The Italian government is contemplating restrictions on Chinese investments in both private and state-owned firms, particularly focusing on major companies like Pirelli and CDP Reti.

Pirelli is under scrutiny due to its significant Chinese ownership, with Sinochem International Corporation holding a 37% stake, raising concerns about cybersecurity and access to US markets.

CDP Reti, which has a 35% stake owned by a subsidiary of China's State Grid Corporation, is also being closely examined due to its critical role in Italy's energy infrastructure.

To implement these restrictions, Italy plans to invoke the 'golden power rule,' a legal framework that enables the government to safeguard essential infrastructure from foreign influence.

Italy's decision to exit the Belt and Road Initiative in 2023 has heightened tensions with China, as the country seeks to balance its relationship with Beijing while responding to US pressures.

This strategic shift aligns Italy's economic policies more closely with US interests regarding foreign investments, reflecting a broader trend among European nations.

European countries are increasingly cautious about Chinese investments, particularly in sectors affecting national security, while favoring opportunities in electric vehicles and renewable energy.

The trend of Chinese divestment is evident, with significant retractions from investments in companies like CPT Reti and Ansaldo Energia, indicating a broader reevaluation of foreign investments.

In response to Italy's tightening investment policies, China has urged for fair treatment of its companies and warned against excessive limitations on its investments.

Officials in Rome are concerned about maintaining positive relations with China following their withdrawal from the Belt and Road Initiative, which had previously strained ties with the US.

The Italian government aims to limit the influence of Chinese investors in strategic sectors, despite the presence of approximately 700 Italian companies with Chinese participation.

The European Union's trade deficit with China is projected to double by 2025, driven by subsidized Chinese exports, particularly in the electric vehicle and renewable energy sectors.