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Business

France hopes billion-dollar China Airbus deal is first of many

© AFP

Video by Oliver FARRY

Text by Sam BALL

Latest update : 2013-04-26

China signed a letter of intent for the purchase of 60 planes from French firm Airbus during François Hollande’s visit to the country on Thursday. However, France faces an uphill battle in catching up with rivals in the race for Chinese business.

China announced Thursday that it had signed a letter of intent with Toulouse-based Airbus to buy 60 of its planes in a deal worth an estimated $7.7 billion.

The letter was signed during a state visit to China by French President François Hollande, who is hoping to strengthen economic ties between the two countries.

Hollande, who is the first Western leader to be received in the Chinese capital by new President Xi Jinping, is accompanied by a plane-load of businessmen hoping to increase their share of the fruits of China's economic growth.

France currently suffers from a significant trade deficit with China, with the value of France’s imports from the country worth €26bn a year more than goods heading the opposite way.

And at a time when France’s economy is floundering, exploiting the vast Chinese market could hardly be more important to the country’s economic recovery, or to Hollande’s presidency.

"Today there is a trade imbalance and it behooves us to fix it, not to reduce our investments and our exports but to increase them," said the French president during the first day of his visit on Thursday.

In addition to the Airbus deal, during Hollande’s visit French nuclear giant Areva and the Chinese energy group CNNC are expected to sign letters of intent on the construction of a nuclear waste treatment facility, while carmaker Renault hopes to progress negotiations on a proposed factory in the Chinese city of Wuhan.

Late to the race

But Hollande faces a mammoth task if France is to catch up with rivals such as Germany when it comes to doing business with China - the Eurozone’s economic powerhouse accounts for five per cent of China’s total foreign trade. In comparison, trade with France makes up just 1.3 per cent.

James Roy, a senior analyst at the Shanghai-based Chinese Market Research Group, believes that many French firms, such as those in the automotive industry, have been slow to react to China’s growing economic importance.

In contrast, rivals from Germany entered the market far earlier and have been able to establish a reputation among the Chinese public for high quality products.

"German automotive firms created a very strong position early on in China. But French car companies have been slow to expand and haven’t been able to create a strong image for the ‘Made in France’ brand," said Roy.

France pigeon-holed

France also needs to shift Chinese perceptions of France, which until now has been seen almost exclusively as a producer of luxury goods.

While this has allowed companies such as luxury fashion Hermes and LVMH to flourish in China, it may have hampered the progress of French firms operating in less glamorous sectors, says Roy.

"France has been pigeon-holed," he commented. "When the Chinese think of France, they think of the finer things."

Diplomatic disputes between France and China may have also damaged French business interests in the country.

In 2008, for example, French protestors lined the streets of Paris as the Olympic torch passed through the city to express their anger over alleged human rights abuses in China, much to the rancor of Beijing.

"The Olympic torch incident angered a lot of Chinese citizens, which caused significant blowback for French companies in the country, "continued Roy. "Germany tends to avoid diplomatic crises more than France does," he added

But with Hollande’s visit to China, which comes hot on the heels of a similarly trade-focused trip to India, it appears France is now willing to pull out the stops to gain favour with the world’s emerging economic giants – and hopefully reap the economic rewards.

 

Date created : 2013-04-25

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