UPDATE 1-China must not "colonise" Italian business -ruling League

Italy's ruling League party gave hesitant backing on Monday to government plans to endorse China's "Belt and Road" initiative, saying the venture had to boost local businesses and not threaten national security. Italian Prime Minister Giuseppe Conte has said he might sign a memorandum of understanding (MOU) to become a part of China's giant infrastructure plan when Chinese President Xi Jinping visits Rome and Palermo later this month.

The prospect has alarmed Italy's main Western ally, the United States, which has urged Conte to drop the plan, calling the Chinese venture a "vanity project" that would bring no benefit to the Italian economy. The U.S. admonition has created tensions within the ruling coalition and one senior League official has called for the MOU to be put on ice. But the party leadership gave the idea conditional backing following a meeting near Milan.

"If it's about helping Italian companies invest abroad, then we are ready to talk to anyone," League leader Matteo Salvini told reporters. "But we're absolutely not ready to do so if it's a question of foreign companies colonising Italy." Giancarlo Giorgetti, a senior League figure and cabinet undersecretary, added that Italy had "golden share" powers to protect strategic sectors such as defence, energy, transport and communications, and would not hesitate to use them.

Looking to allay any such concerns, the industry ministry put out a statement saying the mooted deal did not include any accord over the creation of a 5G high-speed telecom network -- a major worry for Washington, which has accused Beijing of looking to insert equipment for espionage in next-generation technology. Chinese companies have denied this.

CATCH UP The Belt and Road plan, championed by Xi, aims to link China by sea and land with southeast and central Asia, the Middle East, Europe and Africa, through an infrastructure network on the lines of the old Silk Road.

Washington has said China is using the initiative to bolster authoritarian regimes and export standards for technology applications that could threaten U.S. businesses and market access across the globe. It is also worried the plan might enable Beijing to extend its military influence. A number of European Union states have already signed MOUs with China, including Hungary, Greece and Poland. If Italy does likewise, it would be the first Group of Seven major industrialised nation to do so.

Junior Trade Minister Michele Geraci, who has championed the China deal, said on Monday that Italy needed to convince Western allies that their fears over the planned accord were unfounded. Geraci, who spent a decade teaching in China, says Italy is simply playing economic catch up with its main trading partners, particularly regarding job creation and so-called green-field investment to build local companies from the ground up.

"China has invested $5.5 billion in Britain and just $130 million in Italy," Geraci told a foreign policy seminar at the weekend, speaking of green-field projects. "There is huge potential there that other countries are already taking advantage of," he said.

Italy went into recession at the end of 2018 for the third time in a decade and the government is anxious to find ways to boost the economy and revive the stalled construction sector. (Reporting by Sara Rossi and Francesca Piscioneri; Writing by Crispian Balmer; Editing by Catherine Evans)

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