Workers produce large building materials and equipment for export to countries along the Silk Road. Hai’an City, Jiangsu Province, China, June 15, 2020.

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Italy’s reported withdrawal plan could set a precedent for a constructive exit from China’s global trade and infrastructure initiative and set the stage for future exits.

Italy remains the only Group 7 industrialized country that is a signatory to Beijing’s Belt and Road Initiative, a centerpiece of President Xi Jinping’s foreign policy program launched a decade ago.

At a time of shifting geopolitical alignments that is fragmenting the global economy, Rome is coming under pressure to reset its relationship with Beijing to appease its Western allies as Italy takes over the rotating presidency of the Group of 7 developed economies in 2024.

“Washington assumes that if Italy withdraws and does so with a degree of real cooperation and smiles with Beijing – that is, without informal sanctions and retaliation – that will mean that other Western European countries, perhaps even Eastern European countries, “Most BRI participants could potentially withdraw,” Giulio Pugliese, a lecturer at the University of Oxford’s School of Global and Area Studies, told CNBC’s Squawk Box Asia on Thursday.

“We must not forget that many Baltic states and many other Central and Eastern European countries other than Hungary are quite skeptical about China’s role these days,” Pugliese said.

China’s ambitious Belt and Road Project is a complex network of infrastructure connections connecting China to countries in Asia, Africa, Europe and Latin America via railways, pipelines, roads and highways.

Italy’s mystery

Italy’s Prime Minister Giorgia Meloni told reporters on Sunday at a press conference during the G-20 leaders’ summit in Delhi that Rome was still considering exiting the BRI.

The current Italian government believes that BRI membership has not brought sufficient benefits to its economy. Rome has until December to officially withdraw, otherwise its membership will be extended for another five years.

Meloni met Chinese Prime Minister Li Qiang on the sidelines of the G20 summit on Saturday.

The meeting “confirmed the common intention to consolidate and deepen dialogue between Rome and Beijing on key bilateral and international issues,” according to a readout of the meeting provided by Meloni’s office.

Her comments came after US President Joe Biden, along with Indian Prime Minister Narendra Modi, announced a plan to build a network of railways and sea routes connecting India, the European Union and Middle Eastern countries – such as Israel, Jordan and Saudi Arabia – is intended to connect and the United Arab Emirates – in “a transformative regional investment”.

The Americans have framed their new initiative as a countermeasure to China’s influence in the energy-rich Middle East, but also as a competition to China’s global Belt and Road infrastructure initiative.

“There are European nations that have not been part of the Silk Road in recent years but have been able to establish more favorable relations [with China] than we have managed at times,” Meloni reportedly said Sunday.

“The question is how we can guarantee a mutually beneficial partnership, regardless of the decision we will make regarding the BRI,” she added.

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