Economic rise benefits partnership

The economic relationship between China and France has been progressing steadily over the last years, based on the strategic partnership established by the two governments.

An excellent political climate, a convergence of views on many international issues, and frequent visits from both sides at the highest level have created a very solid basis for strengthening the economic relations.

For Hubert Testard, a minister at the French Embassy in Beijing, "France is keen on developing strong and confident relations with China," the minister said, adding: "We have to be aware that the rapid changes in our economic relations, which are on the whole very positive, can sometimes lead to difficulties that we need to handle together in a cooperative mood and with mutual trust."

Before arriving in China, the minister lived in several Asia-Pacific countries including Japan and South Korea. He is impressed by China's rapidly changing economy.

"The economic boom in China before the Olympics is quite similar to Japan in the 1960s and South Korea in the 1980s, but with a great difference in size. China's impact on the world is much bigger, even though it is still a developing country. This is why China has to handle at the same time difficult internal issues and growing adjustment problems with the outside world," he said.

China's rapid economic rise has had a positive impact on bilateral economic relations and it has even added stimulus to the French economy.

According to French customs, China-France trade volume reached over $32 billion in 2006, an increase of 19.38 percent over the previous year. China is the eighth largest trading partner of France, ahead of Switzerland and Japan.

Last year, French exports to China reached a new record at about 8.1 billion euros ($11 billion), up by 39.25 percent compared to the previous year and almost four times the growth rate of 2005.

The growing export market is supported mainly by such industries as aeronautics, automobile and railway transportation, agro-food and consumer goods, mechanical and electrical machinery.

Although French exports to China are rapidly growing, France has, like many European countries, a large and growing trade deficit with China.

In 2006, French imports from China reached 24 billion euros ($32.64 billion), close to three times the exports to China during the same period. China ranks number one in terms of trade surplus with France.

Testard admitted there are many industries such as consumer products, fashion, agriculture and service that are still underdeveloped and could help boost French exports to China.

The trade deficit is an important issue, but from a more global viewpoint, investment is also vital. French companies are very active investors in China.

According to a survey made by the French Embassy, their collective turnover in China was more than 14 billion euros ($19.04 billion) in 2005 (far bigger than direct exports) and progressing on average by 25 percent every year.

These companies have more than 200,000 Chinese employees. The development of their presence in China is strategically essential for several reasons:

"Firstly, China is a very big market. Foreign companies need to be there to be price competitive and to improve the services to their clients. Secondly, China is also a good manufacturing base from which to export all around Asia. Thirdly, sourcing from Chinese subcontractors becomes more and more a necessity to improve the global cost structure of many French products," Testard said.

However, French investors' attraction to the Chinese market is sometimes hampered by government regulations (limiting investment in some sectors) or by the business environment, Testard said.

"It takes time to change, but the more open China is going to be vis vis foreign investment, the better it will be for China-France economic relations," Testard said.

One of the main problems faced by French and other foreign companies is the protection of intellectual property rights (IPR), he said.

"A number of French companies are facing major difficulties in that respect. The fake products include not only consumer goods, but also pharmaceuticals and industrial goods. Other Asian countries like South Korea or Japan had similar problems in the past, but technological progress has made it much easier than before to make counterfeits in China," said Testard.

"Despite these difficulties, investing in China remains a great opportunity and probably the biggest challenge for our companies during at least the next 10 years," he added.

(China Daily 07/13/2007 page18)