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‘Make it a two-way street’: China’s Silk Road faces French roadblock

Gonzalo Fuentes, REUTERS | Men in suits: French President Emmanuel Macron attends a meeting with his Chinese counterpart, Xi Jinping, at the Elysée Palace in Paris on March 25, 2019.

French President Emmanuel Macron, who is hosting his Chinese counterpart for a three-day state visit, has called for increased "reciprocity" in trade deals with China and a united European front to contend with Beijing’s global ambitions.

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Xi Jinping's visit poses a particular challenge for Macron, who wants to deepen EU ties with China and secure lucrative contracts for French companies, while also pushing back against Beijing's growing global clout.

After talks at the Elysée Palace on Monday, the French president called for a "strong Europe-China partnership", adding that this must be based on "strong multilateralism" and "fair and balanced" trade. Xi, for his part, stressed that "a united and prosperous Europe fits in with our vision of a multipolar world".

The statements of intent followed the signing of a raft of deals on nuclear power, cultural exchanges, clean energy, and a huge contract which will see China buy 290 Airbus A320s and 10 A350 airliners from Europe's Airbus conglomerate – all amounting to a total of some $40 billion.

Macron also announced that France and China would cooperate on a number of investments in some of the countries providing stepping stones on Xi’s flagship plan, the “New Silk Road”.

But, unlike Italy last week, the French president stopped short of signing up to the hugely ambitious infrastructure project that has sparked unease in the US and the European Union.

French investors welcome, or are they?

Known officially as the “Belt and Road Initiative", Xi’s Silk Road aims to link China by sea and land with Southeast and Central Asia, the Middle East, Europe and Africa, through a vast infrastructure network running along the lines of the old Silk Road.

French officials initially warmed to the idea, provided it would work for domestic firms too and help plug France’s massive trade deficit with China. But Paris is adamant Silk Road cooperation must work in both directions.

In a column in French daily Le Figaro, published on Sunday, Xi made clear he wanted Paris to take part in the project, calling for more trade and investment in sectors ranging from nuclear energy to aerospace and agriculture.

"French investors are welcome to share development opportunities in China. I also hope that Chinese companies can do better in France and make a greater contribution to its economic and social development," he wrote, likening ties between the two counties to “a myriad of small streams converging into a mighty river”.

The trouble for Xi is that French and other European firms don’t feel that welcome in China, and EU leaders are concerned the "mighty river" has been flowing in one direction only.

“France has been mostly positive about the idea of developing trade routes, but it has voiced a number of caveats, including a clear demand for reciprocity” when it comes to accessing Chinese markets, said Marie-Françoise Renard, a professor at the University of Auvergne in central France and head of the IDREC Institute for Research on China's Economy.

“And fortunately, several other European countries have woken up to this too,” Renard told FRANCE 24. “They are starting to realize that with Europe’s clout behind them, they can actually stand up to China.”

Time of ‘European naiveté’ is over

Spurred on by Paris and Berlin, the EU has been weighing a more defensive strategy on China, alarmed by Chinese takeovers in critical sectors and frustrated by Beijing’s slowness in opening up its economy.

Addressing an EU meeting in Brussels last week, Macron said the “time of European naïveté” regarding China was over. He added: "For many years we had an uncoordinated approach and China took advantage of our divisions."

'Europe needs a clear, unitary view on China'

In February, the European Parliament gave its green light to new powers to screen foreign takeovers in Europe's strategic sectors, and member states signed off on the measure this month. The move was seen as a response to concerns that foreign firms – many of them Chinese – are snapping up key technologies.

Some EU countries already have their own measures to screen foreign investments, and the rules are tightening. Following the Chinese purchase of Kuka, a cutting-edge producer of robots for factories, Germany lowered from 25 to 10 percent the stake threshold above which it can block any foreign investor from buying more shares.

Italy in the cold

Long the EU’s main beneficiary of trade with China (and the only one to enjoy a trade surplus with Beijing), Germany is now largely aligned with France on the need for a joint European approach on China. But the EU’s 28 members remain split on the Silk Road, with 13 central and eastern states having been enlisted so far.

Athens ceded its key port of Piraeus to China's freight giant Cosco, which also controls container ports in Valencia and Bilbao in Spain. Portugal strengthened its ties with China during the financial crisis, with Chinese investment rising to €6 billion. And in the Czech Republic, a visit by Xi in 2016 sealed massive investments from energy firm CEFC in media companies, an airline and a football club.

“It’s a matter of opportunities,” said Jean-François Dufour, head of the Paris-based consultancy firm DCA Chine Analyse. “All these countries sought Chinese investments, whereas this has not been the case with France,” he told FRANCE 24.

Italy’s decision to sign up to the $1 trillion infrastructure project at the weekend – making it the first G7 member to do so – prompted a swift rebuke from officials in France and Germany.

>> New Silk Road: Will Italy be China's Trojan horse?

"In a world with giants like China, Russia or our partners in the United States, we can only survive if we are united as the EU," Germany’s Foreign Minister Heiko Maas told Welt am Sonntag newspaper. "And if some countries believe that they can do clever business with the Chinese, then they will be surprised when they wake up and find themselves dependent."

Macron will be hoping to push a more united approach when he hosts Xi for a further round of talks on Tuesday, this time with German Chancellor Angela Merkel and EU Commission chief Jean-Claude Juncker also attending. Needless to say, Italy’s populist leaders were not invited.

 

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