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2008-11-28 | All chapters

Sino-French rift sparks business fears
Ben Hall in Paris and Geoff Dyer in Beijing, Financial Times, 28th November 2008

Business leaders expressed concern yesterday that French commercial interests could be harmed by fresh tensions between Beijing and Paris, but said there was no sign of immediate repercussions.

Laurence Parisot, head of Medef, the French employers' body, said she was "concerned" at the Chinese government's decision to call off an EU-China summit in protest at plans by President Nicolas Sarkozy to meet the Dalai Lama, the exiled Tibetan leader.

Ms Parisot expressed some irritation with Beijing. "I don't see why Nicolas Sarkozy shouldn't meet the Dalai Lama. I need explanation," she said.

The latest tensions come only months after protests in Paris against the Beijing Olympics triggered a nationalist backlash in China and a boycott of French products and businesses - especially Carrefour supermarkets.

Beijing defended its decision to cancel the summit, suggesting that French interests were at stake. "As France has major interests in China, and the French government and leaders have repeatedly said they are an important partner of China, why they should do this is precisely what the Chinese people do not understand," said Qin Gang, a foreign ministry spokesman.

One French company chairman who often visits China said he was worried that Beijing's riposte to Mr Sarkozy heralded a surge in government-sponsored nationalism at a time of slowing growth and rising social unrest, and that this could be targeted at France.

"My impression is that the Chinese need to distract the population from the real issues," he said.

The EU Chamber of Commerce in China said it hoped the latest spat "will not lead to the rise of economic nationalism in terms of antagonistic and protectionist actions".

There appeared to be no evidence yesterday of an immediate impact on business interests. There was no sign of a Chinese internet campaign against French brands as in the spring. Airbus denied reports that completion of a Chinese aircraft deal had been delayed indefinitely, saying it planned to assemble aircraft in China from next year.

Anne-Marie Idrac, the French trade minister, played down the possibility of retaliation against French business interests, many of which are involved in Chinese economic and infrastructure development.

"They are subjects [projects] that are very deep and very long-term, have been in preparation for a very long time and which stretch way into the future," Ms Idrac told the FT.

French diplomats suggested that it suited China to call off the summit because of differences with Europe on several subjects, including exchange rates, trade, intellectual property rights and climate change.

The cancellation of the summit will be a blow to EU diplomats and officials who hope that closer engagement with China will eventually yield results on these issues.

China's enormous trade surplus with the EU is creating political pressures inside the bloc to defend the EU against supposedly unfair Chinese trade practices. These pressures may translate next year into action such as "carbon tariffs" on Chinese goods - protectionist measures dressed up as sanctions on China for not applying the EU's rigorous environmental policies.

A European businessman in Beijing said the summit issue would probably blow over. But if a nationalist backlash against France follwoed, there would be a greater risk of increased protectionist rhetoric in Europe.

Source: http://www.ft.com/cms/s/0/8b1687c6-bcec-11dd-af5a-0000779fd18c.html