First glance

Can Italy leave the Belt and Road Initiative without a backlash?

How China responds to Italy’s exit from the BRI may influence other members who are contemplating a similar move.

Publishing date
12 September 2023
Giorgia Meloni

On 10 September, at the G20 summit in New Delhi, Italy’s prime minister Giorgia Meloni announced her country’s exit from China’s Belt and Road Initiative (BRI), which Italy joined in March 2019. Meloni’s words were rather accommodating, saying that despite the exit there would be a “strengthening” of bilateral cooperation between the two countries and even a “mutually beneficial” partnership to come. But neither Italy nor China has clarified what form such cooperation will take.

Italy’s official BRI exit should not come as a surprise. During the summer 2022 Italian election campaign, Meloni called Italy’s adherence to the BRI a “mistake”. Data tends to support this view.

Compared to other European Union countries, Italy does not fare well either on trade or investment relations with China and the BRI has not changed this. Italy’s exports to China increased to $18.6 billion by the end of 2022 compared to $14.5 billion in 2019, while Italy’s imports from China increased from $35.4 billion to $65.8 billion. Italy thus has an increasingly large bilateral trade deficit with China (from minus $20.9 billion in 2019 to minus $47.3 billion in 2022), despite rebalancing an unbalanced trade relationship being one of the goals of Italy’s BRI membership. As for investment, China's outbound foreign direct investment into Italy plummeted from $650 million in 2019 to barely $20 million in 2020, which is worse than the general slowdown in China’s outbound investment globally.

But the question now is no longer about the benefits or costs of the BRI, but rather the consequences of leaving, something no BRI partner country has done officially. A former under-secretary in Italy’s ministry of economic development, Michele Geraci, has stated that there would be heavy economic consequences for Italy if it were to leave the BRI.

Past experiences of deteriorating bilateral relationships between China and Western countries are not encouraging for Italy. For example, when a Taiwan Representative Office opened in Vilnius in November 2021, China retaliated against Lithuania by stopping all imports from Lithuania and even banned some German goods with Lithuanian components. However, Lithuania is much smaller in economic size than Italy and the reason for retaliation was a much more obvious redline for the China, namely because of the official treatment of Taiwan. A more relevant example might be that of Australia, where-then Prime Minister Scott Morrison endorsed an inquiry into the origins of COVID-19 in early 2020, angering China. Following this, China started imposing very high tariffs on some Australian exports. 

Both Lithuania and Australia’s cases had a high political content. The issue for Meloni, therefore, will be whether the decision to leave the BRI is considered as political by Chinese leaders.

Meloni's choice of a multilateral setting like the G20 summit for the announcement is unlikely to have pleased the Chinese. Among several reasons given in the media for President Xi’s absence from the G20 summit, Meloni’s intended official announcement to exit BRI could well come high in the list. However, Meloni’s signalling of potential new agreements with China might have mitigated China’s loss of face, since Chinese officials have so far remained rather silent on the issue.

Meloni’s more balanced approach to exiting the BRI, compared to the strident call for a rapid BRI exit during her electoral campaign, reflects Italy’s two conflicting constraints. Italy is a founding NATO member and Meloni has been one of the most critical voices against Russia’s invasion of Ukraine, which China has – at least indirectly – been supporting.

Meloni’s most powerful constituency is the business sector which she needs to keep on her side. The sector is clearly using their lobbying power to remain in a reasonable working relationship with China. Many of these business groups depend on China either for its market or for sourcing goods back to Italy. Meloni’s decision to opt for a multilateral platform to announce the exit while still promising a continuation – if not upgrading – of business cooperation might allow Italy to escape the BRI without too heavy a retaliation from China.

Meloni’s handling of Italy’s exit from the BRI is important for the rest of the world. She chose a multilateral setting for the announcement but has clearly avoided confrontation by floating the idea of renewed bilateral cooperation with China. How this cooperation shapes up will be watched carefully, not only in the EU but also by other BRI members who are disappointed enough to also consider exiting.

This is an output of China Horizons, Bruegel's contribution in the project Dealing with a resurgent China (DWARC). This project has received funding from the European Union’s HORIZON Research and Innovation Actions under grant agreement No. 101061700.

EU funded project disclaimer

About the authors

  • Alessia Amighini

    Alessia Amighini is a non-resident fellow at Bruegel and Co-Head of Asia Centre and Senior Associate Research Fellow at ISPI. She is Associate Professor of Economics at the Department of Economic and Business Studies (DiSEI) at the University of Piemonte Orientale (Novara, Italy), and Adjunct Professor of International Economics at the Catholic University (Milan, Italy). Amighini previously worked as an Associate Economist at the United Nations Conference on Trade and Development (UNCTAD, Geneva, Switzerland). Alessia holds a PhD in Development Economics from the University of Florence (Italy) and a Master in Economics as well as a BA in Economics from Bocconi University (Milan, Italy).

    She has published in many international peer-reviewed journals such as China Economic Review, World Development, The World Economy, International Economics, China and the World Economy. Alessia also published chapters in several books for Edwar Elgar, Harvard University Press, Oxford University Press, Palgrave, Routledge; she coauthored ‘L’economia della Cina’ (Carocci, 2007) and Macroeconomics: A European Perspective (Pearson, 2010 and 2013). She has contributed to several international research projects sponsored by Central Bank of Sweden, Inter-American Development Bank and UNU-WIDER.

    Alessia is a member of the ASEFUAN (Asia-Europe Foundation University) Alumni Network since 1998.

  • Alicia García-Herrero

    Alicia García Herrero is a Senior fellow at Bruegel.

    She is the Chief Economist for Asia Pacific at French investment bank Natixis, based in Hong Kong and is an independent Board Member of AGEAS insurance group. Alicia also serves as a non-resident Senior fellow at the East Asian Institute (EAI) of the National University Singapore (NUS). Alicia is also Adjunct Professor at the Hong Kong University of Science and Technology (HKUST). Finally, Alicia is a Member of the Council of the Focused Ultrasound Foundation (FUF), a Member of the Board of the Center for Asia-Pacific Resilience and Innovation (CAPRI), a member of the Council of Advisors on Economic Affairs to the Spanish Government, a member of the Advisory Board of the Berlin-based Mercator Institute for China Studies (MERICS) and an advisor to the Hong Kong Monetary Authority’s research arm (HKIMR).

    In previous years, Alicia held the following positions: Chief Economist for Emerging Markets at Banco Bilbao Vizcaya Argentaria (BBVA), Member of the Asian Research Program at the Bank of International Settlements (BIS), Head of the International Economy Division of the Bank of Spain, Member of the Counsel to the Executive Board of the European Central Bank, Head of Emerging Economies at the Research Department at Banco Santander, and Economist at the International Monetary Fund. As regards her academic career, Alicia has served as visiting Professor at John Hopkins University (SAIS program), China Europe International Business School (CEIBS) and Carlos III University. 

    Alicia holds a PhD in Economics from George Washington University and has published extensively in refereed journals and books (see her publications in ResearchGate, Google Scholar, SSRN or REPEC). Alicia is very active in international media (such as BBC, Bloomberg, CNBC  and CNN) as well as social media (LinkedIn and Twitter). As a recognition of her thought leadership, Alicia was included in the TOP Voices in Economy and Finance by LinkedIn in 2017 and #6 Top Social Media leader by Refinitiv in 2020.

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Alessia Amighini, Alicia García-Herrero, Michal Krystyanczuk, Robin Schindowski and Jianwei Xu