Italy reportedly going to support China’s Belt and Road program
Italy is planning to officially announce its support for China’s Belt and Road Initiative this month, the Financial Times reported on Wednesday.
It would be the first endorsement by a G-7 nation, the report pointed out.
Chinese President Xi Jinping’s regional infrastructure investment program is widely seen as Beijing’s attempt to expand its influence globally through the construction of a network of land and maritime routes across Asia, the Middle East, Africa and Europe.
Critics say that through the project, China forces developing nations to take on high debt burdens while benefiting Chinese companies which are often stateowned.
In the last few months, Malaysia, Pakistan, Myanmar, Bangladesh and Sierra Leone have either canceled or stepped back from their prior commitments to
Risks ahead
Belt and Road projects.
Italy’s undersecretary in the economic development ministry, Michele Geraci, told the Financial Times his country is in negotiations to sign a memorandum of understanding in support of the program.
China has been a strong performer among emerging economies, even if its growth has been slowing. But that’s set to end, according to research firm Capital Economics.
Growth in China could plummet to two percent over the next decade — from the expected 6.0 to 6.5 percent target this year, predicted Capital’s Chief Asia Economist Mark Williams, CNBC reported.
“China’s time as an emerging markets outperformer is ending,” said Williams, at the Capital Economics annual conference in Singapore on Tuesday.
He added that the estimated two percent growth is a ‘long way’ from the five to six percent expected by the International Monetary Fund for the next decade.
Speakers at the conference pointed to a number of risks, as well as changing demographics in the world’s second largest economy. That includes its debt problem, declining work force, and increasingly weaker drivers of productivity, they said.
Those predictions come as Chinese Premier Li Keqiang said at the annual National People’s Congress on Tuesday that the official economic growth target this year will be six to 6.5 percent, slowing from last year.
Li also warned that there will be greater risks ahead for the Asian economy, saying, “We must be fully prepared for a tough struggle.”
China’s debt problem will not go away, with the real concern being corporate debt and household debt — as opposed to government, said Julian Evans-pritchard, Capital Economics’ senior China economist, at the conference. He blamed rising debt levels on poor lending practices.
“Policymakers have been trying to shift lending away from state firms towards their more efficient private counterparts. But so far, the results have been The plan is to sign in time for Xi’s visit by the end of March, Geraci said in the article.
“We want to make sure that ‘Made in Italy’ products can have more success in terms of export volume to China, which is underwhelming,” Evans-pritchard said.
Data also showed that state firms’ capital spending is higher now compared to a few years ago, he added.
“Servicing the existing stock of debt will be more difficult as China’s economy continues to slow.”
Evans-pritchard noted that the real risk lies with property developers, who have borrowed the most to fund their land-buying spree.
Some analysts have said that Beijing might stimulate its slowing economy this year through more loans, but Williams warned that the ‘key headwind’ on the Chinese economy so far has been the tightening on shadow the fastest-growing market in the world,” he added in the report.
Such public support would come at a critical time in China’s relations with the US and the European Union, of which Italy is a founding member.
Xi is expected to meet with US President Donald Trump by the end of March to clinch a deal to end their trade impasse. This week, the EU Council adopted its first-ever framework of rules on foreign direct investment, amid a rise of Chinese investments in the region and concerns about protection of key technologies.
Garrett Marquis, White House National Security Council spokesperson, told the FT that the US is skeptical of the benefits to Italy from an endorsement of the Chinese initiative, and urged allies and partners to increase the pressure on Beijing to align its global investments with international practices.