• Italy signed a memorandum of understanding with China to take part in its giant Belt and Road Initiative (BRI) trade project.
  • The BRI aims to link China with dozens of countries around the world with mostly Chinese infrastructure.
  • Italy, the 8th-biggest economy in the world, is the largest so far to join the BRI.
  • The second-largest party in Italy and the White House have both criticized the decision.

Italy has joined China’s Belt and Road Initiative (BRI), the massive trade project aiming to connect the country to dozens of nations across Asia, Africa, Europe, and the Americas through Chinese-built infrastructure.

Its participation in the project marks a huge victory for China. Italy, the world’s eighth-largest economy by nominal GDP, is the largest nation to join so far.

Italian officials signed a memorandum of understanding (MOU) to support an infrastructure program with Beijing on Saturday, during Chinese President Xi Jinping’s visit to Rome, according to The Associated Press.

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Foto: Chinese President Xi Jinping and Italian Prime Minister Giuseppe Conte shake hands at Villa Madama in Rome on March 23, 2019.sourceYara Nardi/Reuters

The MOU is non-binding - meaning there will be no legal ramifications for Italy or China if either withdraws from the agreement - and the exact details are unclear. BRI contracts between China and partner nations are typically shrouded in secrecy.

On top of Italy signing up to the BRI, the two nations signed ten additional deals in sectors including port management, energy, steel, and gas, Reuters reported.

Details of those contracts were not immediately clear, but Reuters said they could be potentially worth up to 20 billion euros ($22.62 billion), citing an unnamed government source.

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Foto: The China-Kazakhstan logistics terminal was built in 2014 to boost the construction of the Belt and Road.sourceVCG/VCG/Getty Images

What is the BRI?

The BRI, which came into effect in 2013, is divided between six land routes, collectively named the Silk Road Economic Belt, and one maritime route, the Maritime Silk Road.

Along those "roads" are railroads, gas pipelines, shipping lanes, and other infrastructure projects.

China is estimated to have invested between $1 trillion and $8 trillion into the project. It is one of President Xi Jinping's personal priorities, and was written into the country's constitution in 2017.

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Foto: A vendor holds up a Chinese paper umbrella in front of Rome's Colosseum in July 2013.sourceReuters

Many major economies, including the US and India, have been reluctant to join the BRI amid growing concern over China's military and political ambitions with their trade projects and tech exchanges, and its global trade war with the US.

Currently at the center of global suspicions over China is telecom giant Huawei's plan to install 5G networks around the world. Earlier this year the US Department of Justice charged Huawei with fraud and IP theft, and called the company a threat to US national security.

Read more: Here's why the US is terrified of one Chinese company controlling the world's 5G networks

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Foto: Map showing the projects subsumed under the BRI as of March 2017.sourceReuters

China has also been accused of offering loans at high interest to economies which struggle to pay them back. A notable case is Sri Lanka, which in 2017 handed over an entire port in its south to China because it couldn't afford to pay back loans.

Malaysia axed $22 billion worth of infrastructure projects with China last year, citing an inability to pay back its loans from China in the face mounting national debt.

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Foto: A composite image of European Commission Jean-Claude Juncker, US President Donald Trump, and China's Xi.sourceVincent Kessler/Reuters; Evan Vucci/AP; Fred Dufour/Reuters

A controversial decision that's rattled Italy, the EU, and even the White House

Italy's decision to join the BRI has exposed sharp divisions within its domestic politics. The government is currently a coalition between the Northern League and Five Star Movement. The parties have diametrically opposed views on China.

The Five Star Movement, which is overseeing the MOU, has pushed for closer trade ties with Beijing. On the other hand, the League - led by the pro-Trump, anti-immigration Matteo Salvini - has vehemently opposed it, warning against foreign powers "colonizing Italy" and saying that Chinese ties could endanger Italian national security.

Shortly after Prime Minister Conte announced that Italy would join the BRI, the White House National Security Council tweeted: "Endorsing BRI lends legitimacy to China's predatory approach to investment and will bring no benefits to the Italian people."

Matteo Salvini.

Foto: Italian Deputy Prime Minister and right-wing League party leader Matteo Salvini.sourceREUTERS/Tony Gentile

Teresa Coratella, a program manager at the European Council on Foreign Relations in Rome, told Business Insider that the MOU is "a really big deal at the EU level" as well. The EU has been trying to pursue a bilateral relationship with Beijing, rather than have 28 nations have their own relationships.

The EU appears split over its attitude to China's economic influence. France and Germany have also been mulling policies to limit China's economic influence, like imposing more stringent screening measures on foreign investment.

Meanwhile, countries like Greece and Portugal have welcomed Chinese investment. The Port of Piraeus, Greece's largest seaport, is majority-owned by the state-owned China Ocean Shipping Company, also known as COSCO.

Prior to his visit Xi wrote a gushing op-ed in Italy's Corriere della Sera discussing China and Italy's historic trade ties and impending new one under the BRI.

"The Chinese people are anxious to join forces with Italian friends to cultivate together the terrain of bilateral relations and ensure that it can reach a new and richer flowering," he wrote, "and that the friendship between China and Italy can be renewed constantly."