MILAN, ITALY - FEBRUARY 25: A woman, wearing a respiratory mask, walks past a placard showing a handshake between two hands representing the Chinese and the Italian national flags and reading 'The enemy is the virus, not the people. Go China!' in the Paolo Sarpi district (Milan's Chinatown) on February 25, 2020 in Milan, Italy. (Photo by Emanuele Cremaschi/Getty Images)

Italy’s China card: Finance, trade and geopolitics

Economic considerations drive the positive and negative narratives on China in Italy. The country is a trading nation and the current government wants to stay on good terms with China – as much as this may cause uncertainty to the transatlantic relationship.


  • Senior Fellow, Istituto Affari Internazionali (IAI); Fellow, Wilson Center

  • In-depth view
  • 30 Oct 2020
  • 12 min read


  • Senior Fellow, Istituto Affari Internazionali (IAI); Fellow, Wilson Center

Italy increasingly looks toward China for reviving its economy severely hit by the pandemic-induced lockdown. During the visit of Chinese foreign minister Wang Yi to Italy at the end of August 2020, Italian foreign minister Luigi di Maio declared that China is a key strategic partner of Italy and that the two partners need to forge closer ties in trade, finance and industrial cooperation. For its part, Wang Yi emphasized the trade benefits of the relationship, underlying that China is now one of the largest cooperative partners of Italy in terms of imports and exports.

Italy’s interest in strengthening ties with Beijing has raised concern in Washington. US Secretary of State Mike Pompeo visited Italy at the beginning of October, seeking to contain Chinese ambitions in Italy, a trusted ally of the US and a founding member both of the European Union and of the North Atlantic Treaty Organisation (NATO). Yet, Pompeo’s efforts at steering Italian foreign policy in a direction more favourable for the transatlantic alliance have met resistance from some Italian politicians and corporate leaders who hold a positive view of the Asian giant.

The positive narrative maintains that the Chinese market has become important for Italy whose prosperity depends on exports. By signing the Memorandum of Understanding (MoU) on the Belt and Road Initiative (BRI) – China’s massive infrastructure and connectivity project linking China to Europe though Eurasia - in March 2019, the Italian government in power at that time hoped to increase the bilateral trade, in particular exports of the so-called ‘Made in Italy’ products - to China.

While bilateral trade has undoubtedly increased in recent times, data from the Italian National Institute of Statistics (ISTAT) shows that the importance of the Chinese market for Italian exports remains rather small – 2.8% in 2018 – and that the trade gap has further widened in recent years. According to the Italian Ministry of Foreign Affairs, two-way trade reached 43.9 billion euro in 2018. Italian exports to China amounted to 13.2 billion euro, while imports reached 30.7 billion for the year.

Besides those numbers, the narrative put forward by the proponents of closer Rome-Beijing ties insists that China provides Italy with great potential in the future, given the size of the Chinese market and its expanding middle class which increasingly appreciate ‘Made in Italy’ products. Luigi Di Maio, Italy’s Foreign Minister, several times referred to the Chinese market as ‘a great opportunity for Italian companies’.

China-friendly politicians and corporate leaders in Italy have also tended to present Chinese investments as a boon for Italy’s ailing economy and as a sign of the country’s international attractiveness. According to a 2018 report by the Italy-China Foundation (a private organization for the development of cultural and economic relations between Italy and China), more than 600 Italian companies have received some Chinese investment since 2000, for a total value of 13.3 billion euros. Acquisitions have been facilitated by the small size of most Italian companies, although Chinese investors have also targeted big companies.

Germany, France and the United Kingdom have traditionally been the preferred destinations for Chinese foreign direct investment (FDI). However, in 2015 Italy overtook France for cumulative Chinese FDI calculated from the year 2000. The sudden increase in Chinese FDI in Italy in 2015 was due to the 7.9 billion dollar acquisition of a 16.89% stake in Pirelli, the world’s fifth largest tire maker, by state-owned ChemChina.

Aside from the Pirelli acquisition, Chinese firms have made investments in some of Italy’s key strategic industrial and financial companies. According to data from S&P Market Intelligence elaborated by Il Sole 24 Ore, Chinese portfolio investments have surged. The investment arm of the People’s Bank of China, the State Administration of Foreign Exchange, has invested almost 3.5 billion euros representing about 2% each in ten of Italy’s largest companies in the banking (Monte dei Paschi di Siena, Unicredit, Intesa SanPaolo, Mediobanca), energy (Saipem, Enel, Eni), auto (Fiat Chrysler Automobiles), telecommunication (Telecom Italia), cables and systems (Prysmian) and insurance (Assicurazioni Generali) industries.

However, since 2018, there has been a decline of Chinese investments in Italy, in line with the more general fall of Chinese company deals in the old continent also due to increase scrutiny following the adoption of an EU-wide screening mechanism. In 2020, Chinese investments in Italy have also been withheld by the coronavirus crisis. However, in May this year Faw, the largest Chinese car manufacturer (with almost 4 million vehicles sold in China and 90 billion dollars in turnover) announced that it will invest over one billion euros in an electric car design centre in northern Italy’s region of Emilia Romagna.

Besides trade and investments, a positive view of China includes financial issues. Beijing is now increasingly perceived even as a potential savior, should Italy’s debt fall under speculative attacks. Investors have continued to attend in big numbers Italy’s bond sales managed by the Bank of Italy in 2020. However, the country’s sovereign debt – which gives a high premium over German bonds – is attractive to investors but comes at a heavy cost for Italy.

On 28 April 2020, the rating agency Fitch downgraded Italy’s credit rating to BBB-, just a single notch above ‘junk’. Fitch justified the decision with the jump in debt levels resulting from the coronavirus crisis which increases doubts about the sustainability of Italy’s borrowings. It is in the context of such a severe deterioration of the Italian economy and financial situation that the positive narrative about China gains steam.

The proponents of closer Rome-Beijing ties hope in fact that China would come to rescue Italy, should the country fall prey to international speculation. Remarkably, Alessandro di Battista, one of the leaders of the Five Star Movement (M5S – the party which holds more than one-third of the seats in the Italian parliament) declared in an interview for a daily newspaper that should Italy finds itself under speculative attacks because the EU has not given to Italy the economic help that the country expects, ‘we can use the China card, given the good ties established by the current government with Beijing.’

Not surprisingly, these declarations by some M5S politicians have raised concerns in Brussels and Washington as they seem to run counter the more critical approach that Italy had taken towards Beijing by the previous centre-left governments. For instance, it was the Gentiloni government – in power until March 2018 - which had joined Germany and France in sending a letter to the European Commission in February 2017 to back calls for an EU-wide investment screening mechanism clearly aimed at Beijing.

Those Italian politicians of the centre-left Democratic Party – together with the General Confederation of Italian Industry, commonly known as Confindustria  – that backed the creation of a EU-wide investment screening mechanism were proponents of another narrative, i.e., one that views China as an ominous economic threat, due to its state-dominated economy and its unfair trade practices, which have contributed to de-industrialization and a declining standard of living across some parts of Italy.

Since the mid-2000s – following China’s entry into the WTO – a negative narrative has emerged in Italy, based on a Chinese economic threat to some industrial sectors. The debate has focused on the idea that China has been invading the Italian (and European) market with cheap products and taking away jobs in the manufacturing sectors.

The rapid growth of skill-intensive imports from China has represented a serious challenge for many Italian productions such as textiles, shoes, toys, but also ceramics and machineries – sectors quite important in Italy. This negative narrative about China was nowhere more evident than in the case of the debate on the market economy status.

The more Atlanticist members of the centre-left Democratic Party that supported the EU-wide investment screening mechanism (clearly aimed at Beijing) also led the campaign to avoid relaxing EU anti-dumping measures against China. Since the mid-2000s, most of the anti-dumping initiatives by the EU against Beijing were instigated by Italian firms. Remarkably, the M5S which is currently in power in Rome has found support among many small and medium-sized enterprises (SMEs) which have suffered from Chinese unfair trade practices. Yet, it is Luigi Di Maio, Italy’s fminister and leader of the M5S, who spearheads Italy’s charm offensive towards Beijing.

The centre-left coalition in power in Rome since September 2019 – dominated by the M5S and those elements of the Democratic Party which are in favour of closer Italy-China ties  –  has thus put forward a positive economic narrative about Beijing, creating some frictions with the traditional US ally which is engaged in a new Cold War with China.

However, even a more Atlanticist centre-left coalition, or a centre-right government led by far-right and sovereigntist forces may not be that different. Italy is a trading nation which has been hit hard by the coronavirus pandemic. It will take years for Italy to recover economically. In the meantime, the country may have little choice but to stay in good terms with China – as much  uncertainty as this may cause to the transatlantic relationship.

The piece is part of multi-year project on China’s rise and the future of the transatlantic partnership. Chatham House would like to thank the Konrad Adenauer Foundation (Konrad-Adenauer-Stiftung) for its generous support of this work. The opinions expressed in this piece do not necessarily reflect the views of Chatham House, or the Konrad Adenauer Foundation.