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By Andrew Callus
PARIS, March 25 France will use a visit from
China's President this week to seek tighter business links to
the world's number-two economy in a bid to boost its own anaemic
one, signing big-ticket industry deals and working to cut its
trade and investment deficits.
Xi Jinping's three-day tour starts on Tuesday in the south
eastern city of Lyon, where Chinese silk-making skills took root
in the 15th Century. Technology transfer now flows firmly in the
opposite direction, and business diplomacy around products
ranging from cars to cooked meat is set to dominate the visit.
With the drubbing his Socialist party received in Sunday's
municipal elections for failing to tackle record unemployment
still fresh in the mind, French President Francois Hollande
hosts Xi at a state dinner on Wednesday night.
Hours earlier, both men are to attend a signing ceremony at
which Chinese carmaker Dongfeng is set to deepen ties
with PSA Peugeot Citroen, buying a 14 percent stake in
a mainstay of European automobile design and construction.
Peugeot and Dongfeng plan to extend an existing joint
venture and Chinese production to enter new Southeast Asian
markets and to co-develop new vehicles and technologies.
Talks on opening a second Airbus factory on its
home soil continue as China prepares to sign a deal to buy at
least 150 aircraft worth $20 billion - and possibly as many as
200 - from the Franco-German group.
The discussions may bear some fruit this week, according to
a French diplomatic source. The aerospace
industry accounts for 29 percent of French exports to China.
Nuclear co-operation may also be on the agenda after
agreements last year including a letter of intent for French
firms to build a used fuel treatment and recycling facility in
Officials are also considering whether to build more
reactors at China General Nuclear's (CGN) Taishan
site in the south of the country, where French utility EDF
is its partner, building reactors designed by another
French group, Areva.
Xi's visit marks 50 years of diplomatic relations between
the two countries. Recognition of the People's Republic of China
by France in 1964 - in the face of anti-Communist hostility
elsewhere in the west - forms part of France's claim to a
Nevertheless, France trails far behind Germany on the trade
front, accounting for just 1.2 percent of Chinese imports
compared with 4.8 percent.
With his popularity at a record low, Hollande's efforts to
harness France's patchy and slow economic recovery more tightly
to China's powerful growth engine have a degree of urgency about
them, and not just because of his troubles at home.
Signals China is not the global growth motor it has been in
past years grew on Monday as purchasing managers index data
showed its manufacturing sector contracted in the first quarter.
"Relations with China could get more complicated over the
coming years with growth there slowing,"... said Jean-Pierre
Raffarin, a former French prime minister, now chairman of the
annual forum of the France-China Committee, who travelled with
Hollande on his visit to China last year.
"We are in a position today to provide a Franco-Chinese
offering at a world level."
In the shadow of the big-ticket deals, France also hopes to
develop ties with the small and medium sized enterprise (SME)
sector. Raffarin is planning to send 1,000 such French companies
to China later this year.
Some 150 Chinese executives are travelling with Xi, who
arrives in France from the Nuclear Security Summit in The Hague
as part of a trip that also takes in European Union institutions
in Brussels and a visit to Germany.
France has a wide trade and investment imbalance with China.
French foreign direct investment (FDI) in China totalled
16.7 billion euros ($23.0 billion) at the end of 2012 - just
1.83 percent of total FDI there but still dwarfing a 4.2 billion
euro FDI stock of Chinese investment in France, which is just
0.9 percent of the total, according to Bank of France figures.
Dongfeng's Peugeot stake purchase alone is worth 800 million
euros. "These investments are very welcome in France and should
create employment here," said a finance ministry official.
France's trade deficit with China was around 26 billion
euros in 2013, up from 11 billion in 2004.
In that decade, China's economy has grown at an average 10.5
percent annually, compared with just 1 percent a year in France,
the world number-five economy.
MEAT AND DRINK
The deli meats, wines and spirits France is famous for are
in strong demand in China, and one initiative tied to the visit
is focused on building that connection. Food and agricultural
products accounted for 11.6 percent of French exports in 2013.
The likes of traditional dry sausages and hams may be
cleared this week for export to the world's biggest consumer of
pork meat, agriculture ministry officials said.
Sales of raw French pork were cleared in 2005, but health
regulations barring sales of French charcuterie have remained in
place, even though Italian and Spanish producers have been
exporting to China for some years.
Milk is another area of interest to China, whose wealthier
consumers want quality, traceable supplies after a series of
health scares. Two direct investment deals were signed last
year, one between Synutra and France's largest dairy
cooperative Sodiaal and the other between infant milk producer
Biostime and dairy cooperative Isigny Sainte-Mere.
A third is under discussion, a source close to the matter
told Reuters. French milk and whey exports to China rose 40
percent in 2013 compared to 2012, customs data shows.
A cloud on the trade horizon was lifted last week when China
and the European Union reached a deal to end a dispute over
European wine exports.
($1 = 0.7255 Euros)
(Additional reporting by Yves Clarisse, Leigh Thomas, Sybille
de La Hamaide and Jean-Baptiste Vey, editing by Dominique
Vidalon, John Stonestreet)