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Macron Visits China, Profiting from Trump’s Incoherences

French president Emmanuel Macron’s visit to China this week is the first by a major European leader since the Communist party’s recent leadership congress, and Macron, profiting from Trump’s incoherences and from the situations of blockage in which Angela Merkel and Theresa May find themselves, will use it to try to secure greater access for French companies.

In his first official visit to the world’s second-largest economy since his election last May, Macron is expected to push for a more level playing field in trade relations, as France tries to cut a 30 billion-euro trade deficit with China.

By reciprocity, French officials mean easier access for foreign companies to regulated or protected sectors of the Chinese economy. Chinese officials say that concept is "relative” in an emerging economy.

Like other Westerners, the French have long complained about China’s rules for foreign investments and its demands for technology transfers and compulsory joint-ventures with local rivals.

French carmakers Renault and Peugeot-Citroen in particular have had to set up partnerships with domestic companies but have had only limited success in gaining a slice of the world’s biggest auto market.

French officials hope the emergence of a prosperous Chinese middle-class will give French companies, which tend to specialise in consumer products, an edge over German rivals more focused on machinery and equipment.

But besides the usual race for market share, Macron’s advisors say he will also defend a common European Union line for freer trade between the blocs, in the face of U.S. President Donald Trump’s protectionist rhetoric.

As an economy minister in the previous Socialist government, Macron led the fight to toughen EU anti-dumping rules imports of cheap Chinese steel surged. In June, he also urged the Commission to build a system for screening investments in strategic sectors from outside the bloc, which drew criticism from Beijing. A delegation of 50 company executives, from nuclear giants EDF and Areva, plane maker Airbus and hotels group Accor, as well as representatives of the French beef, pork and milk lobbies are expected to travel with Macron.

Airbus is in talks to sell 100 or more jetliners to China during the visit, sources said.

Slowly, the Chinese manage to creep into the economy of many Western countries, sometimes even by proxy. This will be the case with at least part of England’s energy infrastructure, where the Chinese can penetrate through their French partners. Thus, on in October 2014 it was announced that Britain would sign with Electricité de France (EDF) for the building of a nuclear plant, composed of two reactors close to Hinkley Point, in south-west England. It is expected that the plant would produce 3,260 megawatts, that is 5-6% of UK’s total consumption. It would be the first nuclear plant to be built in UK since 1995 and it is supposed to be functional in 2023.

The problem is that an important part of the money used to build it will be Chinese. The cost of the two EPR’s (Evolutionary Power Reactors) built by the French Areva will be as high as 16 billion Euros, which EDF cannot assume by itself. So EDF turned to the two Chinese nuclear giants CNNC (China National Nuclear Corporation) and CGN (China General Nuclear Power Group), with which the French company started working already three decades ago. The two Chinese companies will own together 30% to 40% of the shares in the British plant.

By entering a joint-venture with EDF in building the nuclear plant in England the Chinese would also enter the British energy market, where EDF is dominant, after having bought British Energy in 2009.

As the EDF case shows, Chinese companies have long invested in strategic sectors in France. The Chinese are present even in the French tourism sector. Club Med has allied itself with the Chinese Fosun conglomerate, whose operating activities include insurance, industrial operations, investment and asset management. China is thus on track to becoming the second biggest market for Club Med after France itself.

Airbus has allied itself with the Chinese Avic, in an effort to get onto the Chinese market. GDF Suez sold to a Chinese company (China Investment Corporation ) 30% of its gas-producing sub-branch.

Another big French company that the Chinese might soon penetrate, and which has a symbolic status in France, is Peugeot-Citroën. This family-run company offered the Chinese Dongfeng to buy half of a 3 billion Euros capital increase (the other half going to the French government), in exchange for 20% to 30% of the shares. The Chinese say they are still considering the offer, but this could simply be a bargaining trick, knowing that Peugeot-Citroën is making serious losses.

For Western countries, spreading the red carpet in front of the Chinese could have serious political consequences. Chinese representatives sit already on the Volvo board in Sweden, as they will in France if the deal with Peugeot receives the green light from Beijing. On top of being politically cumbersome, such intrusions would mean that the Chinese will also have access to technologies and obtain an inside picture of the functioning of key industries in some Western countries’ economies.

Criticising China would also become more difficult for elected officials on whom pressure would be applied from the industrial sector and lobbyists.


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