France should increase competitiveness to reduce trade gap with China

By Bai Ming Source:Global Times Published: 2018/1/9 17:38:40

How can France reduce its trade deficit with China?

Illustration: Peter C. Espina/GT

French President Emmanuel Macron is in China on his first trip to Asia. The trade deficit is one important topic for this trip, said media reports.

According to Eurostat, the statistical agency of the EU, in the first nine months of 2017, bilateral trade was $39.19 billion, up 12.1 percent from a year earlier.

Exports to China totaled $15.4 billion, a 22 percent increase. China accounted for 4 percent of overall French exports, a rise of 0.6 percentage points. Imports from China totaled $23.8 billion, a 6.5 percent increase, accounting for 5.2 percent of France's total imports, unchanged from the previous year. The trade deficit was $8.4 billion, a 13.5 percent decrease. China is France's No.7 export market and No.6 import market.

Actually, trade between China and France is reciprocal and the deficit is at a reasonable level. The services sector has seen a surplus. But there is still large room to expand trade and reduce the deficit. To achieve that goal, France will have to enhance its competitiveness.

After the European debt crisis, the economy of the EU has been slow to recover. Only Germany was able to benefit much from foreign trade. China has made a decent number of purchases from Germany, which has a favorable balance of trade with China. Trade between China and Germany has put France under pressure.

Meanwhile, France is trying to mitigate the impact of Brexit. The UK has been a close neighbor and a major market for France, and bilateral trade ties are close. There will be a breaking-in period after the UK leaves the EU, which will cast uncertainties on trade between the UK and France. The two countries will have to re-enter each other's market.

Given this situation, France is pushed to expand its foreign markets and get more deals from China.

A lack of competitiveness is the main reason for France's trade deficit with China. The traditional export fields such as high-speed trains, cars and communication devices have not performed well in the Chinese market. French products cannot compete with those from Germany and the US. Also, the emerging "Made in China" plan has also shaken the sales of French products in China.

Traditional French automakers PSA Peugeot Citroen and Renault SA have performed weakly compared with German brands. Communication device makers like Alcatel, affected by the popularity of Apple and Huawei, have gradually lost brand awareness. Not to mention the fact that high-speed trains made by China have become substantial overseas competitors. Siemens and Alston have had to team up to compete with Chinese trains.

While France is asking China to open its market further, it fails to open up itself especially in the high-technology field. Not only France, some other EU countries are very alert to China's investments and acquisitions. They all follow the same logic, which is hoping to press China to open more while being very selective when it comes to their own markets.

Transportation facilities, mechanical and electronic products and chemical products are the three major categories of China's imports from France.

France has strength in core technologies in these areas, and it will take a while for China to catch up. France should fully utilize this window of opportunity.

French companies should focus on technological innovation and adjust their overseas strategies to maintain their advantages. The civil aviation industry in China has vast market potential. China usually buys large numbers of planes from Airbus or Boeing. Buying more from Airbus will drive trade between the two.

France has a solid foundation in the automobile industry. But if it only uses China as a manufacturer without offering core technologies, it will inevitably lag behind. As far as the retail sector, companies like Carrefour have to adjust their strategies in respond to local grocery stores.

The benefits of cooperation are greater than trade protectionism.

To cut its deficit with China, France has to increase its competitiveness, revive its own economy and deepen cooperation with China in high technology.

The author is a research fellow at the Chinese Academy of International Trade and Economic Cooperation.

Newspaper headline: How can France reduce its trade deficit with China?


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