Italy signed up to China’s Belt and Road Initiative. Now it’s having second thoughts

Italy’s rather surprising decision to join China’s Belt and Road Initiative a few years backs is being thrusted back into the fore, with a deadline to potentially end it fast approaching under Rome’s new leadership.

Italy has previously been described as a “middle-power” bridge used by Beijing and Moscow to strike deals with a country that’s a member of NATO, the European Union, and the G-7 group of advanced economies.

In 2019, Rome sent shockwaves throughout the Western world when it signed up to the BRI — China’s massive infrastructure and investment plan aimed at boosting its influence across the world. At the time, analysts said that by joining the project, Italy was undermining Europe‘s ability to stand up to Beijing.

When former European Central Bank governor Mario Draghi took power in Rome in 2021, he froze the agreement and led a critical screening of Chinese investments in the country — having vetoed at least three Chinese takeovers during that year.

Two years down the line and with a new government in place, Rome is now having another think about its ties with China.

“It is a very controversial issue for the Italian government,” Silvia Menegazzi, professor of international relations and Chinese studies at Luiss University, said over the phone, adding that this is due to one key reason: Taiwan.

China sees Taiwan as a breakaway province, while Taiwan sees itself as separate from China, having ruled itself since splitting from the mainland in 1949 following a protracted civil war. Tensions between the two have risen over the years and high-level U.S. politicians’ visits to Taiwan have drawn Beijing’s ire.

New Italian Prime Minister Giorgia Meloni said via Twitter prior to her election in September — and standing next to a representative from Taiwan — that she stands alongside those who believe in democracy.

If Italy chooses closer ties to Taiwan that will surely jeopardize its relations with China. At the same time, deepening investment links with Beijing might go against what Meloni promised pre-election.

A delegation of Italian politicians was due to travel to Taiwan in April. But the trip was postponed to an unspecified date, according to media reports.

“I believe they might not decide anything,” Menegazzi said, suggesting the Italian government will continue its Belt and Road participation for now.

Under the agreement the two parties can end the deal after five years, otherwise the partnership gets extended for another five-year term. Italy has until the end of the 2023 to inform China on whether it wants to end the deal.

Back in 2022 and prior to being elected, Meloni said that joining the BRI was a “big mistake.”

“Since becoming PM, she’s chosen to present herself as aligned with the U.S. on the Chinese front. Yet she’s under pressure from her coalition partners, [Lega’s Matteo] Salvini and [Forza Italia’s Silvio] Berlusconi, whose respective constituencies are softer on China being interested in closer economic ties through the Belt and Road initiative,” Alberto Alemanno, professor of EU law at the H.E.C. business school, said via email.

The office for the prime minister was not immediately available for comment when contacted by CNBC Wednesday. Meloni leads a coalition with two other right-wing parties: Lega and Forza Italia.

The upcoming decision for Rome comes at a time when the wider European Union is framing a new relationship with China. The bloc is finding it increasingly hard to strike a united front toward Beijing, with some nations favoring economic links and others pushing for a more critical approach.

In 2022, China was the largest source of EU imports and the third largest buyer of EU goods, highlighting the economic importance that Beijing has for Europe. This is particularly relevant when economic growth in the EU is vulnerable to the ongoing war in Ukraine.

This economic argument is also supported by those who think a close relationship with Beijing is needed to accomplish advancements in climate policy.

But for many European governments, China could and should do more to support Ukraine in the wake of Russia’s invasion. China has failed to condemn Russia’s onslaught of its neighbor and in a visit to Moscow in March, China’s leader Xi Jinping referred to his Russian counterpart as a dear friend.

On top of that, Beijing has proposed a 12-point peace plan for the Ukraine war. The plan fails to specify whether Russia needs to leave Ukrainian territory for a deal to be completed. Ukraine has made it clear it will not agree to any peace deal that does not involve regaining full control of its territory.

Furthermore, the United States has added pressure on EU nations to be more critical of China in line with national security concerns. Countries in Europe that are keen on a healthy transatlantic relationship will not have a problem following that path.