Italy has decided to leave the biggest global connectivity project, China’s Belt and Road Initiative (BRI), arguing that it failed to bring the expected economic benefits to the country.
The decision, a day before China and the European Union’s (EU) first in-person summit in four years, has put Beijing in an embarrassing situation.
Italy was the first Group of Seven (G-7) member to join the BRI. From this December (2023), Beijing had added Italy to the list of five countries whose citizens did not need a visa to visit China.
Though Italy says it will continue to maintain good and cooperative ties with China, its decision has brought back the focus on the viability of the BRI viability among some of the developed and big economies in the world.
India, the fifth largest economy in the world, is not part of the BRI, nor is the.
Many other countries like Japan, Australia, Philippines, Vietnam, etc., though members of the BRI, have become reluctant participants because of aggressive Chinese policy in the Indo-Pacific region. Similarly, many European countries are also having second thoughts about their participation in the BRI, in order to balance their ties with the US.
Italy’s objection
The withdrawal of Italy from the BRI has not been officially confirmed by Italy or China.
But media reports quoting government sources said that Italy formally submitted its plan to withdraw from the BRI a few days back.
The BRI partners are obliged to give a three-month notice for withdrawal. Otherwise, their membership gets automatically renewed for another five years. Italy’s renewal was due in March next year.
The decision is not a surprise as Italy has aired its dissatisfaction with the BRI in the past.
Even before Giorgia Meloni, Italy’s right-wing leader, became the first woman Prime Minister of the country, she had wanted to discontinue Italy’s participation in the BRI.
In 2019, while still in the Opposition, Meloni had said that it was a "serious mistake" on Italy’s part to join the BRI.
Italy’s growing trade gap with China could be a major reason for the dissatisfaction.
According to the International Monetary Fund (IMF), in the period from 2019 to 2022, Italy’s exports to China increased by 19 percent to $17.3 billion.
But its imports from China increased by over 70 percent, to $60 billion, in the same period.
BRI has had problems in recent years
A number of countries have had problems with BRI, as they struggled to repay loans to China, incurred for infrastructure projects under the BRI.
China changed its approach to future loans under BRI because of the slowdown in the Chinese economy, that was compounded by a real estate crisis at home, and the inability of many countries to repay loans.
This was reflected at the 10th BRI anniversary summit in Beijing in October this year. Though 150 countries and 30 international organisations participated, the number of foreign heads of state came down from 37 in the previous summit, to 23.
China also shifted focus from large-scale investments and government involvement, to promoting “small and beautiful” projects with more private capital.
The Italian decision before the crucial summit with the EU will force China to play down the development in order to maintain its attractiveness as an economic partner.
India’s opposition to BRI
The reason for India’s opposition to the BRI is because its flagship project — the China-Pakistan Economic Corridor (CPEC) — runs through Pakistan-occupied Kashmir. India’s participation in the BRI could be seen as an endorsement of Pakistan’s illegal possession of its land.
India also sees the BRI as China’s attempt to expand its global influence. By roping in south Asian countries in the BRI, China has already challenged India’s primacy in the region.
Not much expected at the China-EU summit
Experts cautioned against high expectations from the China-EU summit. Some said it could be little more than a forum for photo-ops and exchanging talking points.
"If it does prove to be as empty as anticipated, it should make the EU rethink its approach to these meetings,” said one expert.
After a year of intense engagement, both the EU and China are keen to hold this summit. A number of issues, like the Ukraine war, the Middle East crisis, and the growing Sino-Russian partnership are likely to be discussed at the meeting.
However, the focus will remain on economic issues.
The EU wants investment and trade with China to rejuvenate the economy in major European economies.
China is keen to revive its access to the European market and investment in the continent, which were disrupted because of the pandemic and its trade war with the US.
The trade volume between China and the EU last year reached $983 billion, accounting for over 15 percent of the EU's total trade, according to Eurostat data.
But the EU's trade deficit with China reached $434 billion, the highest ever.
The EU is likely to correct this imbalance and ask for greater access to China’s market and more transparency in Chinese investments in Europe.
China may call for easier access to European technology, besides its markets.
While the summit may not produce any dramatic breakthrough, the possibility of a Eurosceptic like Donald Trump being elected as America’s next president may force the EU to keep its China option open for the future.
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