China and Italy - A Complicated and Concerning New Relationship

As kids, we studied Marco Polo who was a merchant and explorer who traveled the Far East and China for much of his life. He was born in Venice in 1254. Venice was a wealthy city. His father was a merchant. They traveled by many means between many cities and trading routes, but it was called the Silk Road, partially because much of what Marco brought to Europe was Chinese Silk, spices and other products in exchange for prized Roman glass. The journeys were dangerous and many in their entourage died along the way. Marco Polo was fascinated with the wealth and luxury of the Chinese cities.

Now the Chinese have built a New Silk Road which links China to Europe. A purpose is to speed Chinese goods to market by rail, truck, ship and many other means. It is also called the Belt and Road Initiative.

The BBC says that, “Critics see it as a bold bid for geo-political and strategic influence. It has already funded trains, roads and ports, with Chinese construction firms given lucrative contracts to connect ports and cities. The levels of debt owed by African and South Asian nations to China have raised concerns in the West and among citizens - but under certain circumstances roads and railways have been built that would not exist otherwise.”

In Uganda, Chinese millions built a 30-mile road to the international airport. In Tanzania, a small coastal town may become the continent’s largest port. In Europe, too, the Chinese shipping firm Cosco managed to buy 51% of the port authority in Piraeus near Athens in 2016, after years of economic crisis in Greece. It also bought the terminal in Zeebruge, Belgium’s largest port.

Western countries believe that New Silk Road is another name for Trojan Horse which will undermine NATO and compromise Italy’s allegiances. It will cause the Italian government’s willingness to break with its traditional trading partners.  The US distancing itself from Europe with its theme of America First is not helping.

Italy is known for its coveted luxury goods. Fashion names like Valentino, Versace, Gucci, Fendi, Giorgio Armani, Prada, Fila are recognized around the world. (Ironically as are Chinese knockoffs). Add to that Ducati motorcycles, Ferrari, Maserati and Alpha Romeo automobiles and you get the picture.

According to the New York Times, "for decades, Italy felt the brunt of the Chinese economic juggernaut that the United States argues poses a threat to the financial and political future of the West. China’s government backed-backed manufacturers, operating on a much larger scale with much cheaper costs, devoured small Italian companies producing machinery, textiles and pharmaceuticals."

Italy’s intelligence services are interwoven with ours and the other NATO countries and you gain some insight as to the potential price of increased Chinese influence.

China believes that the China model, which is economic growth, without political liberty represents a superior alternative to a liberal democracy, with application far beyond China’s borders, according to The Wall Street Journal.

Italy is a major tourist and travel destination for much of the world including increasingly affluent Chinese.

This month, as the United States continued to engage in a trade standoff with China, and European leaders of the European Union, banded together to demand an end to Chinese unfair business practices. Italy took another route - China’s New Silk Road.

In a move that signaled geopolitical shifts from West to East, Italy broke with its European and American allies in March during a visit by President Xi Jinping of China and became the first member of the Group of 7 major economies to officially sign up to China’s vast new One Belt One Road global infrastructure project.

Italy’s transactional tradition in trade and foreign policy, its anti-establishment government’s antagonism toward the European Union, the failure of the United States to intervene effectively and China’s expertise in exploiting political dysfunction, all of these things contributed to the making of the deal.

So too, did Italy’s desperation for investment, access to China’s enormous markets and anything resembling an economic uptick. The US sought to stop Italy from joining New Silk Road.

The US has vastly more money invested in Italy than China does.

Is this the first domino to topple?

What do you think?

Ira Friedman