Hong Kong and the debate around CAI presents an opportunity for France to lead a reappraisal of Europe's economic dependency on China

France is not as economically dependent on China’s export market as Germany is, with its trade deficit with China standing at nearly 29.2 billion euros in 2018. Yet the French Government appears to have an ambivalence when it comes to raising the deteriorating human rights situation in Hong Kong.

At the trial of the 47 pro-democracy activists this month in Hong Kong, the absence of French diplomats was noticeable in contrast to the attendance of their colleagues from the consulates of Germany, the Netherlands, EU, UK, USA, Australia, and Canada. Nor did President Macron feel the need to raise the dismantling of Hong Kong’s autonomy in a call with President Xi Jinping in late February which covered vaccination distribution, G20 debt relief initiatives, climate change, investment, co-operation in eastern and central Europe, and the promise of Chinese investment in the financial services sector in Paris.

The speed at which Hong Kong’s freedoms, democracy, and rule of law have been undermined by the National Security Law should concern not just the UK and France, but democracies across the world. Yet, many western countries are faced with the difficult choice between standing up for human rights or seeking to deepen their economic relationship with China, in the hope of securing the mirage of promised riches.

France is in the position of much of Europe, in that the foreign direct investment it receives from China has doubled since 2010, to the point where China on averages invests 1.7bn euros a year in the French economy. Twenty seven percent of Chinese foreign direct investment from 2000-2016 has gone to the French energy sector, which has included the state-owned China Investment Corporation buying thirty percent stake in GDF Suez (now Engie), PetroChina buying the Ineos refinery at Lavera, and the Chinese nuclear company Yantai Taihai taking over Manoir Industries and CTI.

Outside of the energy sector, Chinese carmaker Dongfeng in 2014 bought a fourteen percent stake in the French car manufacturer Peugeot, Fosun International bought the French tourism company Club Med in 2015 for 939 million euros, and according to the American Enterprise Institute and Heritage Foundation between 2010-2018 Chinese investors have spent 76 billion euros acquiring agricultural land in France.

As with other parts of Southern Europe, the southern French city of Marseille has become a hub for China’s Belt and Road Initiative. In recent years Cosco Shipping, PetroChina, Tinno Mobile, and China Merchants Group, like China Telecom, China Mobile and China Unicom have all invested in Marseille, seeing it as a gateway to the markets of Europe, the Middle East and Africa.

Despite rising Chinese investment into France, the driving force behind France’s economic relationship with China is a series of partnerships between French companies overseas and their Chinese counter-parts.

The French Foreign Ministry boasts that over 1,100 French companies are currently operating in China with cooperation in civil nuclear energy, aviation, and the space sectors. These collaborations include French energy company EDF partnering with China Energy Investment Corporation to develop windfarms, French tyre company Michelin working with the Shanghai Huayi (Group) Company to produce tyres, French pharmaceutical company Sanofi investing in the French-Chinese investment fund Cathay Innovation, and the French aerospace company Thales entering into a partnership with Aviation Industry Corp of China on a number of airport projects.

These sweetheart partnerships and the prominence of multinational companies in the French economy have blunted political concerns about intellectual property theft or what China’s drive for self-sufficiency by 2025 will mean for the future of French industry. Let alone questions over the dominance of Uyghur and Tibetan slave labour in the Chinese economy and the continued dismantling of Hong Kong’s autonomy.

In President Xi’s last visit to France in June 2019, France signed bilateral deals worth 13.5 billion euros including the sale of 300 Airbus A350 aircraft and a promised increase in investment by Airbus in China. In fact, the sale of aircraft and spacecraft account for the largest slice of French exports to China, in 2019 they were worth $6.59bn.

It is therefore an unmitigated irony that French companies are now working to make their own aerospace industry redundant, by entering into partnerships with China to create a national aerospace industry, that will produce cheaper and more competitive airline carriers built on stolen intellectual property.

Of course, guaranteeing investor protection and a level-playing field was the very rationale for the EU to press for the negotiation of a comprehensive agreement on investment with China all those years ago. Yet, the rush by German Chancellor and French President in December 2020 to finalise the deal has meant that investor protection has fallen by the wayside, alongside any commitment to hold China accountable for its appalling human rights record and encroachment in Hong Kong.

This is of particular concern given that the Rhodium Group, who is the EU Commission’s favoured independent research provider, found that forty-six percent of Chinese foreign direct investment in Europe in 2019 without proper mitigation was problematic, accounting for investment in vulnerable areas including sensitive individual data, critical infrastructure and emerging computing technologies.

In June 2017, France proposed that the EU take increased power to prevent Chinese acquisitions of European businesses. Today, it appears to champion an investment treaty with China, which will usher in a wave of Chinese mergers and acquisitions of European businesses post-COVID.

Early next year the European Parliament will finally have a vote on the EU-China Comprehensive Agreement on Investment. It is not too late for EU Member States and parliamentarians to come to their senses and recognise the threat entrenching economic dependency on China presents, particularly on their ability to speak out on human rights.

France as one of the founding members of the European project, should be leading this reappraisal of Europe’s economic relationship with China and not leaving it to others.

 Sam Goodman, Hong Kong Watch’s Senior Policy Advisor