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Original illustration by Tse Yuet Ching. 

08:20 am | 22. June 2020

Italy Oscillates on China

While some recent moves, from trade to coronavirus aid, may suggest Italy is moving closer to China, the reality is that the country's China policy continues to seesaw between assuagement of traditional Western allies and closer ties with China.

By Nicola Casarini

When Italy became the first G7 nation and the first founding member of the European Union to sign a memorandum of understanding on China’s Belt and Road Initiative (BRI) on March 23, 2019, its embrace of Chinese President Xi Jinping’s signature foreign policy initiative weakened the European Union in its drive to frame a common position vis-à-vis the Asian giant. The signing of the MOU was also a strategic setback for the United States in its tug-of-war with China over trade and global leadership.

One year after the signing of the MOU, Rome-Beijing relations are back in the spotlight following the outbreak of the coronavirus epidemic in Italy – the first major outbreak of the COVID-19 outside of China. In March 2020, the Italian government imposed a strict lockdown to contain the virus and began reaching out to Beijing for help since the country lacked critical medical supplies. In April, China donated masks and other medical supplies to Italy, for which it received grateful acknowledgement from Janez Lenarčič, the EU’s commissioner for crisis management, who also noted donations had gone the other direction in February. But the mainstream media, in particular the national broadcaster RAI, presented the entire operation as a big donation, even though some of the supplies were part of a commercial deal, and Italian Foreign Minister Luigi Di Maio was quoted as saying, as the supplies were unloaded, “[We] are not alone, there are people in the world who want to help Italy.”

Key Points: 

Italy’s signature of an MOU on China's Belt and Road Initiative last year and recent bilateral exchanges over coronavirus “aid” might suggest Italy is closer to China. The reality is that Italy’s China policy continues to seesaw between assuagement of traditional Western allies (the EU and the US) and promoting closer ties with China.

This oscillation is likely to continue in the coming months and years, making Italy an uncertain player on a range of issues, from investment to 5G security. While Italy has signaled to the Trump administration that it is cooperating in restrictions on Huawei, vested interests inside Italy taking a more pro-China stance have so far prevented real action. 

For Brussels, Italy’s oscillating China policy has different implications whether it is made by a center-left coalition or a center-right executive led by far-right and sovereigntist forces which tend to emphasize national politics in foreign relations.

The support provided by China – together with a well-orchestrated media campaign – has arguably translated into increased positive perceptions of the country among Italians. On April 20, an opinion poll by SWG research institute (one of Italy’s major polling companies) showed that 52 percent of Italians would consider China their “best friend,” an astonishing rise of 42 percent from the 2019 survey. China was followed by Russia, which was considered a friend by 32 percent of those interviewed (up 17 percent over last year’s survey). Meanwhile, the United States was seen as a friend of Italy by just 17 percent of those polled, a drop of 12 percent. This is possibly the most visible result of the propaganda campaign launched by China following the outbreak of the coronavirus pandemic.

But despite this apparent new depth in the friendship between China and Italy, the relationship is still strongly conditioned by China’s often contentious role in Italian national politics – a complex knot of hopes, fears, and the vested interests of political parties and key players – and it is further complicated by a triangle of relationships involving two other major powers, the United States and the European Union. This article examines the shifts in Italy’s policy toward China over the past two years, and how that policy is likely to continue oscillating as Italy’s complex national politics intersect with larger geopolitical pressures.

Signature Hopes

The MOU on China’s BRI was finally signed in March 2019 by Italy’s populist coalition government, formed between the anti-establishment Five Star Movement (M5S) and the far-right Northern League (in power between June 2018 and August 2019). While this is sometimes viewed as stemming from the “China-friendly line” of the new Italian government, it was actually Italy’s center-left politicians who prepared the ground for the country’s endorsement of China’s connectivity project almost two years earlier.

In May 2017, Paolo Gentiloni, Italy’s former Prime Minister of a center-left coalition government, attended the first Belt and Road Forum in Beijing, where he floated the idea of signing an MOU on the BRI. Support for an Italy-China MOU came also from Sergio Mattarella, Italy’s president (and a member of the center-left Democratic Party), during his state visit to China in 2017.

After the M5S-League coalition was sworn in in June 2018, preparations began through several high-level visits for the signature of the MOU. Italy’s then economy minister, Giovanni Tria, made his first trip abroad to China in August 2018. He was followed by Luigi di Maio, then head of the M5S (the senior party in the coalition) and vice-premier and minister for economic development, who suggested the signature of the MOU during a visit to China in September 2018.

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In 2017, Italian President Sergio Mattarella visits Beijing. Screenshot of Chinese state media coverage.

The economic context surrounding the signature of the MOU must not be overlooked. By pushing forward heavy spending plans, Italy’s populist government sparked a spat with the EU in December 2018 that pushed up bond yields, making it more costly for Italy to refinance its huge public debt. This happened against the backdrop of uneasiness among investors about the possible impact of weaker growth on Italy’s high debt to GDP ratio. As Italy risked further downgrading of its credit status, Italian populists bet on China to continue buying Italian bonds. Moreover, by endorsing the BRI the populist government in Rome hoped to obtain more market access in China for Italian companies and “Made in Italy” products, as well as more Chinese investments in Italy under the BRI framework.

Trading Narratives

Italy’s China policy has traditionally been based on economic considerations. For its part, China has sought to emphasize the trade benefits of the relationship, state media stressing last year around the MOU signing that "China is now one of the largest cooperative partners of Italy in terms of imports and exports," and that BRI has "already helped expand the shipping trade in the Mediterranean region, creating unprecedented development opportunities for Italy's major ports."

But while bilateral trade has undoubtedly increased in the last decades, data from the Italian National Institute of Statistics (ISTAT) indicates that the importance of the Chinese market for Italian exports remains rather small – 2.8 percent in 2018 – and that the trade gap has further widened in recent years. According to the Italian Embassy in Beijing, two-way trade reached 43.9 billion euro in 2018. Italian exports to China amounted to 13.2 billion euro, while imports reached 30.7 billion for the year. Meanwhile, Between 2014 and 2018, the trade gap increased just over 8 percent, from 19.3 billion to 20.9 billion, according to the World Bank. 

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Proponents of closer Rome-Beijing ties maintain that China offers Italy great potential, given the size of the Chinese market and its expanding middle class, which has a growing appreciation for “Made in Italy” products. Luigi Di Maio several times referred to the Chinese market as “a great opportunity for Italian companies.”

China-friendly politicians and corporate leaders in Italy have also tended to present Chinese investments as a boon for Italy’s ailing economy and as a sign of the country’s international attractiveness. According to a 2018 report by the Italy-China Foundation (Fondazione Italia-Cina), more than 600 Italian companies have received some Chinese investment since 2000, for a total value of 13.3 billion euros. Acquisitions have been facilitated by the small size of most Italian companies, although Chinese investors have also targeted big companies.

Germany, France, and the United Kingdom have traditionally been the preferred destinations for Chinese foreign direct investment (FDI). However, in 2015 Italy overtook France for cumulative Chinese FDI calculated from the year 2000. The sudden increase in Chinese FDI in Italy in 2015 was due to the 7.9 billion dollar acquisition of a 16.89 percent stake in Pirelli, the world’s fifth largest tire maker, by state-owned ChemChina.

Aside from the Pirelli acquisition, Chinese firms have made investments in some of Italy’s key strategic industrial and financial companies. According to data from S&P Market Intelligence elaborated by Il Sole 24 Ore, an Italian national daily business newspaper, Chinese portfolio investments have surged. The investment arm of the People’s Bank of China, the State Administration of Foreign Exchange, has invested almost 3.5 billion euro representing about 2 percent each in ten of Italy’s largest companies in the banking (Monte dei Paschi di Siena, Unicredit, Intesa SanPaolo, Mediobanca), energy (Saipem, Enel, Eni), auto (Fiat Chrysler Automobiles), telecommunication (Telecom Italia), cables and systems (Prysmian) and insurance (Assicurazioni Generali) industries.

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Palazzo Generali, headquarters of the Italian insurer Assicurazioni Generali Company in Trieste. Assicurazioni Generali has received investment from China. Image available from Wikimedia Commons under CC license.

The promoters of closer Italy-China ties have declared on several occasions that the signing of the MOU could translate into an increased flow of Chinese investments into Italy, in part because under the BRI framework outward investments tend to receive smoother approvals from Chinese authorities – in particular towards those countries with which Beijing has signed MOUs.

While Paolo Gentiloni was the first to float the idea of signing an MOU on the BRI while attending the first Belt and Road Forum in Beijing in May 2017, the Gentiloni government was also staunchly pro-EU and supportive of the more hawkish voices inside the General Confederation of Italian Industry – commonly known as Confindustria – that demanded a tougher approach to China. Therefore, the same center-left coalition that floated the idea to endorse Xi Jinping’s signature foreign policy initiative in May 2017 had also backed, a few months earlier, the creation of a EU-wide investment screening mechanism. By doing so, the Gentiloni government was able to square the circle, reaching out to China and its potential market, while at the same time joining with key European partners (Germany and France) and Confindustria in promoting stricter rules regarding Chinese investments into the bloc.

The center-left coalition in power in Rome at that time consisted of both pro-China elements, emphasizing a narrative of China as opportunity, and a number of proponents of the idea that China posed an economic threat due to its state-dominated economy and unfair trade practices. According to the latter argument, China’s practices had contributed to de-industrialization and a declining standard of living across some parts of Italy. For this reason, Italy led the campaign to avoid relaxing EU anti-dumping measures against China, under pressure from powerful industrial lobbies, in particular Confindustria.

In April 2019, Confindustria issued a position paper advocating for a more strategic and cohesive EU approach to dealing with economic challenges in the relationship with Beijing. In the document, Confindustria accused Beijing of withholding its domestic market for its national champions and restricting access by European companies. It also accused China of subsidizing domestic competitors, and failing to protect intellectual property rights. The Confindustria paper followed a similar report from the Federation of German Industries (BDI) issued in January 2019, in which the group argued in favor of a more assertive position toward Beijing on trade and investment.

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The majority of small and medium-sized enterprises (SMEs) and their associations in Italy also have negative perceptions of China. Many SMEs have been forced to close down in the last decade due to dumping of Chinese goods and theft of technology and know-how.

Concerns within Italian industry over unfair Chinese trade practices, and worries about over-exposure to Chinese investments, have persisted alongside a narrative of China as representing immense opportunity. According to this narrative, China is a potential financial savior should Italy encounter problems in re-financing its huge debt – an event quite likely to happen in the near future.

The majority of small and medium-sized enterprises (SMEs) and their associations in Italy also have negative perceptions of China.

 

On April 24 this year, Italy escaped a potential downgrade to its credit rating by Standard & Poor’s which held its rating for Italy at BBB (two notches above “junk”), handing the country’s bonds a reprieve following a recent sell-off that had pushed borrowing costs sharply higher. On April 28, the rating agency Fitch downgraded Italy’s credit rating to BBB-, just a single notch above ”junk.” Fitch justified its decision by noting the jump in debt levels resulting from the coronavirus crisis, which it said increases doubts about the sustainability of Italy’s borrowings. Fitch expects the country’s ratio of debt to GDP to rise by around 20 percentage points in 2020 to 156 percent, as a surge in spending combines with a 8 percent contraction in the economy. Fitch thus joined Moody’s in rating Italian debt at a single notch above junk. This means Italy would see its bonds thrown out of widely followed indices if two of the three rating agencies were to strip the country of its investment-grade status, forcing some investors to offload Italy’s debt.

To hedge against speculative attacks on Italy’s debt, the promoters of closer ties with Beijing hope that China will continue to buy Italian bonds, thus sending a reassuring message to markets. Alessandro di Battista, one of the leaders of the Five Star Movement (which now holds more than one-third of the seats in the Italian Parliament) declared recently, referring to the possibility that Italy might face speculative attacks because the EU has not rendered sufficient economic help, that his country expects “we can use the China card, given the good ties established by the current government with Beijing.”

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M5S politician Alessandro di Battista, who recently suggested that the “China card” could be useful to Italy if it faces debt-related attacks. Image from Wikimedia Commons available under CC license.

For and Against

M5S currently has a reputation as the most China-friendly political party in Italy. The MOU with China found support among M5S lawmakers, but also enthusiastic backing from one particular figure within Matteo Salvini’s Northern League (the junior party in the coalition): Michele Geraci. Appointed Italy’s Undersecretary of State in the Ministry of Economic Development in June 2018, with responsibility for international trade and investment, Geraci was the main supporter of closer ties with Beijing, a stance that he also signalled by creating and leading the Task Force China in August 2018. This initiative, which seeks to bring various ministries, individual companies, business associations as well as universities and think-tanks, was established with the stated goal of becoming China’s privileged partner on the BRI.

Geraci, while appointed to his position by the far-right Northern League, has always been very close to the M5S, the political movement first created by comedian Beppe Grillo. Indeed, Geraci’s op-eds – often very enthusiastic about China, and never very critical regarding the situation of human rights and democracy in the country – have appeared for years on Beppe Grillo’s blog.

That Grillo’s widely-read blog has long echoed Chinese communist propaganda is well-documented, with Xi-era concepts like “shared destiny” often treated uncritically on the site. In June 2019, the blog hosted an article that ridiculed the protest movement in Hong Kong. Grillo’s blog also hosts the reflections of Fabio Massimo Parenti, a professor of geopolitics who is an avid defender of  Xi Jinping. Parenti has claimed, for example, that the detention of hundreds of thousands of Uighurs in Xinjiang is an invention of Western media. Last November, Beppe Grillo made two separate visits to meet with the Chinese Ambassador in Rome as a gesture of friendship. Both visits carefully avoided any contentious issues concerning human rights or the pro-democracy movement in Hong Kong.

Luigi Di Maio, Italy’s foreign minister and main leader of the M5S, skipped the G20 summit in Japan in November 2019. He did, however, make a point of going to Shanghai to attend the second China International Import Expo (CIIE), during which he met with President Xi Jinping. On that occasion, Di Maio mirrored China’s own foreign policy talking points by insisting that the Hong Kong issue is “an internal Chinese affair.”

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Luigi Di Maio, Italy’s foreign minister, has often mirrored China’s official talking points. Image from Wikimedia Commons available under CC license.

Friendliness toward official Chinese agendas is also noticeable within the Democratic Party (PD), the other coalition partner of the second Conte government in power since September 2019. For instance, Romano Prodi – former prime minister, former president of the European Commission, and founder of the PD – has been appointed by the Chinese government to the Advisory Council of the Belt and Road Forum. Massimo D’Alema, former prime minister and one of the last leaders of the Italian Communist Party – now part of the PD – continues to maintain good relations with the Chinese Communist Party through his foundation, ItalianiEuropei, which has organised several meetings with high-level Chinese delegations. D’Alema has repeatedly expressed his support for the Belt and Road Initiative. The former Prime Minister is a member of the “Silk Road Cities Alliance,” an initiative that seeks international support for the promotion and implementation of BRI.

At the other end of the political spectrum, Italy’s far-right and sovereigntist parties have tended to use anti-China rhetoric to woo the Italian electorate and weaken the M5S and the Democratic Party, who they accuse of being too friendly with the Chinese government. Critical voices on China and the MOU were also aired by members of the  League – the same party of Michele Geraci, the former Undersecretary of State – when the League was in power in coalition with the M5S (June 2018-August 2019). The League’s leader, Matteo Salvini, did not attend the state dinner given in honor of President Xi Jinping before the signature of the MOU as he was intent on consolidating ties with the Trump administration and wanted to be seen as pro-US and pro-NATO. Giancarlo Giorgetti, the powerful former undersecretary of state under Prime Minister Conte, and Guglielmo Picchi, former undersecretary of foreign affairs and Salvini’s advisor on foreign policy, both voiced reservations about the signature of the MOU, citing the possible implications closer ties with Beijing could have for NATO and the transatlantic alliance.

Italy’s far right has also used the protests in Hong Kong to accuse the center-left government of being too subservient to Chinese interests. On November 28, 2019, Adolfo Urso, a senator from the far-right and sovereigntist party “Brothers of Italy” together with members of the small Radical Party (a centrist movement) organized a video-conference with Joshua Wong inside the Italian Parliament. Various Representatives from the center-right opposition (including both far right and centrist parties such as Berlusconi’s Forza Italia) were present at the meeting, while there was only one MP from the center-left PD and none from the M5S.

These recent votes over Hong Kong in the Italian parliament have reflected a divide in thinking between far-right and sovereigntist parties – which now appear more willing to question China over issues such as human rights and democracy – and center-left parties that have remained relatively silent on these questions, giving the impression that they have accepted China’s narrative.

Ever since Italy’s signature of the MOU on the Belt and Road in March 2019, China-related issues have become part of heated domestic political debate. There are presently two camps in Italy. On the one hand, there is the center-right – including the far right under Salvini and Meloni and centrist forces under the leadership of Berlusconi – which increasingly accuses the center-left parties of being subservient to Chinese interests. On the other hand, there is the center-left Democratic Party – split between those keen on closer relations with Beijing and those favoring instead containment vis-à-vis China – and the M5S, which openly parrots China’s narrative on many issues.

Ever since Italy’s signature of the MOU on the Belt and Road in March 2019, China-related issues have become part of heated domestic political debate.

 

The division between center-left parties – keen to establish closer ties with Beijing – and the center-right opposition, more in line with the Trump administration on China, was showcased once again this year as the coronavirus epidemic reached Italy.

Propaganda Spreads

As the virus erupted in the Chinese city of Wuhan, the Italian government adopted strong measures that were viewed by Chinese leaders as unfriendly, including the suspension of all flight connections to and from China. Matteo Salvini, the League’s leader, tweeted critically several times about the virus, saying that Italy should close its doors to China and that signing the MOU the year before had been a big mistake.

“If the Chinese government knew [about the virus] and didn’t tell it publicly, it committed a crime against humanity,” Salvini said during a Senate debate.

But in the face of mounting criticism of China from the far-right and sovereigntist parties, coupled with growing xenophobic acts against Chinese people in January and February this year, Sergio Mattarella, Italy’s president, took a number of friendly initiatives towards China, dubbed the “diplomacy of solidarity.”

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One of a number of Tweets from Northern League leader Matteo Salvini in February critical of China’s handling of the coronavirus epidemic.

First, President Mattarella sent a letter to the Chinese President to express to him and to the Chinese people his solidarity and friendship. At the beginning of February 2020, Mattarella visited a kindergarten in the outskirts of Rome attended by numerous children of Chinese origin – an act showing solidarity with the Chinese population as it faced mounting xenophobic attitudes. On February 13, President Mattarella organised, in his official residence, a concert by Chinese pianist Jin Ju within the framework of the 2020 Italy-China Year of Culture and Tourism. China’s official Xinhua News Agency reported that the concert, which was attended by the Chinese ambassador, showed Italy’s “special friendship with the Chinese people.”

As the virus spread through Italy, the country became Europe’s hardest hit by the pandemic. Lacking critical medical supplies, Italy reached out to Beijing for help. China sent masks, medical supplies and doctors, receiving much media and political attention – not least against the backdrop of the slow reaction of the European partners on which Italy has traditionally relied. The EU was slow in its response, and the other member states, notably Germany and France, responded initially with counterproductive reactions, such as blocking exports of face masks to Italy. The United States, meanwhile, preoccupied with its own coronavirus preparation and rankling internal politics, did not send medical equipment to Italy.

The lack of response from Western allies would subsequently change, and countries like Germany, France and the US would contribute to Italy’s pandemic response. But together or separately, they could not match the effective communication strategy deployed by Beijing. The official Twitter account of the Chinese Embassy in Italy, for example, regularly posted videos, vignettes, slogans and messages emphasizing the support it provided to the country. China’s ambassador to Italy, Li Junhua, even released interviews and personal messages of support to the Italian population through the Twitter account, focusing on simple messages like, “We understand what Italy is going through and are here to help.”

The Chinese narrative was of course incomplete. But it nevertheless allowed the Chinese regime to frame itself as a global leader in disease control efforts, grabbing attention away from criticism that its initial cover-up of the outbreak allowed the virus to spread abroad.

The media campaign was a boost to staunchly pro-China voices within Italy’s government, in particular Foreign Minister Luigi Di Maio, who took credit for arranging Chinese donations of masks and medical supplies and who personally met the Chinese doctors at the airport. The event was live-streamed on Di Maio’s Facebook account, where the politician portrayed Chinese donations as the result of the special ties between the two countries.

In this light, it is worth mentioning that a series of collaborations were arranged between Italian media and Chinese state-run media around Xi Jinping’s March 2019 visit to Rome. These included an agreement between ANSA, Italy’s largest news agency, and the official Xinhua News Agency, according to which ANSA would distribute Xinhua’s Italian-language news content exclusively. While ANSA’s announcement of the 2019 deal identified Xinhua simply as “China’s largest multimedia group,” it is no secret that the agency, directly under the Chinese government, is a key part of China’s strategy to boost its global media influence. The China Media Group (CMG), a media entity formed in 2018 through the merger of three state-run media including China Central Television, China National Radio, and China Radio International, has also established partnerships with a number of Italian media, including the Milan-listed conglomerate Class Editori. In March, complimentary copies of Cinitalia, a bilingual magazine produced by CMG, also known as "Voice of China," were distributed to all members of the Italian Parliament.

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The official Twitter account of the Chinese Embassy in Rome, downloaded May 11, is topped with a message in Italian that reads: “Come on, Italy and China!”

The jury is still out on how effective these strategies have been for China. One scholar called the distribution of Cinitalia “an excellent example of ineffective propaganda,” noting that its blatantly pro-China messages had “triggered suspicion among some recipients.” But while there was some discussion inside Italy about China’s propaganda tactics, and even its deployment of fake news – such as a video posted by foreign ministry spokeswoman Hua Chunying claiming Italians in Rome had played the PRC national anthem and shouted “Grazie, Cina!” – there are signs, as previously mentioned, that the media campaign actually produced remarkable results in terms of positive perceptions of China among Italians. The April 7 opinion poll by SWG, showing that Italians looked more to China than to the US as a “best friend” and partner, certainly came as a surprise to some.

China’s disinformation campaign over Covid-19 drew concern from both the European Union and the US. Following a meeting of the G7 in late March, US Secretary of State Mike Pompeo said the economies had discussed an “intentional disinformation campaign” by China over the epidemic. In a briefing in late March, the European Parliament warned that China was "attempting to shift the focus and blame away from China as the origin of the new coronavirus – distracting from its systemic failures – to position itself as a responsible global health leader." Avoiding mention of either Italy or the actions of politicians like Foreign Minister Luigi Di Maio, the briefing voiced concern about the longer-term implications, saying “a combination of disinformation and heavily promoted health diplomacy, echoed by local proxies in Europe, could potentially pave the way for wider influence in other sectors in the wake of the crisis.” Writing in Foreign Policy, Mattia Ferraresi, a writer for the Italian newspaper Il Foglio, was more blunt, suggesting that M5S was “China’s chief enabler as Beijing spreads disinformation about the origins of the coronavirus.”

The Huawei Issue

Another China issue on which divisions are likely to continue inside Italy, impacting relations with the EU, and particularly with the US, is the question of Huawei and its participation in Italian 5G infrastructure. The US has pressured Italy and other EU member states consistently  to ban Huawei since 2018. On March 25 this year, the Trump administration released its “National Strategy to Secure 5G,” which aims, among other goals, to prevent Chinese telecommunications companies such as Huawei and ZTE from entering the US market and that of the allies – though the document does not single China out by name, referring instead to "high-risk" vendors.

The current Conte government (the so-called “Conte 2”) – a center-left coalition between the M5S and the Democratic Party – once again shows oscillation over the Huawei issue. On the one hand, it sends signals to the Trump administration that it is cooperating. On the other hand, there are vested interests that take a more pro-China stance, arguing that action against Huawei could antagonize China. For instance, some important members of the government have taken the position that the question of Huawei is too complex and that simply banning the Chinese company is not the right approach.

Aligned on the other side, arguing that Italy should take a tougher stance on Huawei and Chinese technology, are the two far-right and sovereigntist parties: Matteo Salvini’s League and Giorgia Meloni’s Brothers of Italy. Sharing Washington’s concerns about possible infiltrations of foreign entities in 5G networks, including cyber-theft and cyber-espionage linked to Beijing, are a number of pro-NATO and pro-US members of the Democratic Party. Reflecting these concerns, in December 2019, the Parliamentary Committee for the Security of the Republic (Copasir), Italy’s parliamentary security committee, advised the government in a non-binding opinion to consider banning involvement by Huawei and ZTE in Italy’s 5G network.

After being sworn in on September 4, 2019, the first act of the second Conte government was to activate the so-called “golden power,” a mechanism based on a 2012 law allowing the Italian government to examine foreign investment in strategic sectors and critical infrastructure. The objective was to scrutinize a number of supply deals for 5G networks, including a few involving the Chinese ICT companies Huawei and ZTE. The move was a clear signaling of Italian cooperation to US President Donald Trump, who just a few weeks earlier had endorsed Conte’s government in a tweet.

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In February this year, there were claims in the Italian press, citing defense and foreign affairs sources, that Italy would use the “golden power” rules to end 5G contracts with Huawei. However, the Ministry of Economic Development quickly issued a statement saying that it “denies its intention to take any initiative in this regard.”

In April this year, the Italian government reformed the “golden power” rule, guaranteeing public authorities the right to intervene in market transactions involving companies regarded as strategic. This move was regarded as especially important in the face of the coronavirus pandemic and the strict containment measures imposed in Italy – the fear being that companies whose stock valuations had fallen as a result of the crisis could more easily prey to hostile foreign takeovers.

The reformed “golden power” notwithstanding, Huawei continues to operate in Italy. In fact, Huawei is a partner of three mobile operators in Italy – Wind Tre, Vodafone and TIM. Equipment from the Chinese company is used across 20-30 percent of their mobile networks, and also accounts for about 10 percent of the landline network operated by Tim, Italy’s main phone operator. In recent 5G mobile communications auctions, Huawei was a leading candidate to supply 5G equipment to mobile networks in various Italian cities, including Milan, where Huawei is a partner of Vodafone. Milan is also the home to one of Huawei’s most important research and development centers outside China.

Huawei’s continued involvement owes partly to the fact that legislation required to screen Chinese ICT companies continues to be blocked in the Italian Parliament by the M5S. Stefano Patuanelli, a leading figure of the M5S and currently minister of economic development, responsible for ICT infrastructure and the 5G, has stated several times that he will not block Huawei from bidding for the construction of the 5G in Italy. He has cited both economic reasons and the fact that Italian intelligence services have so far not found evidence of malicious Chinese state cyber activity through Huawei.

Behind the scenes, M5S business interests are also clearly at play in the decision not to single out Chinese ICT companies. One prime example is Davide Casaleggio, owner of the company called the “Rousseau Association” that controls the “Rousseau” platform, the participatory democracy platform that both fostered the movement and now also controls M5S voting behavior in the Italian Parliament, where one-third of the seats are held by the party. Casaleggio was called by the New York Times, “the Wizard of Oz-like figure behind the tightly drawn curtain” of M5S. He also has strong business interests with some Chinese ICT companies. In November last year, Casaleggio organized a major conference in Milan at which the keynote speaker was Thomas Miao, CEO of Huawei Italia. In December last year, Giorgia Meloni, leader of far right Brothers of Italy, raised the question of a possible inquiry into connections between Casaleggio and Huawei.

In fact, a number of figures in M5S have closely associated themselves with Huawei. At a ceremony held in September 2018, Luigi Di Maio, then leader of the 5 Star Movement, was on hand to switch on the antenna for the Bari Matera 5G Project, a pilot program by Huawei, TIM and Fastweb that also involved an array of public and private partners. More recently, the formal inauguration of Huawei's new Rome office in October 2019 was attended by Manlio Di Stefano, an undersecretary in the Ministry of Foreign Affairs who was group leader of the 5 Star Movement from 2013 to 2018.

The vested interests of important members of the coalition mean that the Italian government has so far been unwilling to ban Huawei and other Chinese ICT companies, despite the warnings from Copasir and pressure from the Trump administration. For his part, Patuanelli, the economic minister, minimized the importance of the Copasir report. Only strong intervention from the Trump administration is likely to convince the Conte government to change course. Absent a more robust initiative by the Trump administration, Italy can be expected to continue to oscillate between sending signs of apparent cooperation to Trump on Huawei and other Chinese ICT companies while in reality Huawei will continue to operate inside Italy. Alternatively, it is likely that a center-right government led by Italy’s far-right parties (which are more in line with the Trump administration on China) would ban Huawei from Italy.

When Vittorio Colao, a former CEO of Vodafone Group, an important Huawei partner in Italy, was appointed in April as the head of the expert task force guiding the country through the process of gradual re-opening in the wake of the coronavirus crisis, this decision did not go unnoticed in Chinese media. Colao has in the past spoken out to downplay concerns over Chinese ICT and security implications. "We never found anything less than normal in the Huawei equipment and software,” he said at a conference in 2018. “It's not like the Cisco router is very different. It's made in China.”

Conclusion

While Italy’s signing of the MOU on the Belt and Road Initiative last year and Foreign Minister Luigi Di Maio’s lavish display of gratitude over China’s Covid-19 “aid” might seem to suggest that Italy has moved closer to China, the reality is that the country’s China policy continues to oscillate between assuagement of traditional Western allies – namely, the EU and the US – and promoting closer ties with China. This oscillation is likely to continue in the coming months and years, making Italy an uncertain partner on a range of issues, from investment to 5G security.

Today, some Italian politicians openly support China’s positions on various issues, including Huawei, while others actively oppose them. For now, despite US pressure to ban the Chinese tech giant, Huawei is likely to remain active in Italy, thanks to powerful vested interests connected to the M5S and the center-left Democratic Party. But that situation could change if Italy’s far-right parties, which are more in line with the Trump administration on China, should win the next elections. A far-right victory could potentially result in the banning of Huawei from the country.

For Brussels, Italy’s oscillating China policy has different implications whether it is made by a center-left (progressive) coalition or a center-right executive led by far-right and sovereigntist forces. Progressive political parties, including those currently in power in Rome, tend to favor EU positions over national ones in their relations with Beijing, as the author explained in greater detail in a previous paper on EU-China relations. The current center-left government in Italy is staunchly pro-EU, and as such will continue to promote a China policy in line with that of Brussels, Berlin and Paris – as much as that it possible.

However, things might be different if the coalition in power in Rome were led by far-right and sovereigntist forces such as Matteo Salvini’s League and Giorgia Meloni’s Brothers of Italy. These parties seek to undermine the EU for ideological reasons and in foreign policy emphasize national politics. Meanwhile, their anti-EU stance hinders their capacity to extract meaningful concessions from Beijing as they lack the necessary clout that the EU would have when negotiating with China. The China policies of the far-right and sovereigntist parties would likely, for this reason, be a lose-lose prospect, both unsuited to Italy’s national interests and bad for the EU, which would be bypassed and undermined. The only party to gain appreciably from such policies would be the Trump administration, which would find support for the banning of Chinese technology companies such as Huawei, and would see at the same time a weakening of the European Union.

 

Rebalancing EU-China Relations

This series explores the shifting strategic debate in the European Union and various member states over the economic and political relationship with China. 

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Italy Oscillates on China

22. June 2020
Author
Nicola Casarini

Nicola Casarini is a senior fellow at the Istituto Affari Internazionali in Rome and fellow at the Wilson Center in Washington DC.