Italy’s relationship with China illustrates the strong push and pull that the world’s second largest economy exerts on global geopolitics.
On the one hand, Italy has made clear that it does not want to be dependent on China. Last year, Milan made the high-profile decision to drop out of the Belt and Road Initiative (BRI), months after Rome called its 2019 decision to join Beijing’s flagship transcontinental project an “improvised and heinous act.”
Yet even as Italy has sought to distance itself from China in some respects, it is also turning to Chinese companies for investment in key areas of its economy. The dueling objectives highlight the complexities of de-risking from China, and indicate that efforts to reduce dependence on Beijing will require strategic choices and at times difficult tradeoffs.
Ramping up Italy’s car output
Take automotives. Rome is reportedly in talks with China’s Chery Auto about having the state-owned carmaker to set up manufacturing in Italy. The talks are part of the Italian government’s efforts to boost national car production to 1.3 million vehicles a year from below 800,000 in 2023. Italy has also approached Chinese EV giant BYD, Reuters reports.
Setting up manufacturing in Italy would be a big win for China’s auto industry, which sees Italy as a strategically positioned bridgehead from which to push further into European, African, and Middle Eastern markets. Elsewhere, Chinese EV and battery makers are already establishing footholds in Hungary, another EU and NATO member viewed as a key hub for Chinese brands’ global business expansion.
Stellantis bets on China
Meanwhile, Stellantis is betting big on China. The Franco-Italian automaker, formed from a 2021 merger of Fiat Chrysler and PSA Group, last year acquired a minority stake in Chinese EV maker Leapmotor. The Stellantis-Leapmotor tie-up also includes a joint venture, just approved by Beijing this month, that would allow Stellantis to manufacture and sell Leapmotor cars outside China.
Now, Stellantis is mulling producing up to 150,000 low-cost Leapmotor EVs in a historic Fiat plant, according to Automotive News Europe — a move symbolic of the rise of Chinese EV upstarts and the decline of legacy western carmakers. And while cranking out Leapmotor EVs in Italy would serve Rome’s goal of raising national car production, it also means greater reliance on Chinese technology.
For Italy, leaving Beijing’s BRI was the easy part. Now for the difficult part: figuring what kind of relationship it wants with China, and on what terms.