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Business Insight


Business Insight

China's French Connection

Yasuko Takeda

China's foreign investment is rising rapidly, not only in developing countries but also in industrialized nations - particularly those in Europe. A recent study conducted by a joint US-German research team demonstrates the trend.

Foreign direct investment by Chinese companies in EU member states has shot up from virtually zero more than a decade ago to 14 billion euros, or $15 billion, last year. The rush accelerated in the wake of the 2008 global financial crisis.

The study also projects that China will triple its global assets by 2020, making the country one of the world's biggest cross-border investors. Leaders in Beijing say they see Europe as a key partner in reforming China's economic structure and creating sustainable growth. And European officials and business leaders are rolling out the red carpet for Chinese investors and politicians.

Officials in Paris have thrown lavish ceremonies to welcome Chinese Premier Li Keqiang and his entourage of business managers. Representatives from 200 companies took part in a business summit this month in the southwestern city of Toulouse. French Prime Minister Manuel Valls unveiled a wide range of new deals with China.

"Companies in France and China can help each other, just like the two engines that fly an airplane," Premier Li said. In fact, Chinese firms have bought engines - and a lot more.

They are paying $1.8 billion for 75 Airbus passenger jets, and they will also purchase French food products worth nearly $900 million over the next five years. A French company is selling liquid natural gas to China liquid natural gas in a deal worth more than $100 million.

The French prime minister got straight to the point in his summit address. "Please come and invest in France!," Valls urged the Chinese visitors. "France will always respond to your wishes! Long live China! Long live France! And long live the Franco-Chinese friendship!," he continued.

A wave of large-scale Chinese investments has buoyed France's key brands since last year. A Chinese firm has become a major shareholder in PSA Peugeot Citroen, bailing out the country's second-largest automobile maker from its financial difficulties.

Another consortium bought nearly half the stake in France's fourth-largest airport, in Toulouse. And a Chinese billionaire staged a high-profile buyout of struggling Club Med, the country's iconic holiday resort group.

The investments have stirred a public debate about a loss of so-called French values. But the government didn't say, "Non" to the deals.

"We're playing a game of 'give and give'," says economic adviser Joseph Boillot of the CEPII Business Club. "Grant special favors to French companies in China, then we'll help the Chinese."

Premier Li toured the Airbus headquarters before wrapping up his visit. The European aircraft maker announced plans to build the company's second plant on Chinese soil with partners there. The two sides project that thousands of new aircraft will be needed in China over the next 20 years.

Leaders of the two countries are trying to fend off downward pressure on their economies by creating a strategic partnership.

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