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Vive la France! Will message play in China?

FRANCE, well known for its romance with idealism, is surprisingly realistic in seeking further cooperation with China.

Its desire to deepen its trade and investment relationship with China is expected to be underscored when French President Francois Hollande begins his first state visit here on Thursday.

On a recent trip to France, I was impressed by the country's efficiency, straightforwardness and its strong desire to showcase its prowess in technology and manufacturing.

Officially, France hopes to enhance cooperation with China in four major areas, according to French Foreign Trade Minister Nicole Bricq. They are: aviation and aerospace, nuclear energy, agriculture and food processing, and medicine and health.

Among them, nuclear energy for civilian use seems to be at the top of the French agenda. With a long history of nuclear research and use, France can provide all the know-how in making safe reactors, Bricq claimed.

Currently, two next-generation EPR reactors - the latest commercial reactor design - are being built in Taishan, Guangdong Province, by French utility EDF Group, in cooperation with China Guangdong Nuclear Power Corp. The reactors are expected to be operational next year, becoming the first of their kind in the world.

Discussions on further partnerships in nuclear power are certain to be high on Hollande's agenda.

France is similarly eager to sell its technological expertise in other areas.

Most Chinese think of France as a producer of luxury fashion goods. It comes as a surprise to many that the nation is also versed in technology manufacturing. Multinational leaders like Schneider Electric and GDF Suez sit alongside L'Oreal and Danone in the catalogue of French business giants.

Investment destination

While seeking to explore increased investment in China, the French are also anxious to sell their nation as an attractive destination for Chinese investment.

Serge Boscher, managing director of Invest in France Agency, spent nearly two hours explaining to us why China should raise its direct investment in France. According to Boscher, three main factors work in France's favor.

One is the size of the French market, which numbers 145 million people if you add in the 80 million tourists who visit there every year. France is the world's biggest tourist destination, and tourists spend money.

The second factor he cited is the competitiveness of French companies. Of the world's Fortune Global 500, 32 are in France - the same number as in Germany and a greater number than in Britain.

The third factor is France's mature business infrastructure. Its central position in Europe allows easy access to markets in Africa and the Middle East, Boscher said.

Indeed, it's hard for any company that wants to become a global player to ignore France. Chinese companies like Huawei, ZTE and Haier all established their presence in France years ago, helping them raise brand awareness across Europe and points beyond.

Bluestar Silicones, a chemical firm in Lyon, is an example of successful Chinese investment in France. And among the latest to set up operations there, Qingdao-based Syrutra Group has purchased farmland in southern France to produce diary products for the Chinese market.

In addition to the factors cited by Boscher, France's strength in innovation may be equally important. During my trip there, I visited Danone's research center in Paris, the labs of Schneider Electric and the Lyonbiopole, where biomedical companies are clustered. All of the facilities look highly advanced. According to Invest in France Agency, the nation has 71 innovation clusters where companies, educational institutions and laboratories work together to develop and commercialize technology. Boscher said 8.3 of every 1,000 employees in France works in research and development.

Within Europe, Germany is clearly a rival in competition for foreign investment. France, for its part, has been wise to focus on its strong points in trying to attract Chinese investors.

Yao Ke, director of Bank of China's newly established Lyon branch, said it is rewarding to work with French people because they are willing to work for a Chinese company and try to understand the dynamics of a different culture of thought.

Labor productivity

France is certainly making an effort to dispel any negative perceptions about its investment attractiveness, such as that French people work fewer hours than their peers in Europe and France demand higher taxes.

Boscher took pains to point out that France ranks fourth in Europe for hourly labor productivity. It is true that France has recently imposed higher taxes on its wealthiest citizens, but for business, start-ups and innovative companies in particular, taxes are not that high. Besides, the government provides special funding to encourage small businesses, including those that are foreign-funded, Boscher said.

For France, foreign investment is an important source of growth, he stressed. There are more than 20,000 foreign-owned companies doing business in France. They contribute to nearly 40 percent of the French economy, according to Invest in France Agency.

However, there are still many challenges for foreign investors, especially at a time of the European economic crisis.

Claire Waysand, directorate-general of the Treasury, said France is likely to report zero growth again this year, which may discourage domestic consumption and make it more difficult for investors to cash in on the investment.

Besides the tough economic conditions, Chinese investors also have to overcome language barriers, cope with the powerful French unions which hold very different work ethics from that of China, and fly a long way to get to the market.

In addition, Chinese people have seemingly become a major target for attack recently in France, based on the frequent reports of Chinese tourists being robbed there. But China has become a major Asian country to invest in France regardless of all these, according to a latest IFA report. There were 31 new projects from China in 2012, up 35 percent from the number a year earlier and the most among BRIC countries (Brazil, Russia, India and China).

Chinese investment has created about 11,000 jobs for France to date, though the number falls short of France's expectations, given the potential of the world's second-largest economy.

China ran a trade surplus of 26 billion euros (US$34 billion) against France in 2012. That was a drop of 1 billion euros from 2011, and France is eager to narrow the gap further.

Hollande may be greatly encouraged by the remarks of Chinese President Xi Jinping earlier this month. Xi said in the coming five years, China's imports will reach about US$10 trillion annually and its outbound investment will rise to US$500 billion.

It is still early to tell what President Hollande's visit to China will produce, but there's no doubt that he will receive a warm welcome.

Next year is the 50th anniversary of the establishment of formal diplomatic relations between China and France. It is perfect time to be laying the foundation for even closer ties in the next 50 years.


 

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