Chinese Direct Investments in France: No French Exception, No Chinese Challenge

China's direct investment in France remains surprisingly low even compared to other EU states although the targets are quite similar, being heavily biased towards export-support and services rather than industrial activities.

In terms of motivations, Chinese companies are primarily seeking access to the French and European market, although strategic asset seeking considerations also prevail in some cases.

In terms of performance, Chinese investors have seen mixed results, at best, with a number of spectacular failures and a more limited number of success stories. The latter tend to occur in industries where there are substantial complementarities between the two partners and when the Chinese partner is already a large, established firm with international experience.

Some acquisitions have been win-win deals, with Chinese investors building up international competitiveness and the French firm also benefiting, not only by surviving but also by gaining better access to the booming, but often difficult to penetrate, Chinese market.

The modest presence of Chinese firms in France is not surprising given domestic comparative advantages in many manufacturing activities. But country-specific characteristics also account for this relatively poor position. France appears to be overshadowed by Germany's strength in key industrial sectors and by the UK's attractiveness. Most importantly, bilateral trade between France and China remains below potential and is therefore failing to help stimulate commercial relationships and investment growth.

As a result, it is no doubt in the interest of the French government to take appropriate steps to improve opportunities for both bilateral trade and Chinese investment. Enhancing the country's reputation for openness in trade and investment relations should rank high on the policy priority list.