French Economy Minister Broaches Diverging Interests with China During Beijing Visit

The Lede: The French Minister of Economics and Finance Bruno Le Maire politely made the point that France wants to lessen its dependence on China, its third largest trading partner, in a visit to Beijing visit the last weekend of July to co-host the China-France High Level Economic and Financial Dialogue with China’s Vice Premier He Lifeng.

What We Know:

• France’s Minister of Economics and Finance Bruno Le Maire and China’s Vice Premier He Lifeng jointly hosted the China-France High Level Economic and Financial Dialogue in Beijing on July 29.
• Le Maire emphasized the interdependence between France, the West in general, and China. He also defended his country’s desire to become more economically independent in particular industries, such as in microchips, as part of the ‘de-risking’ path. Nevertheless, the minister proposed new investments and cooperation on major challenges including the green transition, reorganization of value chains, and technological revolution. In the dialogue, he raised issues regarding market access for French companies in the banking, nuclear, cosmetics, and agricultural industries.
• At a news conference after the discussions, Le Maire announced important advances in bilateral relations in the areas of cosmetics, aerospace, food and beverages, and finance. He remarked on France’s decision to extend Huawei 5G licenses in its cities.
• Le Maire also traveled to Shenzhen on Monday to meet with Wang Chuan-fu, the chief executive officer of electric carmaker BYD Co.

The Background: China is France’s third largest trading partner. Western countries have recently adopted policies to reduce their economic dependence on China. Aside from the leadership of the U.S. in the ‘de-risking’ trend, Germany has adopted a ‘Strategy on China’ that has compelled firms in Europe’s leading economy to pivot and diversify their global presence away from the Chinese market. Authorities are currently investigating two Chinese citizens for their alleged smuggling of French-made processor chips with military uses to China and Russia. The talks come three months after a state visit by French President Emmanuel Macron, which resulted in a 51-point joint declaration to expand ties with China.

Likely Outcomes:

• The Western countries that are pursuing a ‘de-risking’ path may trend toward this approach of pivoting away from China in certain key industries while still pursuing opportunities that fall outside of political sensitivities. For France, industries such as aircraft manufacturing and cosmetics are highly prioritized and trade will likely continue with China. Computer chips will be an industry that the West and China will continue to diverge in the foreseeable future.
• Until the European Union formulates a unified approach to trade relations with China or the U.S. issues new measures that nudge them otherwise, member countries will follow this basic approach of ‘de-risking’ in many of the same industries and seeking cooperation in others as they see fit.
• There will emerge countries in the EU that will be more receptive to cooperation with China than others. This will likely contribute to disagreement in the bloc that may bring the issue increasingly to the forefront of political and economic debate. China will eye these gaps in the EU in order to gauge future engagement.

Quotables:

"We are totally opposed to the idea of decoupling. Decoupling is an illusion. There is no possibility of having any kind of decoupling between the American, European and Chinese economies. Derisking does not mean that China is a risk. Derisking means that we want to be more independent and that we don't want to face any risk in our supply chains if there would be a new crisis, like the COVID one with the total breakdown of some of the value chains." – Bruno Le Maire, French minister of the economy

Good Reads:

Le Maire says France wants better China access, not decoupling (Reuters)

China hopes France can help take heat out of relations with EU (CNBC)

French finance minister says economic ‘decoupling’ from China is impossible (France 24)

France’s Le Maire presses China on market access and lobbies for electric car investment (AP)

De-risking and market access dominate China-France economic talks (SCMP)

China and France Make Progress on Financial Cooperation (Caixin)