier Luigi Di Maio last month.
Chinese President Xi Jinping (習近平) might make a visit to Italy next year, Geraci said.
Geraci, who has been to China twice since his appointment, said he would next month return with Di Maio to attend China’s first-ever International Import Expo in Shanghai.
China has reiterated that it would like to boost imports from all over the world, including the US, to meet domestic demand and reduce the trade surplus.
Geraci dismissed any concerns that Italy could get in too deep with China and face a debt risk.
Sri Lanka borrowed from China to build a port and then could not repay the loans.
Italy could learn about “what pitfalls we may be running into” from Sri Lanka, Malaysia and Laos, he said, but added that Italy has other issues.
“Our European friends already have a lot of Italian debt, we don’t need to worry about China, it’s the European Central Bank that has Italian debt,” Geraci said. “The size of the Italian economy saves us from this debt trap.”
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