Italy welcomes China's leader Xi Jinping and vast Belt and Road infrastructure project

China's President Xi Jinping reviews Italian Carabinieri during a welcoming ceremony upon his arrival for a meeting with Italy’s Prime Minister at Villa Madama in Rome, on March 23, 2019.
China's President Xi Jinping reviews Italian Carabinieri during a welcoming ceremony upon his arrival for a meeting with Italy’s Prime Minister at Villa Madama in Rome, on March 23, 2019.PHOTO: AFP

ROME (NYTIMES, BLOOMBERG) - President Xi Jinping of China arrived on Friday (March 22) at Rome's presidential palace with a cavalry escort usually reserved for royals.

For a three-day visit, Italy pulled out all the stops for an economic superpower promising billions in investment and trade deals in exchange for officially signing on to China's vast new Silk Road.

Chinese and Italian companies will sign 10 accords potentially worth as much as 20 billion euros (S$30.62 billion) at a ceremony with Mr Xi on Saturday, according to an Italian official who declined to be named before the event.

Those involved in the business accords will include gas pipeline operator Snam SpA, engineering company Ansaldo Energia SpA and leading banks, people with knowledge of the matter have said.

But even as Mr Xi and his wife were serenaded at a state dinner by Andrea Bocelli, the leaders of France, Germany and the European Union huddled in Brussels hoping to strengthen the continent's defences against what they considered to be China's economic incursion.

The disconnect between the two scenes laid bare the divisions and tensions in Europe, caught in the middle of a trade war between the United States and China, while trying to find its bearings and assert its power in a volatile era of shifting geopolitical alliances and American retrenchment.

"China plays on our divisions," President Emmanuel Macron of France, speaking in Brussels, told reporters on Friday, adding that the European Union had finally woken up to China. "The period of European naiveté is over."

 
 

But stalling China's success in dividing European allies will be easier said than done. Italy may be just the latest economic partner for China in Europe, but it is a significant one.

It is the first member of the Group of 7 nations that once dominated the global economy to take part in China's vast Belt and Road infrastructure project, a sign of how a rising China is reshaping the world's economic and political order.

Even as Europe now struggles to forge a common policy toward China's economic advance, Beijing has managed to hive off deal after deal in Europe.

France and Germany, which are now leading the call for greater "reciprocity" in economic relations with China, already have some of the largest stakes in continuing to lure Chinese trade and investment.

Their wary eye on Chinese investments is not necessarily new, but it is intensifying.

"What is newer and perhaps unprecedented is China's growing influence in European countries, such as Cyprus, the Czech Republic, Greece, Hungary, Macedonia, Montenegro, Poland, Portugal, and Serbia, to name just a few," said Mr Philippe Le Corre of the Harvard Kennedy School.

There is growing concern, in fact, that China has arrived in Europe not as an economic collaborator, but as a conqueror.

The European Commission called China an "economic competitor" in critical industrial fields and a "systemic rival" politically in a tough paper issued last week.

European Commission President Jean-Claude Juncker repeated that refrain on Friday, saying "the Chinese market is not sufficiently open to European companies, and we must change this".

While that language aligned more closely with the view of the Trump administration, European allies and Washington remain relatively estranged. The Europeans lament that the United States has not done enough to offset what China has to offer.

 
 

The Trump administration, according to Italian officials, failed to argue against the Chinese deal with Italy until the very late stages.

Mr Juncker noted that Europe did not want to be caught having to choose between the United States and China. But that has become increasingly difficult, as it has also become more difficult for European allies to coordinate policies with a Trump administration that has wielded sticks - like the threat of sanctions against German automakers - where Mr Xi offers carrots.

Still, to emphasise the European unity, Mr Macron invited Chancellor Angela Merkel of Germany and Mr Juncker to join him on Sunday when Mr Xi meets him during the French leg of his European tour.

In Brussels, European leaders discussed their commitment to increased "screening" of foreign, and especially Chinese, investments. (Italy abstained from a recent vote to bolster that screening.)

They have pointed to China's failure to open its markets and its public procurement, its national subsidies to create big corporations, its push for dominance in key new technologies like 5G and artificial intelligence, and its aggressiveness in the South China Sea.

"There is a broader rethink of EU policy toward China to protect industrial interests, the EU and member states against Chinese influence in many fields," from investment to security risks like the Chinese electronics giant Huawei, said Dr Daniela Schwarzer, director of the German Council on Foreign Relations.

European leaders were correct to demand more reciprocity with Beijing, Mr Le Corre of the Harvard Kennedy School said, so that their new Silk Road won't be a "one-way road".

Italy's President, Mr Sergio Mattarella, had a similar message as he stood next to Mr Xi in the Quirinal Palace on Friday morning.

"The ancient Silk Road was a tool of knowledge among people and to share mutual discoveries," Mr Mattarella said. "The new one must also be a two-way street."

But so far, no matter which way the road goes, it is Beijing that is doing most of the driving. On Saturday, Mr Xi and Italy's Prime Minister, Mr Giuseppe Conte, will sign a memorandum of understanding in which Italy will officially join the Belt and Road project.

 
 

Next month, Prime Minister Li Kequiang of China will meet with all the nations of the European Union in an annual summit. He will also meet separately in Croatia with 16 European nations, several of them members of the European Union, with which Beijing has signed deals to join the Belt and Road initiative.

On Friday, Mr Xi thanked Italy for its "deep friendship" and spoke about the importance of "revitalising the ancient Silk Road", strengthening ties and developing a "series of concrete projects" together.

He assured the Italians, who are desperate to open Chinese markets to Italian goods, that he wanted a "commercial exchange that goes both ways and a flow of investments that goes both ways".

The tightening relationship between China and Italy has worried US officials, who have tried and failed to stop the deal, expressing concern that China's economic expansion is a precursor to military and political ambitions.

When it became clear that Italy would nevertheless sign the deal, the US ambassador in Italy and other officials instead tried to convince Italy not to use 5G wireless networks developed by Huawei, which Washington warns could be used by Beijing to spy on communications networks.

Leaders of the European Union in Brussels have also raised fears that Italy - saddled by debt, and tempted by promises of hundreds of millions of euros in infrastructure investment - could fall prey to a Chinese divide-and-conquer strategy. And critics of the Italian government have called the deal yet another example of its dangerous naiveté and incompetence.

Italian leaders have argued that there is nothing to be concerned about. Italy, they say, will avoid China's debt traps, and its laws prevent foreigners from taking control of its ports, as China has done in Piraeus, Greece.

But critics of the government do not find these guarantees reassuring.

A full-page cartoon on the front page of Thursday's Il Foglio, a newspaper critical of the government, showed Mr Conte, the Prime Minister, leading an enormous, fire-breathing Chinese dragon with a short leash.

In the cartoon, Mr Conte says, "Take it easy guys, I can manage him. He practically eats from my hand."

Mr Conte has defended the deal, saying Germany and France have considerably more business with China and that it was a way to inject Italian goods into a huge Asian market.

"We want to first and foremost rebalance our trade, which is not favourable to us now. Our exports to China are far lower than other European countries'," Mr Conte told Italy's Parliament before the visit.

"We will have new airports, new trade corridors, and it will certainly influence our economic growth. We don't want to lose any opportunity."