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Car, plane deals to get Franco-Chinese presidential treatment

China's President Xi Jinping (L) and his wife Peng Liyuan wave as they arrive at the Lyon-Saint-Exupery airport in Colombier-Saugnieu, near
China's President Xi Jinping (L) and his wife Peng Liyuan wave as they arrive at the Lyon-Saint-Exupery airport in Colombier-Saugnieu, near

By Andrew Callus

PARIS (Reuters) - China's President Xi Jinping and French counterpart Francois Hollande are set to oversee the signing of two industrial co-operation deals in Paris on Wednesday, the business highlights of a meeting that carries a strong investment theme.

Chinese carmaker Dongfeng is set to deepen ties with PSA Peugeot Citroen, buying a 14 percent stake as part of a recapitalization deal for the struggling French carmaker.

Peugeot and Dongfeng plan to extend an existing joint venture and Chinese production to enter new Southeast Asian markets and to jointly develop new vehicles and technologies.

At the same ceremony Airbus is set to agree the sale to China of at least 150 aircraft worth $20 billion, and possibly as many as 200, in a deal that could include both planes and helicopters. Progress in talks on opening a second Airbus factory on Chinese soil may also be announced.

However, aircraft deals signed in the presence of heads of state in the past have sometimes included orders that are already known about. There might not be any significant new details on the auto industry tie-up either.

But for Hollande's government, bruised by last week's losses in a first round of municipal elections which many blame on its failure to tackle record unemployment, there are hopes the deals will lead to more tie-ups and harness France's patchy economic recovery more tightly to the growth-leveraging potential of the world's second largest economy.

France trails far behind neighboring Germany - also on Xi's European itinerary - on the trade front with China, accounting for just 1.2 percent of Chinese imports compared with 4.8 percent in Germany's case.

Foreign direct investment (FDI) in both directions between France and China is modest, but France is in deficit there too at the moment.

French FDI in China totaled 16.7 billion euros ($23 billion) at the end of 2012 - just 1.83 percent of China's total FDI but still dwarfing the 4.2 billion euros of Chinese investment in France, which is just 0.9 percent of its FDI total, according to Bank of France figures.

Dongfeng's Peugeot stake purchase alone, at 800 million euros, is equivalent to a fifth of that FDI stock.

"These investments are welcome in France and we are here to facilitate them," said French Foreign Minister Laurent Fabius at a reception for Xi in the southeastern city of Lyon on Tuesday evening.

Nuclear co-operation may also be on the agenda at the multiple deal-signing ceremony after agreements last year including a letter of intent for French firms to build a used fuel treatment and recycling facility in China.

Officials are also considering whether to build more reactors at China General Nuclear's (CGN) Taishan site in the south of the country, where French utility EDF is its partner, building reactors designed by French group Areva.

Xi's visit marks 50 years of diplomatic relations between the two countries. Recognition of the People's Republic of China by France in 1964 in the face of anti-Communist hostility elsewhere in the west forms part of France's claim to a special relationship.

(Additional reporting by Marine Debliquis; Editing by Greg Mahlich)

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