Chinese president, Xi Jinping, visited Rome on Friday 22nd March to sign various agreements with Italy’s government as part of the New Silk Road project (also known as the Belt and Road Initiative, or BRI). The deal with Italy finally gives this huge continental investment programme the legitimacy it was lacking. Mr Salvini’s government has taken a historic decision by making Italy the first G7 country to consider borrowing from China’s bond market.
Italy now the Eurasian outsider on Europe’s geo-economic map
The Bank of China and Cassa Depositi e Prestiti (CDP, Italy’s state lender) signed a draft agreement allowing the latter to launch a programme of Panda bonds, which enable Chinese investors to buy foreign debt. These Panda bonds will help to co-finance Italian companies that invest in China. The CDP announced that it would issue bonds worth 5 billion renminbi ($744.5 million). Opening up China’s bond market, which is estimated to be worth $12,000 billion, is a central part of Beijing’s strategy to put its currency on the international stage.
Rome now officially supports China’s Belt and Road Initiative and, therefore, the Eurasian pivot that could drive global trade in the future. China also needs new overseas outlets for its economy, so it could opt to make Italy its springboard into Europe.
The memorandum of understanding signed by the two countries includes plans for closer economic cooperation in such sectors as gas, the metal industry, construction, electronics, financial products, energy and tourism, but also for Chinese investment in the ports of Trieste and Genoa, which are seen as becoming China’s future European maritime hubs.
European Union and United States concerned about closer Chinese-Italian links
On 12th March the European Commission described China as a “systemic rival” to the EU, so Rome’s economic choices are also seen as having a geopolitical slant. Washington went so far as to label the BRI “China’s infrastructure vanity project”. Meanwhile, Europe’s spokesperson for foreign affairs, Maja Kocijancic, called for “full unity” among EU member states with regard to China.
Similarly, the US National Security Council opposed the deal when it was announced that one was to be signed: Garrett Marquis, a White House spokesperson, explicitly asked Rome not to lend legitimacy to the BRI, saying that this would end up “harming Italy’s global reputation in the long run”.
Luigi di Maio, the Minister of Economic Development in Salvini’s government, responded to these warnings in an interview filmed for the France 2 channel during which he felt the need to issue a reminder that Italy remained a US ally, a member of the EU and a member of NATO.
Who is Michele Geraci, the Economic Development Ministry’s ‘Mister China’?
As undersecretary in the Economic Development Ministry, Michele Geraci firmly defends the Italian government’s new approach to China and is one of the architects of the draft agreement.
He is the head of a ‘China task force’ in the ministry and runs a news blog where he expresses very clear views in favour of closer ties with Beijing as a means of reviving Italy’s economy. He had, for instance, hinted that China could participate in rescuing the country’s biggest airline, Alitalia, which was placed under extraordinary administration in 2017.
Michele Geraci’s involvement in the Chinese-Italian deals and role in Italy’s government are a cause for concern, particularly in the USA. He was an economist and professor of finance from 2008 to 2018 in China, having previously spent 17 years working in the telecommunications sector. He started off as a manager in the UK’s BT. He then became an investment banker, working for the UK’s Schroders and Pali International, and the USA’s Bank of America, Donaldson, Lufkin & Jenrette (DLJ) and Merrill Lynch, always as a telecom analyst. He appears regularly on Chinese and English-speaking media. So Mr Geraci has a great deal of financial expertise in the field of telecommunications, and he is very familiar with China’s economy and economic agents. He is also fully integrated into China’s academia and media.
Michele Geraci’s openly pro-China stance could undermine the USA, which is currently leading a major global offensive to prevent Huawei’s technology from breaking into the markets of its European allies. When questioned about this, Mr Geraci had said that the issue was not whether or not to agree to work with Huawei, but whether or not to give foreign telecom equipment manufacturers access to European networks. Views on this vary even within the government itself, with Matteo Salvini having said he is wary about deploying Chinese 5G technology in Italy.
In light of all the opposition from its allies, Italy has decided to postpone the signing of some twenty or so other agreements until later. But the country is keen to forge closer ties with China and place Italy on the New Silk Road map, and this could create further tension among Western countries at some point in the future.