A phone call this week between presidents Xi Jinping and Emmanuel Macron could signal more constructive discussions on trade between China and the European Union (EU), analysts said, at a time when relations between the two economies are near all time lows.
In a conversation on Wednesday, the two leaders made special mention of bilateral trade in areas such as agriculture, finance, aviation and commerce, as well as cooperation on climate change.
Wang Huiyao, founder and president of the Centre for China and Globalisation in Beijing, said the call “will help ease friction between China and the EU”.
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“I think it will be a huge signal of high-level consensus for both China and the EU … to further promote the entry into force of the China-EU bilateral investment agreement.”
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Last year, the European Parliament halted ratification of the investment deal for as long as Chinese sanctions on EU individuals and institutions remained in place.
Following EU action against four Chinese officials and one organisation in connection with alleged human rights abuses in Xinjiang, Beijing bit back with retaliatory sanctions.
The treaty was initially expected to be ratified in the first half of this year after Beijing and Brussels concluded negotiations in late 2020.
During Wednesday’s meeting, the state-backed Xinhua News Agency reported both countries agreed to support more French banks and financial infrastructure connect with China’s Cross-Border Inter-Bank Payments System, which Being is pushing as an alternative to the US-dominated SWIFT system.
Wang Yiwei, a professor of international relations at Renmin University of China, said the bilateral talks came at a delicate moment, as France has taken over the presidency of the EU amid escalating trade and geopolitical tension.
“The five [points of] consensus listed in their statement indicated China’s substantial support for French businesses and intention to improve bilateral ties,” he said.
“Particularly, China’s promise to open up the financial market will bring huge benefits to France.”
But Beijing needs to prevent the recent spat over Lithuania from escalating, especially when its tension with Washington remains, said Wang, adding it was “time to untie the knot”.
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China and France signed a memorandum on yuan settlement in 2014, with the state-owned Bank of China authorised to settle trade in the European nation. Meanwhile, it allocated 80 billion yuan (US$12.6 billion) of Renminbi Qualified Foreign Institutional Investor (RQFII) quota for French investors to enhance the country’s role as an offshore yuan centre.
Last month, the China Securities Regulatory Commission said it was reviewing the application of BNP Paribas to set up a wholly-owned securities venture in the mainland.
The French bank holds a 13.92 per cent stake in Bank of Nanjing, while it also has a 49 per cent stake in HFT Investment Management Company, a joint venture with leading Chinese brokerage Haitong Securities.
On Wednesday, Xi and Macron also discussed deepening cooperation in aviation to “promote mutual airworthiness certification for aircraft”, Xinhua reported.
The French readout of the call said the two countries will “redouble their efforts to support projects in the aeronautics, civil nuclear and space sectors” and the “gradual resumption” of flights to help business exchanges.
China is investing heavily to expand its capability in aerospace manufacturing, including producing its first narrow body passenger jet, the C919, in a bid to challenge the duopoly of America’s Boeing and France’s Airbus.
French company Safran and American multinational GE Aviation are partners producing the engine for the C919, which is yet to be certified by the Civil Aviation Administration of China.
Following the phone call, Chinese customs announced on Thursday it would immediately resume pork imports from two French companies after suspending them for almost half a year.
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Customs also approved two more French firms to export beef to China.
China’s imports of French goods grew 31.8 per cent year on year to US$39.1 billion in 2021, bigger than the 19.9 per cent increase booked by the EU as a whole, Chinese customs data shows.
Exports to France rose 24.3 per cent to US$45.9 billion last year, while overall shipments to the EU were up 32.6 per cent. The trade deficit with France narrowed by 6.4 per cent to US$6.8 billion.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2022. South China Morning Post Publishers Ltd. All rights reserved.
