Italy Cools on China to Focus on Taiwan Semiconductors

The Lede: Italy are considering abandoning its cooperation with China on the Belt and Road Initiative while moving toward Taiwan to cooperate on semiconductors.

What We Know:

Officials from the Italian Ministry for Business and Made in Italy discussed plans to increase cooperation on producing and exporting semiconductors during recent meetings in Taipei.
As part of the talks, Italian officials mentioned the possibility of breaking away from participating in China’s Belt and Road Initiative (BRI), which would otherwise be automatically renewed in 2024.
Taiwan has planned to invest about $400 million in Italy’s chip industry, according to the Taipei representative office in Rome. A second representative office for Taiwan has been planned in Milan, Italy’s business capital.
Italian Prime Minister Giorgia Meloni plans to announce the country’s BRI stance during the May G-7 summit in Hiroshima. She has not yet responded to an invitation to visit Beijing from Chinese President Xi Jinping.

The Background: Italy became the only G-7 country to participate in the BRI when former Italian prime minister Giuseppe Conte signed a memorandum of understanding in 2019. The partnership has been mostly symbolic as it has not practically led to greater bilateral integration, which would require more explicit technical agreements. Luxury brands make Italy the fourth-largest EU exporter of goods to China and the third-largest EU importer. Meloni and her right-wing Brothers of Italy party have criticized China in the past.

Likely Outcomes:

Italy will likely continue its ties with China at arm’s length in the near term. The U.S. certainly welcomes any wedge between European allies and China while Taiwan and Italy are quickly reaching stronger ties with the prioritization of the semiconductor industry. Like the rest of Europe, however, Italy will still have to maintain its ties with China while rebalancing its geopolitical relationships.
China had counted on Italy's Euroskeptic leadership to pressure the unity of the EU to tip some of the balance in Europe in its favor. If Italy chooses to move away from China, Beijing will have fewer cards to play in the region. It would also be a significant blow to the BRI in Europe. However, China still retains a foothold with BRI projects in the Balkans among other parts of southern and eastern Europe.

Quotables:

"Italy is stuck between a rock and a hard place, and what to do with the cooperation pact is a real diplomatic conundrum for Meloni. Renewing it would send a very difficult message to Washington, but not renewing it would put a strain in relations with China.” – Francesca Ghiretti, analyst at the Mercator Institute for China Studies

Good Reads:

Italy may pull out of China's Belt and Road initiative as U.S. backs stronger break (Japan Times)

Italy eyes Taiwan chip deals: sources (Taipei Times)