French incentives to strengthen Hong Kong ties

France's minister for SMEs is promoting her country's economic reforms in a bid to attract investment from Hong Kong and the mainland

PUBLISHED : Friday, 05 April, 2013, 12:00am
UPDATED : Friday, 05 April, 2013, 5:10am

France, whose economy shrank in the fourth quarter, is offering a range of incentives to attract investors from Hong Kong and mainland China.

Fleur Pellerin, France's minister for small and medium-sized enterprises, innovation and digital economy, said the country had brought in measures to address the current economic crisis and was increasingly attractive to investors.

"The worst of the financial crisis is behind us now. This is, in fact, the right timing for investors to come to invest in France," she said in an exclusive interview with the South China Morning Post during a visit to Hong Kong.

"We have a very stable political situation, good transportation and other infrastructure which is ideal for foreign investors."

In the fourth quarter, France reported a 0.3 per cent drop in gross domestic product compared with the previous quarter. Germany recorded a decline of 0.6 per cent.

For last year as a whole, however, France recorded no growth while Germany reported expansion of 0.7 per cent.

French President Francois Hollande in November introduced a range of incentives to boost the economy and create job opportunities, including a tax reduction on certain payroll and research costs. That will reduce French companies' annual expenditure by €20 billion (HK$202.99 billion), representing about 1 per cent of GDP.

The government also set up a state investment bank in January to offer up to €42 billion in financing for firms, particularly SMEs.

"These measures would cut costs for all companies operating in France, including those from Hong Kong and mainland China. We have seen many Hong Kong and mainland companies investing in France in recent years and we believe the new measures will attract more companies," she said.

Pellerin is France's first South Korean-born minister. She was adopted at the age of six months by a French family, and her appointment has been welcomed by the Asian business community. She is touring Asian cities to encourage investment in France.

Pellerin said 200 mainland Chinese companies are operating in France, employing 9,000 staff, while 70 Hong Kong firms in the country have hired another 6,000 people. They invest in infrastructure, luxury goods, and food and beverage industries.

She said her government also wants to encourage French firms to invest in Hong Kong and mainland China.

The French population in Hong Kong has doubled since 2005 to over 15,000 due to closer trade links between the city, the mainland and France.

"More than 750 French companies are operating in Hong Kong, employing around 33,000 people with a turnover of €11 billion," she said, adding that they include big financial and infrastructure firms and many SMEs.

Pellerin said French exports had tripled in the past three years to reach €6 billion last year, while Hong Kong represents about 10 per cent of its exports to Asia.

She said France would also like to become an offshore yuan trading centre. China has not yet allowed the yuan to be fully convertible, but since 2009 has encouraged international investors to use the currency to settle trade and investment.

"France takes the relationship with Hong Kong and [mainland] China very seriously. France is not only a good place for tourists but it is also a great location for investment. The country could act as a gateway for Hong Kong and mainland investors to enter the European market," she said.