Geopolitical Realignment and Strategic Asset Repositioning: The Italian-China Investment Shift

In 2025, Italy's recalibration of its economic relationship with China has emerged as a pivotal case study in the broader European de-risking strategy. This shift, driven by geopolitical realignment and a recalibration of strategic dependencies, is reshaping the landscape of cross-border investments in energy, infrastructure, and technology. For investors, the implications are twofold: a reorientation of Chinese capital flows in Italy and the emergence of under-owned European equities poised to benefit from this transition.

The Italian-China Recalibration: From BRI to Strategic Autonomy

Italy's formal withdrawal from China's Belt and Road Initiative (BRI) in December 2023 marked a symbolic and practical pivot. While Chinese investments in Italian infrastructure—such as the 2024 COSCO acquisition of logistics firm Trasgo—remain active, the focus has shifted from large-scale, debt-driven projects to targeted collaborations in high-value sectors. Prime Minister Giorgia Meloni's July 2024 state visit to Beijing underscored this duality: fostering partnerships in electric mobility and renewable energy while addressing trade imbalances.

The February 2025 Double Taxation Agreement (DTA) between Italy and China further institutionalizes this strategy. By modernizing tax provisions and reducing withholding rates, the DTA creates a more predictable environment for cross-border investments. This aligns with Italy's broader goal of balancing economic sovereignty with strategic cooperation, particularly in sectors critical to its industrial modernization.

Sector-Specific Impacts: Energy, Infrastructure, and Tech

Energy Transition and Hydrogen Infrastructure
Italy's energy sector is a linchpin of its de-risking strategy. Snam, the country's energy infrastructure operator, is central to the EU's hydrogen economy. With ownership of key pipeline and storage networks, Snam is positioned to benefit from the EU's Green Deal and net-zero ambitions. Chinese investments in renewable energy—such as solar and wind projects—have also shifted toward greenfield opportunities, aligning with Italy's focus on decarbonization.

Industrial Automation and Digital Infrastructure
Italian firms like Siemens and ABB are leading the continent's factory automation revolution, integrating AI and digital twin technologies. These companies are less reliant on Chinese supply chains and more aligned with EU strategic autonomy goals. Meanwhile, 5G and fiber infrastructure providers like INWIT are capitalizing on Italy's push for digital modernization, supported by favorable regulatory frameworks.

Defense and Strategic Sectors
NATO and EU defense spending has spurred growth in Italy's defense industry. Leonardo, a key player in Eurofighter upgrades and helicopter exports, is benefiting from increased military modernization budgets. This sector's alignment with U.S. and EU security priorities makes it a long-duration growth opportunity.

Under-Owned European Equities: Opportunities in Italy and Beyond

The de-risking narrative has created a unique window for investors to target undervalued European equities. Italian energy and infrastructure firms, trading at 10x–12x forward earnings compared to the S&P 500's 19x, offer compelling valuations. Snam, for instance, has a forward P/E of 11.5x and a dividend yield of 3.2%, reflecting its role as a cornerstone of the EU's energy transition.

Similarly, Italian banks like UniCredit and CaixaBank are undergoing a re-rating, trading below book value while aggressively returning capital. These institutions are also investing in digital infrastructure and wealth management, aligning with global trends in financial services.

Geopolitical Tailwinds and Strategic Alignment

Italy's strategic position as a Mediterranean logistics hub and its alignment with U.S. and EU de-risking goals amplify its appeal. The country's focus on green logistics, hydrogen infrastructure, and industrial automation positions it as a key player in the EU's industrial renaissance. For U.S. investors, this represents an opportunity to access European equities that are both sectorally familiar and strategically aligned with global supply chain diversification.

Investment Implications and Strategic Recommendations

1. Energy Infrastructure: Prioritize firms like Snam and EDP Renewables (via EU partnerships) for exposure to hydrogen and renewable energy.
2. Industrial Automation: Target Siemens and ABB for their role in factory digitization and energy transition.
3. Defense and Security: Allocate to Leonardo and BAE Systems, which are benefiting from NATO and EU modernization programs.
4. Financials: Consider undervalued Italian banks like UniCredit, which are leveraging digital transformation and capital returns.

In conclusion, Italy's de-risking strategy with China is not a rupture but a recalibration—a shift toward strategic autonomy and high-value collaboration. For investors, this transition opens access to under-owned European equities in energy, infrastructure, and tech, offering both defensive yields and long-term growth potential in a rapidly evolving geopolitical landscape.