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China: for French companies, the end of El Dorado

The downturn in the Chinese economy? The business climate turning gray for French companies based there? Stanislas Bailly, the managing director of the consulting firm Sneci, established in China since 2011, could talk about it for hours. Yet the company he runs has never had so many customers. Only “small” difference: it is now less to help them clear the Chinese market than to help them escape! “We support them in order to find the best country to relocate to according to their needs”, explains the manager.

The bad wind coming from Beijing is in fact radically changing the situation for Western groups. Over the past twenty years, China has been an inexhaustible oasis of growth for small and large bosses, fueled by a market of more than a billion potential customers and a low-cost workforce. A daydream for CFOs. And too bad if, in passing, it was necessary to offload some of its industrial secrets, via the famous technology transfers. But the economic nationalism carried high by President Xi Jinping brutally brought them out of their thoughts.

The rise of economic nationalism

And, for many experts, it is precisely because Chinese groups have progressed at high speed thanks to this technological tithe that Beijing can now aim for self-sufficiency. To the dismay of the 1,100 tricolor companies that have invested heavily on the spot. “The Communist Party has turned the page on openness, and every day we feel the rise of economic nationalism a little more,” confirms Grégory Louvel, business lawyer and managing partner of the firm Leaf in Beijing.

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With big bursts of subsidies, the Party is pushing for the emergence in each sector of the economy of national champions: 10,000 “little giants” must thus hatch by 2025. And, to facilitate their flowering, the Chinese authorities don’t hesitate to pipe the dice. “Many Western companies have had to deal with very, very thorough environmental audits, while their local competitors only had facade audits,” complains a French boss present on the spot.

The flight of expatriates

Distorted competition and a sharp slowdown in the second world economy, linked to the very strict anti-Covid policy, which force foreign entrepreneurs to ask themselves the question of their future in the country. According to a survey conducted in early September by the French Chamber of Commerce in China among its members, 43% of companies no longer plan to increase their investments in the next three years (against 27% in May). What to rejoice Beijing? The reality is more complex. “The Party has a very subtle industrial policy: if certain foreign companies are put into fierce competition, others see the red carpet rolled out, because they can bring technological added value, or else because they have no local equivalent”, explains Jean-François Huchet, specialist in the Chinese economy and president of the National Institute of Oriental Languages ​​and Civilizations (Inalco). This is especially true in luxury. “I’ve been in China for seventeen years and I hear that a Chinese luxury brand is going to win, even LVMH has invested in local brands, but we still don’t see anything emerging”, points out Grégory Louvel.

On the expatriate side, things are much clearer. The American and European chambers of commerce in China anticipate that their communities of “expats”, already halved in two years, should continue to shrink by the end of the year. According to information from L’Express, at the French School in Shanghai, the number of students fell by 18% at the start of the school year, and around sixty teachers preferred to resign to return to France. The brutality of the confinements and the risk of seeing members of the same family separated in the event of a positive Covid test have led to an exodus which worries in high places. So much so that the city of Shanghai has hired several communication agencies to restore its image and staunch the haemorrhage. The famous Chinese paradox.


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