China’s ambitions in Europe suffered a major setback this week when Italy signaled plans to leave Beijing’s flagship foreign-policy program, the Belt and Road Initiative (BRI), underscoring a broader shift in Europe as governments grow increasingly wary of their economic dependence on Beijing. 

While Beijing has long sought to expand its economic footprint in Europe, including by funneling money into BRI infrastructure projects, the biggest European economies largely refused to sign onto the initiative. That changed in 2019 when Italy diverged from its peers and became the BRI’s first and only G-7 member, a move that enraged Washington and represented a major political victory for China. 

By exiting the BRI, Rome will be dealing an embarrassing blow to Beijing on the initiative’s 10th anniversary. Italy’s planned withdrawal also reflects a broader reckoning overtaking Europe as many leaders turn away from the deep economic integration that has for years defined the Europe-China relationship. For years, Europe has lagged behind Washington’s confrontational approach to China, especially when it comes to economic integration—or decoupling. But that appears to be changing.

“For the Chinese, this is a major humiliation,” said Yun Sun, the director of the China program at the Stimson Center, who noted that Beijing took pride in the fact that Western countries—and particularly European countries—had signed onto the BRI. “For Italy to publicly announce its intent to withdraw from BRI, I think for the Chinese they take great offense in that decision.” 

A cornerstone of Chinese President Xi Jinping’s foreign-policy strategy, the BRI has allowed China to export its industrial overcapacity while expanding its geopolitical influence, although the program now appears to be drawing down. In the decade since its inception, two-thirds of European Union members, mostly in the east, have joined the initiative to harness Chinese investment and jump-start growth—resulting in a slew of railway, port, and highway projects. Many of these countries, like Italy, were grappling with slumping economies and touted the potential economic gains that could come from BRI investment. 

Four years later, those bets have not paid off. When Italy signed onto the initiative, Chinese firms agreed to pour $2.8 billion into infrastructure projects, including for Italian ports—fueling lawmakers’ hopes of sweeping returns. But the economic boom never came.

“Back in 2019, there were irrational expectations about what this deal might bring to Italy,” said Noah Barkin, an expert on Europe-China relations at the Rhodium Group. “This deal has not brought great dividends.” Italian exports to China have remained roughly flat, he said, while Chinese foreign direct investment in Italy has plummeted. 

Rome is now taking a harder line toward China. Former Prime Minister Mario Draghi blocked tech transfers to Beijing and prevented Chinese takeovers of Italian companies. Current Prime Minister Giorgia Meloni has gone even further, restricting a Chinese firm’s influence on Italian tiremaker Pirelli and affirming her support for Taiwan. In pointed remarks, Italian Defense Minister Guido Crosetto railed against Italy’s decision to join the BRI on Sunday, labeling it an “improvised and atrocious act.”

“The issue today is: how to walk back [from the BRI] without damaging relations [with Beijing],” he said. “Because it is true that China is a competitor, but it is also a partner.”

The same question has been weighing on the minds of other European leaders who have been reassessing their long-standing economic ties with China amid an intensifying technology trade battle. Last month, China retaliated against Western export controls with its own sweeping restrictions on gallium and germanium, two crucial chipmaking inputs. Fueled by those tensions, Brussels, like Washington, is trying to “de-risk” economic relations.

“Just because everyone agreed on de-risking, it doesn’t mean that everyone agrees what de-risking actually means,” said Liana Fix, a Europe expert at the Council on Foreign Relations. “There is definitely a dividing line that runs between how broad the instruments should be applied.”

Italy’s exit from the BRI would only be the latest in a long string of crumbling partnerships between European countries and China. China’s diplomatic push in Central and Eastern Europe, called the 17+1, has progressively lost members over the years; more recently in April, a key trade and investment agreement between the European Union and China collapsed. 

Beyond unveiling their own BRI counterstrategy in 2021—the Global Gateway—European leaders are now dealing yet another blow to Beijing by spurning its upcoming Belt and Road Forum, the Wall Street Journal reported.

“Europe is increasingly seeing China as a competitor, as a rival, as a challenge, and less as an economic opportunity, which is how it used to see China,” Barkin said. “It is pushing for diversification away from China; it is trying to become more economically resilient [and] reduce dependencies on China for critical inputs, as the U.S. is doing.”

Italy’s latest moves unsurprisingly angered Beijing, which criticized “some forces” for “hyping up and politicizing” Rome’s membership in the BRI. Earlier this week, Chinese state media also stressed that Italy’s entrance into the BRI has “promoted pragmatic cooperation” and “serves the interests of people from both sides.”

Given how closely intertwined the BRI is with Xi’s political legacy, Sun, the Stimson expert, said that Italy’s decision will undoubtedly rebound in its relationship with China.  “The Chinese take BRI as a flagship foreign-policy initiative of Xi Jinping; it’s very much closely associated with Xi Jinping’s credibility and his great power leadership,” she said. “I don’t think the Chinese will just lightly let this go.”