Italy Expresses Intent to Withdraw from Belt and Road Initiative... Concerns Over China's Economic Retaliation

Italy Coordinating Official Withdrawal Notice
Strengthening Cooperation with Taiwan to Secure Semiconductors
Considering Administrative Measures Amid Concerns of Chinese Retaliation

Among the Group of Seven (G7) countries, Italy, the only one that had joined China's Belt and Road Initiative, has indicated to the United States that it may withdraw from the investment agreement with China.

According to Bloomberg on the 9th (local time), Italian Prime Minister Giorgia Meloni met with U.S. House Speaker Kevin McCarthy in Rome on the 4th and stated, "Although a final decision has not yet been made, we are considering withdrawing from the Belt and Road project."

At the first session of the Group of Twenty (G20) summit held in Nusa Dua, Bali, Indonesia, last November, Chinese President Xi Jinping (center) is seen conversing with Italian Prime Minister Giorgia Meloni (left). [Image source=Yonhap News]

Currently, Italy is reportedly coordinating the timing of the announcement regarding when it will officially notify its withdrawal from the project, taking into account potential economic retaliation from China. Bloomberg reported that Italy is expected to make an official announcement only after the G7 summit in Hiroshima on the 19th.

Italy formalized its participation in the Belt and Road Initiative in 2019 during the tenure of former Prime Minister Giuseppe Conte by signing a memorandum of understanding (MOU) with China to strengthen cooperation in the energy, aviation, and port sectors. Amid the intensifying U.S.-China rivalry for hegemony, China's inclusion of Italy, a Western country, in the Belt and Road Initiative held significant meaning.

The agreement between the two countries was expected to be automatically renewed in 2024 and continue unless Italy formally notified its withdrawal. Italy also found it difficult to decide to withdraw from the project easily, given the substantial economic benefits it had gained through cooperation with China.

The reason for Italy's change of heart is attributed to the semiconductor alliance. As the European Union (EU) is promoting stronger ties with Taiwan to foster the semiconductor industry, Italy cannot pursue an independent path alone. Italy's key industry is automobile manufacturing, and securing a stable semiconductor supply chain is essential to maintain vehicle production levels.

Accordingly, Italy has recently shown signs of moving away from its pro-China stance. Italian senior officials visited Taiwan and held talks on semiconductor technology cooperation, and announced plans to open a "Milan-Taipei Representative Office" in Milan, Italy. The representative office is an unofficial diplomatic channel focused on economic affairs, functioning similarly to an embassy.

However, if Italy officially confirms its participation in the Belt and Road Initiative, it is expected that China will respond with economic retaliation. The Italian government appears to be aware of China's opposition and has begun preparing measures to minimize economic damage to its domestic companies.

According to Bloomberg, Italian government officials are considering various administrative measures to control excessive influence by Chinese shareholders in Pirelli, Italy's tire manufacturing company.

Currently, Pirelli's largest shareholder is the Chinese chemical company Sinochem Holdings, which holds 37% of the total shares. Bloomberg reported, "Italian officials are discussing negotiations with Pirelli investors regarding the company's ownership structure," and "They are also considering measures to restrict the sharing of sensitive technical information and limit voting rights of board members appointed by Sinochem Holdings."

This content was produced with the assistance of AI translation services.