A three-year program to strengthen her country’s economic cooperation with China and six trade agreements were signed by Italian Prime Minister Giorgia Meloni during her five-day trip to the land of silk. “It is mutual the will that Sino-Italian economic and trade relations enter a new phase” Meloni said after her meeting on Sunday with her counterpart Li Chiang, and the next day, hosted by President Xi Jinping, she hailed China as an “important interlocutor” for managing international crises.
“There is a growing insecurity at the international level and I believe that inevitably China is a very important interlocutor to respond to these dynamics. We must work together to guarantee security, stability and peace” said the Italian prime minister after her meeting with the Chinese president. Xi commemorated them “long-term bonds of friendship” and also feelings of “tolerance, mutual trust and respect” between Beijing and Rome.
A partner, not a subordinate
It wasn’t always like that. Last year Meloni withdrew Italy from President Xi’s One Belt One Road Initiative (it is the evolution of the older Silk Road). Italy was the only G7 country to sign the Initiative (in 2019) causing reactions from both the Washington government and other Western governments. Meloni, who took office in 2022 as more pro-Western and pro-Hate than her centre-left predecessors, had called her country’s participation in the Initiative a “serious mistake”, so she withdrew the signature. Now he is returning to Beijing invoking the “Spirit of Silk” to usher in a new era in bilateral relations and “restore trade balance”.
Meloni’s new opening in China has a political and an economic dimension. Speaking to the BBC, the chief economist of the Natixis investment bank, Alicia Garcia-Herrero, described the policy: “Every country participating in the Belt and Road Initiative knows that China is ahead and the rest are following. I do not believe that Italy as a member of the G7 would like to be listed with Russia, Pakistan or Sri Lanka among those following the Chinese. Meloni did not come to China as the head of a country attached to the Chinese chariot. He comes less as a subordinate and more as a partner.”
Trade imbalances
The commercial dimension of Meloni’s visit has to do with the fact that relations between the two countries are unbalanced, despite the fact that trade between them is very developed, reaching a value of 66.8 billion euros ($71.76 billion) last year ) – China is Italy’s second largest non-EU partner after the US. “I have repeatedly said that we are the only major Western European country to participate in the Belt and Road Initiative, but we were not the country with the best trade relations with China. We were far from other European countries” Meloni said avoiding mentioning Germany. The Italian Prime Minister announced the signing of six bilateral agreements covering many business sectors, including electric cars and renewable energy. The Chinese Premier’s office announced that the Memorandum of Industrial Cooperation signed covers industries such as shipbuilding, aerospace, energy and artificial intelligence.
On an “equal basis”
In conclusion, the Meloni government wishes to upgrade its country’s relations with China, but on an “equal basis”. In other words, it seeks to promote Italian products in the huge Chinese market, but at the same time “to protect the domestic and European economy, technology and infrastructure from Chinese penetration and influence” as “Politico” magazine notes. He has also made some “nationally proud” commercial decisions. It has, for example, banned a state-owned Chinese company from taking control of Italian tire giant Pirelli, while openly backing the Commission’s imposition of 37.6% tariffs on electric car imports from China – in October the EU is set to impose further tariffs Chinese cars. “Chinese investment in Italy is only a third of Italian investment in China. It’s a difference I’d like to see reduced in the right way.” Meloni stressed at a forum of Italian and Chinese businessmen organized on Monday in the Chinese capital.
What is happening to Italian exports?
“Made in Italy” is limping, public debt is increasing
Last Tuesday, the Italian statistics agency ISTAT announced the first estimates for growth in the second quarter, which came in at 0.2% quarter-on-quarter and 0.9% year-on-year. These are performances expected by the markets and in line with the forecasts of the Meloni government (in April he announced 1% growth this year). ISTAT pointed out that even if growth is zero in the next two quarters, the country’s GDP will grow this year by 0.7%.
What is troubling the economic staff of the Italian government and the prime minister is that, as the statistics showed, the recovery of the economy after the pandemic recession is due to the recovery of domestic demand and not to exports that are still limping. “From the point of view of demand, the contribution to the growth of the domestic product is positive, but the component of net exports is negative” notes ISTAT, which will announce on September 2nd the final data on the course of the GDP in the second quarter.
A constant headache, of course, for the government of Rome is the extremely dangerous fiscal situation of the country. The budget deficit fell to just 7.4% in 2023 from 8.6% in 2022 and remains the highest in Europe, while public debt is second only to Greece’s and is expected to exceed 140% this year as it continues to grow . After all, Italy is one of the seven member countries to which the Commission showed a “yellow card” in June, initiating the “excessive deficit procedure”.
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