How Italy intends to evade the Chinese embrace – Economy

There was a time when Italy was addicted to China. That’s not long ago. Former Prime Minister Giuseppe Conte received China’s President Xi Jinping three years ago in the magnificent Renaissance villa Madama in Rome and signed a bilateral agreement on Italy’s participation in China’s major “New Silk Road” project. Conte’s China flirt met with massive resentment in the West in 2019 – no other G-7 country took part in Beijing’s initiative.

After the mega deal, the Italians also signed a letter of intent with the China Communications Construction Company (CCCC) in November 2019 for a larger stake in the port of Trieste, which fit perfectly with the strategy of the emerging world power. Because the city’s terminals on the northern Adriatic are well connected by rail to Italy’s industrial regions, Austria, Germany and Eastern Europe. Trieste beckoned with major investments that were to turn the old port city into the Italian hub of the Chinese Silk Road and a gateway to Europe. But in north-eastern Italy, that’s exactly what they didn’t want. Instead of CCCC, the operator of the Port of Hamburg came into play in Trieste for the strategically important infrastructure on the Mediterranean. In October 2020, Hamburger Hafen und Logistik (HHLA) took over 50.01 percent of Italy’s largest port.

Just look: The idiosyncratic Trieste, which for five and a half centuries was the port of birth for the Austrian Habsburg monarchy, showed how exemplary friendshoring, i.e. trading only with friendly states, works. Instead of deepening Europe’s economic dependence on aggressive autocracies, the Italians strengthened ties with their largest trading partner, Germany. This happened two years before the Russian attack on Ukraine and the Taiwan conflict meant that a change of course in foreign trade was now on everyone’s lips and so-called friendshoring became a buzzword.

With the controversial entry of the Chinese state shipping company Cosco at a terminal in the port of Hamburg, a curious situation has now arisen in Trieste. If the Italians had locked the door to the CCCC from Beijing, the Chinese are now coming in through the window again in a certain way thanks to their participation in the Hamburg terminal. Cosco does not hold shares in Hamburg-based HHLA, the main shareholder of the Italian Adriatic port, but only in their Tollerort terminal in Hamburg. Nevertheless, the German handling of the Cosco case caused concern in Italy.

The new right-wing nationalist government in Rome is particularly alarmed

The takeover in Hamburg will probably not have a direct impact on Trieste, says Francesca Ghiretti from the Berlin Mercator Institute for China Studies (MERICS). But the participation raises questions about competition. Cosco finances itself from state funds and thus does not compete from the same position as the other players in the industry. “In addition, the dominant market position represents a potential geopolitical leverage for Beijing,” says the economic security expert.

The new right-wing nationalist government in Rome is particularly alarmed. “We are certainly more aware of the risks of Chinese hegemony,” Adolfo Urso commented on the approval of the Cosco participation, which was pushed through by Chancellor Olaf Scholz. Urso, who belongs to Meloni’s Fratelli d’Italia party, heads the Ministry of Economy, now called the Ministry of Enterprise and Made in Italy. Italy is Europe’s border in the Mediterranean and defends the country’s strategic infrastructure against Beijing’s influence. “We will not hand ourselves over to the Chinese,” says Urso. Chinese state-owned companies are also interested in other ports on the Mediterranean peninsula – including Genoa and Palermo.

There have been three changes of government in Italy’s capricious political establishment since the Silk Road Pact with Xi Jinping. They always resulted in a change of heart in international trade policy. This is no different when post-fascist Giorgia Meloni takes office with her penchant for protectionism and self-sufficiency. “Our policy aims to guarantee the strategic autonomy of Italy and Europe in all important supply chains,” says Economics Minister Urso. “If others intend to move from energy dependence to technological and economic dependence on China, we will not follow them on this path,” he taunts the German government.

Last June, Draghi also banned the transfer of technologies

However, as far as China is concerned, Meloni is continuing on the path taken by her predecessor Mario Draghi, in order to bring his country back further away from Beijing. Draghi gradually freed Europe’s troubled country from the Chinese embrace. He had the 29 bilateral agreements checked and prevented Chinese buyers from entering key industries during the 20 months in office. First his government blocked the sale of a semiconductor manufacturer. Then she stopped the takeover of the seed manufacturer Verisem by the Chinese state-owned company Syngenta. Rome even reversed the sale of drone manufacturer Alpi Aviation. Last June, Draghi also banned the transfer of technology and algorithms from Italian robot maker Robox to its Chinese investor. Sometimes government intervention was not even necessary. The agricultural and construction machinery group CNH broke off negotiations with FAW Jiefang on the sale of a subsidiary.

The question remains as to how far Giorgia Meloni will assert her basic protectionist convictions. Even the programmatic renaming of important departments was evidence of the nationalist government thinking. Next to the Ministry of “Made in Italy” there is now also the Ministry of Agriculture and Food Sovereignty. If you took the head of government at her word, the Italian economy would be sealed off from world trade. But that’s not realistic.

Even decoupling from China would be a disaster for the export nation. Not only the luxury fashion labels like Gucci, Prada and Moncler owe their boom to the Asian market. Ferrari has just trumped again with brilliant quarterly results – at 73 percent, sales growth in China exceeded company growth by more than three times. Even a supplier like brake manufacturer Brembo announced that China had become its second largest market. And even the fruit grower Oranfrizer from Sicily is now selling his blood oranges to China on a large scale. So autarky should remain nothing more than a post-fascist slogan.

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