Macron's visit to China ‘possibly changing the anchor of EU-China relations’

January 10, 2018

HONG KONG – French President Macron’s first state visit to China is not only relevant for France’s economic and political agenda but also for that of Europe, says Alicia Garcia Herrero, Chief Economist Asia Pacific for Natixis. She says Macron and China’s President Xi Jinping can be expected to increase the frequency of their State visits as well as bilateral exchanges to an extent that France might become China’s most relevant partner in Continental Europe.

“Macron’s relatively negative approach to China during his campaign (in particularly his push to set up a European-level investment protection agency following the example of the Committee on Foreign Investment in the United States, i.e. CFIUS) seems to have lost ground,” she says.

“Although it is hard to access whether that was a useful device for Macron’s election campaign, it is sure that Macron is now fully aware of the cost of taking a harsh stance when it comes to economic relations with China.

“Such realisation seems to have done wonders in terms of the more relevant content of economic dialogue between the two countries (The China-France 5th High Economic Dialogue concluded on December 1 clearly reached a different level in terms of actionable measures). 

“Most importantly, Xi’s VIP reception for Macron reflects very well what has been China’s increasingly successful approach to its relations with the EU, namely “divide and conquer”.

“We just need to recall that, in the past few years, Germany was obviously China’s key strategic partner within Europe. Thanks to massive machinery and automobile exports to China, and more recently, the direct investment of Chinese companies into the high end of the Mittelstand, Germany was the biggest winner from China’s development model, both in terms of a large trade surplus.

“Both benefits are starting to turn sour for Germany, as China moves towards a more consumption-based economy, substitutes imports of machinery and automobiles with its own production and even starts to compete with Germany in third markets.

“While this is also true for France, Macron is clearly eyeing a special strategic partnership with China as China’s appetite gears closer to France’s comparative advantage (such as retail and hospitality among others).

“In other words, Macron seems to have come to the realisation that he had better be on the right side of the table under China’s divide-and-conquer strategy in Europe, that is, a more accommodating stance towards China.

“This is especially essential when France now has more benefits form this relationship. Evidence of this is the reduction of France’s trade deficit with China.” (ATI).