In today’s world economy, France is one of the major developed countries, the sixth-largest economy, the fifth trading nation, the fourth foreign aid-giving country and the first tourist destination in the world. Meanwhile, France is the fourth largest trading partner, the third investment source and the second l technology supplier in Europe. In global political situation, France is one of the five permanent members of UN Security Council, an important player in promoting world peace and stability, while France also has an important role and rights of speak in the European Union. Therefore, it is of great meaning and necessary for China to strengthen economic and trade cooperation with France, especially when facing the financial crisis and weak global economy.
The situation quo of bilateral trade between China and France
a. The general situation
In 1960s, Sino-French bilateral trade had a value of 110 million US dollars, and it increased to US$370 million in 1970s, to US$1.4 billion in 1980s and to US$4.0 billion in 1990s. Entering 21st century, the bilateral trade between China and France grows rapidly. From table 1 we can see that in 2000 gross trade vale between France and China reached 7.7 billion US dollars, and topped US$10 billion for the first time in 2003, US$20 billion in 2005, US$30 billion in 2007, and US$40 billion in 2010. According to the statistics from Eurostat, the value of Sino-French bilateral trade was 45.21 billion US dollars in 2010, up 27.4%. Of these, France had an export value of 14.49 billion US dollars to China, up 36.1%; and an import value of 30.72 billion US dollars, up 23.7%. In 2010, France had a trade deficit of 16.23 billion US dollars, up 14.4%.
b. Commodity structure of the bilateral trade
Mechanical and electronic products always take the largest share in French exports to China. As shown in Table 2, France exported 4.41 billion US dollars of mechanical and electronic products to China, up by 19.0%, accounting for 30.4% of the total exports to China. Transporting equipments rank the second, the exports from France to China in 2010 totaled 4.03 billion US dollars, up by 71.4%, taking a share of 27.8% of the total exports to China. Chemical products rank the third, the export value from France to China increased by 29.6%, and the ratio grew to 11.2%. The above three catego-






ries take a share of nearly 70% of the exports from France to China. In 2010, France had a growth of less than 10% in exports in foreign trade market, but it had a growth of 36.1% in exports to China, meaning China was the export market with highest growth rate of France.
The batch commodities exported from China to France mainly include clothing, shoes, toys, leather products and other daily consumer goods, and electronic hardware products, plastic products, office equipments, home appliances and other manufacturing or intermediate products. The imports into France from China are mechanical and electrical products, textiles and raw materials, furniture, toys, and miscellaneous products, which valued 20.31 billion US dollars in 2010 in total, amounting to 66.1% of Chinese imports. In addition to the above categories, base metals and the products also take a large share (5%) in French imports from China.
Judging from the top 10 import and export commodity categories, about half of the French exports to China are mechanical products, while nearly half of the imports from China are consumer goods. Table 3 shows that 2010 witnessed aerospace craft and relevant products become the top category of imports into China from France, amounting to 21.9% of the total Chinese imports from France; nuclear reactor, boiler, mechanical appliances and parts ranked the second, taking a share of 19.6%; electric motors, electrical, audio and video equipments and the accessories tanked the third, taking a share of 10.9%. Exports from China to France mainly include wireless phones, toys, clothes, etc. In addition, data shows that 2003 to 2005 saw the share in French market up from 15% to 21% for Chinese shoes, meaning China has become the second largest footwear products supplier to France, following Italy. At the same time, the market share of clothes rose from 13% to 21%, computers from 16% to 26%, and mobile phones from 10% to 26%.
Problems in Sino-French bilateral trade
a. Low ratio of bilateral trade in the respective foreign trade
Although both are great trade powers in the world, the volume of bilateral trade only takes a low percentage in the respective foreign trade. According to the statistics from China customs, in 2009 Sino-French trade only take a share of 1.56% in China total import and export volume, with 1.08% of the exports go to France and 2.13% of the imports from France. According to EU statistics, 2.8% of French exports went to China in 2010, and 5.1% of imports were from China, making China the ninth export market and import source of France. Besides, from 1997 to 2009, Sino-French bilateral trade value increased to 34.46 billion US dollars from 5.57 billion US dollars, up by 518.7%. At the same time, SinoGerman trade value increased to 105.64 billion US dollars from 12.67 billion US dollars, up by 733.8%; Sino-UK



trade value jumped to 39.16 billion US dollars from 57.97 billion, up by 575.5%. It is visible that SinoFrench trade had a slower growth than the average in central Europe.
China takes a low share in French foreign trade market mainly because French foreign trade focuses on EU members, and exports to “BRIC” countries (China, India, Brazil and Russia) are less, compared with German export trade. The reason that France takes a low share in China foreign trade market is that 60% of imports into China are parts, semi-finished goods and so on featuring processing trade, which France is less involved in. In addition, China needs large amounts of energy and raw material imports for the economic development, but France won’t provide either, leading low imports into China from France. The trade between France and China focuses on high value added areas, especially on technology. By the end of June 2009, China has introduced 3798 technologies from France, with the contract value totaled 18.74 billion US dollars.
b. Sino-French bilateral trade imbalance gets severer
According to the statistics from China government, China has had trade surplus with France since 2003. As shown in table 1, before 2003, China had an export trade value lower than import trade value from France. In 2003, the export value from France to China totaled about 6.1 billion US dollars, and import value from China was 7.29 billion US dollars, meaning France had a trade deficit for the first time of 1.195 billion US dollars with China. The trade deficit of France with China in 2004 and 2005 reached 2.26 and 2.63 billion US dollars respectively, amounting to 12.8% and 12.7% of Sino-French bilateral trade. But, according to French customs statistics, France had a trade deficit with China in 2004 and 2005 of 11.21 billion Euros and 15.06 billion Euros, up by 28.1% and 34.3% from a year ago respectively. In 2006, it further
increased to15.89 billion Euros. The amount would be greater if calculated in US dollars. Based on the statistics, China overtook Germany in 2005 and became the largest foreign trade deficit source of France, and China held the position in 2006, with French trade deficit account for 49.6% in SinoFrench bilateral trade.
The gap between Chinese and French trade statistics is mainly due to entrepot trade under the rules of origin. Nearly 60% of the statistical difference is made up by entrepot trade via Hong Kong, and others are from entrepot trade via Netherland, Eastern Europe, CIS and so on. In addition, the valuation standards of customs and fluctuating exchange rates can also contribute to the statistical differences.
With a growing trade deficit, trade conflicts between China and France also increase. Especially in recent two years, there is an obvious trend that France carries out trade protectionism against Chinese bulk commodities such as textiles and footwear. This will certainly affect the future development of Sino-French bilateral trade, and Chinese government and enterprises should pay attention to it.
Measures to strengthen SinoFrench bilateral trade
a. Both countries should pay much attention to the economic and trade cooperation with each other
Data from Institut National de la Statistique et des études économiques(INSEE) shows that in 2008 and 2009 France lost 399 thousand job positions due to the global economic crisis, the largest reduction since World WarⅡ, with a gloomy economic development prospect and serious domestic employment situation. Meanwhile, China has suffered a lot of trade conflicts in recent years, with a deteriorating international economic environment. And the low technical level leads to a low position of China in the international labor division. The challenges ask China to strengthen the economic and trade relations with developed countries, particularly countries like France in European Union. Therefore, both China and France should pay enough attention to the economic and trade coopera- tion between them, to boost economic development and improve domestic employment. Obviously, strengthening economic and trade relations is a winwin strategy for both countries.
b. France should encourage SMEs to develop China market
Small and medium-sized enterprises (SMEs) occupy an important position in French economy. Compared with those in Germany, Italy and other EU countries, SMEs have fallen behind in investing in China. Now there are 81,700 small and medium-sized export enterprises, amounting to 90% of total export enterprises, but they only take 40% of the total export value. French exports mainly rely on a few large enterprises. In the past 10 years, the number of French export enterprises decreased by 16%. French SMEs often possess technologies, but lack of funds and manpower. So, the French government should actively encourage SMEs to develop markets in China by utilizing the advantages of their own, and to strengthen the economic and trade cooperation with China.
c. France should vigorously attract investments from China
By the end of 2010, 80 enterprises from mainland China have carried out investments and cooperation in France, and had 5,000 local employees, while enterprises from Hong Kong in France totaled 51, who had a number of employees of 4,000. In 2010, France raked the third among the European investors in China, while it took a share of 9% in Chinese investments in Europe. At the same time, Germany absorbed 43% of Chinese investments projects in Europe, followed by UK(19%). Therefore, France should actively improve the investment environment, implement favor policies for foreign investments, and vigorously promote the development of the bilateral trade.
d. China should increase imports from France
Manufacturing industry is vital to the national economy in France. Besides aerospace, automobile, highspeed rail and machinery, electronic component is also a part of high-end manufacturing industry. In these advantages fields, France owns complete core technologies, and these technologies basically result from independent innovation. In addition, France is the largest agricultural country in EU. Therefore, China should increase imports from France which are vital to the economic development in China, such as industrial goods, agricultural products and advanced technologies, thus to narrow the trade deficit and ease trade friction. Of course, it will be helpful for France to lower the limitation on exports to China, to attach more importance to Chinese market, to change the discriminatory export control policies against China, and to expand exports of high-tech products.
e. China should vigorously attract French investments
The financial crisis shocked small and medium-sized enterprises in France, and the French government implemented various policies to strengthen the protection and support to SMEs to help them through the difficulties. But, due to the overall economy maintains a down trend, the measures to recover SMEs by the French government have not realized its targets, meaning SMEs still face great challenges. Many SMEs possess complete core technologies, which are basically the results of independent innovation. Therefore, China should facilitate the bilateral trade and investment, promote cooperation between enterprises, strengthen SNEs cooperation, enlarge bilateral trade investments, and deepen the cooperation in nuclear power development, aerospace, highspeed railway and other large projects, and also in emerging sectors like new energy, new materials, low carbon technology, and green economy.
(Author: from Beijing Normal University, International Economics and Trade Department)