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France Business Report 2018

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Discovery Reports

Macron’s gift to Xi is symbol of French desire for long-lasting relationship with China

By beginning his tour in Xian, the starting point for the ancient Silk Road. Macron was offering symbolic support for the “Belt and Road Initiative”

PUBLISHED : Thursday, 29 March, 2018, 11:05am
UPDATED : Thursday, 29 March, 2018, 11:04am

When French President Emmanuel Macron visited Beijing in January this year, he confirmed the intention to present President Xi Jinping with an eight-year-old gelding named Vesuve de Brekka.

The actual handover was delayed by strict quarantine requirements, but for those in the know, the diplomatic gesture was heavy with symbolism.

The choice of official gift was a reciprocal nod to China’s tried-and-tested style of “panda diplomacy”, and an acknowledgement of the admiration President Xi expressed for the equestrian skills of France’s Republican Guard during his own visit to Paris in 2014.

It was also seen as a clear allusion to the Qianlima or “thousand-mile horse”, a mythical winged creature from Chinese folklore famed for its ability to cover great distances. By extension, that was presumed to signal Macron’s wish for a long-lasting relationship with Beijing.

On the other hand, the impressive real-life specimen, which has taken part in formal presidential escorts on the Champs-Elysées, was carefully selected as “a symbol of French excellence”. And, in an interesting twist that officials no doubt downplayed at the time, some sharp-eyed observers noted that the French leader’s name is rendered in Putonghua as “Ma ke long”, which translates as “the horse vanquishes the dragon”.

As with any such high-profile visit, where the prime focus is on promoting trade ties and investment, there was also a subtext to go with each stop and announcement.

By beginning his China tour in Xian, the historic starting point for the ancient Silk Road. Macron was offering symbolic support for Beijing’s “Belt and Road Initiative”, the ambitious global economic plan championed by Xi, which also has significant foreign policy implications.

Protectionism develops when there is no fair trade and no rules of reciprocity. That’s why France insists on global commerce being based on rules of reciprocity. We would always like things to go faster, but the key thing is the [right] direction
Bruno Le Maire, French finance minister

With Britain now struggling with slow-moving Brexit negotiations, it was a golden opportunity to position France as a key partner in Europe for Belt and Road-related projects, to highlight areas for closer collaboration, and to emphasise the importance of long-term mutual benefit.

“The new roads cannot only go one way,” Macron said.

Instead of ceremonially celebrating a few one-off deals, as often happens, the French delegation preferred to talk about free and fair trade and the need for reciprocal treatment in continuing economic ties.

This continued the approach taken in an earlier visit to Beijing by French finance minister Bruno Le Maire, and was seen as confirmation of a gradual “pivot” in Sino-French relations.

On the French side, there is a clear expectation of progress leading to increased sales and access for sectors ranging from food and finance to aerospace and nuclear power. China has appeared more willing to recognise that government subsidies can lead to overcapacity in, say, the steel sector and that they can work to eliminate trade barriers and distortions.

Initial steps have seen China move to approve more imports of French pork, beef, charcuterie products and infant formula. The two will also encourage Chinese and French financial institutions to issue renminbi bonds in both countries. And the mainland has pledged to allow greater access to its fast-growing financial services sector by raising the limit on foreign ownership in banks, insurance companies and securities firms. Some of the changes, though, are unlikely to be rushed through.

“Protectionism develops when there is no fair trade and no rules of reciprocity,” Le Maire said when concluding his visit. “That’s why France insists on global commerce being based on rules of reciprocity. We would always like things to go faster, but the key thing is the [right] direction.”

Macron, too, was all for closer ties on this basis, but must also see that China’s business relations with Europe are shifting faster than expected.

The mainland is now producing a much larger proportion of its own machinery, cars and hi-tech items and green technology, reducing the need to import from manufacturers in countries such as France and Germany.

It is competing head-to-head with European exporters for a bigger share in other international markets. While many in Europe welcome the prospect of continuing Chinese investment, there is increasing unease in some quarters about the wider implications for areas such as agriculture, power, infrastructure and hi-tech innovation.

Macron may have come away from his trip optimistic about building a special strategic partnership with China and perhaps even being regarded as the “go to” leader in Europe.

But like others before him, he may also have to reckon with the changeable nature of China trade and the fact that mainland consumers may not be as “hungry” as expected for what France has to offer.