For France (and Europe), the China card

Posted in China , Asia | 05-Oct-04 | Author: Katrin Bennhold| Source: International Herald Tribune

French President Jacques Chirac speaks at the start of a meeting with the heads of small and medium businesses ahead of his trip to China at the Elysee Palace in Paris, September 27, 2004
PARIS Forget words like "dim sum" and "Tsingtao." As President Jacques Chirac prepares for a lavish four-day state visit to China at the end of the week, the new Chinese catch-phrase here is "guanxi."

Guanxi - or connections and political goodwill - is what the French leader, four of his ministers and 52 business executives hope to cultivate in the world's most promising emerging economy and Asia's foremost military power.

The size of the delegation, the length of the trip and weeks of press coverage leading up to it leave little doubt: For France, China has become a political and economic priority in a global order currently dominated by the United States.

"France likes to play the China card against the United States," said Jean-Pierre Cabestan, a China expert at France's National Center for Scientific Research, or CNRS. "Chirac has a multipolar vision of the world, and economics is a crucial part of it."

France is no exception. China fever has gripped Europe, with leaders regularly traveling to court their Chinese counterparts and European Union representatives holding annual talks with the Chinese government since 1998.

America may have been quicker to gain an economic foothold in China a decade ago, but Europe is catching up fast: If trade between the EU and China in the second half of this year expands as fast as it did in the first six months, the two will be each others' largest trading partners by December.

There is more to it than just trade. Since last year, the EU and China have considered each other strategic partners, cooperating on a host of issues from environmental programs to Europe's Galileo satellite navigation program. France and Britain hold regular talks with Chinese security experts, and Chinese military personnel train in army colleges across Europe. Not even the prickly question of China's human rights record has done serious damage to the new partnership.

The gradual emergence of what David Shambaugh of the Brookings Institution in Washington calls a "China-Europe axis" could have far-reaching implications for the balance of power in the world, political scientists say. Most strikingly, it is bound to irk America, a staunch ally of Taiwan, economic competitor of the EU and a rival of China in Southeast Asia.

"The China debate will matter more and more in trans-Atlantic relations," said Eberhard Sandschneider, sinologist and director of the research institute at the German Council on Foreign Relations. "Close cooperation between China and Europe won't make the Americans happy - there is strategic and economic competition."

For the last nine years under Chirac, a life-long Gaullist with an ambitious vision for his country in world affairs, France has been a European pioneer in fostering closer relations with Beijing.

When the president went on his first state visit to China in 1997, he signed a "global partnership" accord with the Chinese authorities and became the first European leader to stop supporting Washington in its regular push to have China's case condemned at the UN Human Rights Commission in Geneva.

Against stern opposition from the United States and some European capitals, he has also been the leading advocate of lifting the EU arms embargo that was imposed on China following the brutal crushing of democracy supporters on Tiananmen Square in 1989.

When President Hu Jintao of China visited France in January, Chirac called plans by the Taiwan leadership to hold a referendum on independence from China "irresponsible" and "dangerous for everybody," prompting cynical commentaries at home and abroad.

Today's French attitude is a classic example of "shopkeeper's diplomacy," said Cabestan of the CRNS. "When big contracts are at stake, France is all too happy to concede."

There are certainly a lot of big contracts at stake when Chirac arrives in China on Friday. Trade Minister François Loos, who is accompanying the president, says he hopes to return to Paris next week with at least two dozen large-scale business and cooperation agreements.

"China is a huge new market with needs that we can satisfy," Loos said in an interview in his spacious office in eastern Paris on Monday. "Our competitors are there - we also need to be there."

China's gross domestic product has grown by an annual average of 8.6 percent over the past 12 years, more than twice the global rate of expansion. It is the world's third-largest trading power and the largest recipient of foreign investment. By some estimates, China will overtake the United States as the No. 1 economy in the world in less than four decades.

The country's presence at last weekend's Group of Seven meeting in Washington reflected its emergence as a major player in the global economy.

According to Lester Thurow, professor of economics at the Massachusetts Institute of Technology, a foothold in China is a must in a globalized world. "If you're not in China, you're not playing the game," Thurow said.

The French are determined not to be left out. In a Gallic charm offensive, they declared 2004 the Year of China and paid homage to 40 years of diplomatic relations with no fewer than 378 exhibitions and events.

In January, a dragon parade noisily descended the Champs-Elysées in honor of President Hu's visit.

Next Monday, Chirac will inaugurate the Year of France in China, in hopes that French opera and exhibitions on Louis XIV and French industrial design will help France close the gap with other Europeans, notably with Germany.

To be sure, most Chinese hotel minibars have Evian water, and the French retailer Carrefour has the biggest foreign supermarket chain in China. But by the end of last year, France had still only invested a total of E6 billion, or $7.3 billion, in China, compared to Germany's E8 billion. And China imports more than three times as much from Germany as from France, government statistics show.

France has the potential to match the German export figure of about E20 billion, Loos said, adding that small and medium-sized companies are key in this quest. "There is an enormous amount of unexploited potential among smaller companies that, unlike their German rivals, have not yet awakened to China," he said.

While few economists expect France to catch up with Germany, many see a window of opportunity for French companies.

A class of affluent Chinese is developing rapidly: An estimated 60 million are viewed as potential customers for Western consumer goods, eager to try French delicatessen products or dress up in accessories from Louis Vuitton. At the same time, China plans a host of large-scale infrastructure projects that French industry is well-placed to compete for, analysts say.

The stakes are high. China's government is deliberating whether to buy a French, German or Japanese high-speed train for its new Beijing-Shanghai link.

If Alstom's TGV train wins out against Germany's ICE and Japan's Shinkensen, it would mean not only a contract worth as much as E12 billion, but also the prospect of more lucrative deals in the future.

The Chinese government plans to build 20,000 kilometers, or 12,400 miles, worth of rail tracks in coming decades, Loos said.

Similarly, opportunities worth billions of euros loom in China's push to build up its nuclear energy capacity. As the centerpiece of a strategy aimed at diversifying away from coal and oil in order to meet the economy's exploding energy demand, China wants to build 32 nuclear reactors by 2020.

EDF, France's state-owned power utility, assisted in the construction of the Daya Bay reactor in 1994. And in a joint venture with Germany's Siemens, Areva, the French nuclear company, has built 8 of China's existing 11 reactors.

The EDF chief executive, Pierre Gadonneix, and Anne Lauvergeon, head of Areva, are both traveling with Chirac this week.

Not everyone is convinced, however, that selling things to China is a viable long-term strategy to make money there, because sooner or later the People's Republic, world champion in copying patents, will be able to make most things itself - and at a discount.

As the DGAP's Sandschneider puts it: "China isn't just about imitation, it's about innovative imitation. I wouldn't be surprised if in a few years' time the Chinese sell a fully-equipped Volkswagen Golf-type car on the German market for 6,000 euros and really irk their old VW partners."

Analysts take care to note, however, that while economic and political relations between China and Europe may be strengthening, the United States is always in the room.

According to François Godement of the Asia Center at the French Institute of International Relations in Paris, the absence of a military dimension in the relationship between China and Europe is at once its greatest strength and weakness.

"Relations between China and Europe are multifaceted and important, but they will never have the same importance as China's relationship with the United States," Godement said. "Chinese-European relations are complementary to China's relations with the United States."