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France - number one destination for Chinese investment?

France number one destination for Chinese investment

 

It would seem like common sense to pursue the world’s biggest market, yet until recently many businesses have considered China too difficult to penetrate. But having laid the groundwork for success both at home and abroad, France is now reaping the financial and political rewards. In the wake of Brexit, this burgeoning relationship could upset the UK’s position as the number one destination for Chinese investment, and launch a new era of Franco-Chinese prosperity.

An audience comprising 20% of the global population makes China a naturally appealing destination, and for French companies, there’s a sense that the feeling is reciprocated. France is the most visited country by Chinese tourists outside of Asia, and a significant target for Chinese investment, with businesses including e-commerce giant Alibaba and phone manufacturer Huawei choosing France as their gateway to the rest of the world. The French president François Hollande (pictured) certainly has much to smile about in that respect.

But less than a decade ago, such a partnership would have seemed infeasible. Former President Sarkozy’s threatened boycott of the Beijing Olympics in 2008 and the induction of the Dalai Lama as an honourary French citizen hit both diplomatic and business ventures hard, with many fearing a long legacy of mistrust. Others have been put off by perceptions of an autocratic regime and an unforgiving legal system, where copyright laws are notoriously difficult to enforce.

China however appears keener to open itself up since the inauguration of President Xi Jinping. An historic state visit to the UK and carriage ride with the Queen marked an unprecedented partnership with a western country, and positioned Britain as China’s premier trading partner, with some £50bn of trade deals on the table. But tensions remained, with the then Foreign Secretary Philip Hammond having to deflect questions about China’s questionable human rights record, and the Queen being recorded calling Chinese diplomats “very rude”.

Brexit breakup provides opportunities for France

The advent of Brexit throws a distinctly large spanner in the works. Having caused significant uncertainty in the global markets, the weakness of the Pound Sterling and the mooted loss of the ‘gateway to Europe’, the UK suddenly looks a more tenuous destination. While Hammond takes on his new role as Chancellor and Foreign Secretary Boris Johnson hopes to capitalise on his questionable celebrity status, France may look to exploit this opportunity to enhance its own prospects.

Related article: Start a Business in France in 8 Steps

Somewhat ironically, Hong Kong could be the perfect staging post. The former British colony is now a multi-cultural city-state at the forefront of global trade. With a renowned airport providing global links, the city’s independence from mainland China while maintaining relatively seamless trade and travel makes it an ideal destination for mainland and foreign expansion.

Many French businesses have already taken the leap: with more than 300 active companies and an estimated 25,000 French nationals in Hong Kong and Macau, it has become one of the largest French expat enclaves in Asia. It’s not just the allure of world class food and a convenient location, either. The French government has designated Hong Kong as one of its seven global tech hubs, and provides active support and advice to businesses moving there. Given the success of France’s own tech hubs, this move reflects on just how keen France is to establish a presence in the Chinese market, and build business contacts that will come home to roost.

France and China’s esprit de corps

  • Soaring demand for SUVs from massive French automotive sector
  • More cosmetics imported from France than anywhere else
  • Strong consumer electronics sector bodes well for thriving French tech industry
  • More billionaires than any other nation, increasing the potential for angel investment
  • Nearly 2000 major metropolises, offering significant scope for expansion/franchising

The focus on exporting France’s tech pioneers is particularly prudent. With concern over China’s deflating low value manufacturing industry bubbling for some years now, the country’s focus is shifting to higher value industries. While steel mills are being shuttered and overall growth has slowed, wages continue to rise, while digital services are bringing affluence to smaller cities and more rural areas. The result is that China’s middle class has now overtaken the United States’, constituting some 109m people with significant disposable income.

At a time of considerable uncertainty throughout Europe and the United States, Asia seems to be going from strength to strength. With Credit Suisse reporting more growth in the region’s middle class than anywhere else, and the apparent shift of Chinese policy towards courting foreign and particularly French business, the climate around expansion into the region is more positive than ever.

Related article: Expand Your Business Abroad

Larger businesses know it too, actively courting Chinese workers at local jobs fairs in order to bolster their businesses’ knowledgebase. But for the smaller business or entrepreneurs with fewer ties, the region’s unusual economic stability, gargantuan potential audience and French cultural capital will make moving to China an increasingly tough proposition to resist.

For more information on how to open a company in France or how to open a company in China, please contact the Euro Start Entreprises team on 0033 (0) 1 53 57 49 10 or email us via our contact page.

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