(Yicai Global) June 22 -- French Prime Minister Edouard Philippe arrives in China today for his first official visit since taking office. In an exclusive interview with Yicai Global before his departure, he talked about his expectations for the three-day trip with regards to bilateral relations, trade and investment between the two countries.

Philippe pointed out that while inheriting traditional fields of cooperation between China and France such as aviation and nuclear energy, the two countries should also develop a new cooperative partnership, with environment and innovation representing two potential bright spots for future collaboration.

"One-quarter of the companies accompanying me will be start-ups, and 50 percent of the business deals to be signed during my visits will be green' or innovative," he told Yicai Global. Philippe also arrives in Beijing with Belt and Road cooperation high on his list of priorities. Regarding a series of EU bills aimed at strengthening investment reviews, he said what the EU wants to do is to provide more predictability for investors, which is not discriminatory in any way and is not specific to any particular country or region.

As for current global trade conflicts and Trump's 'America First' policy, Philippe said he hopes that all kinds of disputes between China, the US, and the EU could be resolved within the framework of the World Trade Organization.

"As the world's largest trading body, the EU has its own interests to defend. It will work with all countries wishing to avoid trade wars, reform multilateral institutions and seek solutions to the structural causes of the rise of protectionism," said Philippe, adding that France, like the EU, is closely following developments between China and the US.

China and France Look to New Cooperation in Innovation and Environment

Yicai Global: What are the expectations of your first official visit to China as Prime Minister of France?

Philippe: French President Emmanuel Macron's state visit in January was a powerful boost, which set strategic priorities for French-Chinese relations over the next five years. My visit is aimed at the preliminary implementation of the decisions taken during the President's visit in the areas of aviation, food processing and nuclear energy. Besides, I hope to start the 21st-century strategic partnership between France and China in the areas of innovation and environment particularly. Regular high-level political meetings that France maintains with China, relative to its partnership with other countries, are essential to promoting relations between the two countries, ensuring the realization of common aspirations and coordinating responses to major global challenges. Regularity, loyalty, predictability, and personal relationships are all important. That is why Macron announced that he will visit China every year, and that is also the purpose of my visit six months after the President's visit.

I will first visit Shenzhen, a symbol of Chinese innovation, where I will meet with several French start-ups owned by French techs, as well as some Chinese start-ups. Then I will visit Shanghai, mainly to Yangshan Port, which is a window to show modern China and is also the largest port in the world. Yangshan has maintained active cooperation with the French ports of Marseille and Le Havre, and my visit also highlights the importance our two countries attach to the environment in the context of future cities and marine economies. Next, in Beijing, I will have a meeting with Chinese Premier Li Keqiang to continue the dialogue initiated by Macron on our bilateral cooperation in the past and in the future, and to communicate on some major international issues that we believe need more in-depth discussions.

Yicai Global: Since 1964, the relationship between China and France has ushered in a new era of a 'comprehensively strategic partnership'. How should China and France strengthen this relationship?

Philippe: Chinese people clearly remember that in 1964, France and its president at the time, Charles de Gaulle, was the first Western power to acknowledge New China, marking a different China-France relationship from others. Since then, this relationship has continuously developed and expanded to new fields.

In January 2018, French President Macron's state visit boosted the new development of this bilateral relationship, during which he emphasized a more balanced relationship and mutual openness of markets in the two countries while both parties jointly confirmed ambitious plans.

Economically, our traditional cooperative fields reflect our predecessors' far-sightedness and their efforts are yielding good results. For example, in the civil nuclear industry, the world's first European Pressurized Reactor nuclear power unit entered operation in Taishan a few weeks ago; in the aerospace industry, Airbus has set up an assembly line in Tianjin while keeping close relations with several Chinese airline companies. As the French food processing industry is leading its rivals worldwide, if we can say so, we are looking forward to furthering openness in the Chinese market to meet the continuously increasing demand for high-quality and diversified products such as beef.

While maintaining and deepening the cooperation in the 20th century, we must develop a partnership in the 21st century. Our collaboration includes the environmental protection industry – we will kick off the France-China Year of the Environment this summer. Internationally, China and France are joining hands in relevant negotiations for the Global Pact for the Environment and the implementation of the important Paris Agreement. The relationship in the 21st century also reflects the cooperative agreements signed between the two governments such as the marine observation Chinese-French Oceanic Satellite, which is planned for launch this year; or the cooperative agreement signed between standout Chinese and French companies.

Innovation and digitization industry is the pillar of second strategic partnership expected to be signed by the two countries' leaders. In the artificial intelligence and innovation industries, we find new value chains and industrial processes as well as new modes of production set up through start-up enterprises. Cooperation between France and China should also be committed to pushing forward work in the above fields.

I pay great attention to it. One-quarter of enterprises accompanying us will be start-ups. And 50 percent of commercial deals which will be signed during my visit will include the connotation of 'green' and 'innovation.'

Belt and Road Initiative Cooperation

Yicai Global: Macron said that France welcomed the Belt and Road Initiative during his visit to China. China and France will discuss the specific cooperative projects in line with mutually beneficial principles. Since then, what progress have the two countries made?

Philippe: Just like Macron emphasized during his visit, France believes that China's Belt and Road Initiative can bring development opportunities to Asia since there are 'insufficiencies' in infrastructure in the region. France has also participated in several relevant projects: in the EU, we have set up an EU-China platform to jointly carry out infrastructure projects while formulating the overall strategy of interconnection and intercommunications between the bloc and Asia; in the aspect of multilateral relationships, France holds shares in multilateral developmental banks which are actively promoting the global interconnection and intercommunication.

We would like to vigorously develop our collaboration but we need three reasonable conditions. Firstly and obviously, parties must comply with the requirement of fair competition. Relevant open tendering must be transparent to a full extent and French companies must have the possibility to bid and even win bids. Secondly, we attach great importance to the confirmed projects being sustainability to the public finance of the country that we help. In recent years, we have successfully helped many countries to reduce their excessive debt. Therefore, the initiative should not be stopped at the positive development trend. Thirdly, as we are expanding cooperation in environment and innovation as a partner for the 21st century, France and China must propose high-quality infrastructure projects which are in accordance with the best social and environmental standards and technology standards of interoperability.

The Chinese leader also agrees with this idea. I will bring a very specific project list to Beijing. We confirmed these projects after consulting all related French institutions and these are projects that we are capable of carrying out.

Yicai Global: What does France think of the 'expansion of domestic demand' policies in China?

Philippe: The development of China's domestic market indicates that plenty of regions in China have reached an advanced development level, which makes for a rebalance of international trade. Thanks to China's ambitious plans for sustainable energy production, this situation will also contribute to environmental protection. This is also an opportunity for foreign companies, which can meet the new demands of Chinese consumers through their technologies; and we have already seen this in the field of sustainable development. For instance, China and France actively devote themselves to the construction of ecological regions in Chengdu and Caidian District in Wuhan.

Representatives from many companies such as Veolia, Suez, and Schneider that have been intensively developing in China for years, as well as a large number of French companies focused on the environmental field, will accompany on my visit to China. I hope these companies can have the opportunity to introduce their business. In terms of decarbonized energy, as I mentioned, the two countries share a time-honored partnership in the field of civilian nuclear energy. Through French companies including Electricite De France, Engie as well as various small and medium-sized companies, and startups, which are inventing solutions for the future every day, this cooperation has expanded into the sustainable energy field.

In food processing, people told me that French cuisine has a widespread reputation in China, thanks to the high-quality production of French agriculture, animal husbandry and food processing industry. In order to benefit Chinese consumers, the country can import beef and poultry products from France. In addition, French dairy companies hope to get approved export approvals to China. These are specific cases that can play a role in China's expansion of domestic demand via the two countries' cooperation.

France Keeps a Close Eye on China-US Relations

Yicai Global: Chinese investors are keen to invest in Europe. However, many of them are confused about the bill passed by the European Parliament to strengthen investment reviews: on the one hand, most EU countries welcome investment from China; on the other hand, this new investment review system is considered to be directed against China's investment in Europe. What's your opinion on this? Should they be worried?

Philippe: First of all, the EU, especially its member France, welcomes foreign investment much more than many other regions in the world. In France, foreign direct investment has grown rapidly. According to statistics of Ernst & Young, France's FDI climbed by 31% in 2017. France is also generally acknowledged to be the EU country with the fastest growth in foreign investment attraction over the next three years. This trend can be reflected in IBM's recent statement that it will provide 1800 new job vacancies in France over the next two years, 400 of which are in the field of AI. Toyota and Visa also announced that they will set up facilities in France. This January, 140 company presidents gathered at the Palace of Versailles to discuss their projects in France with members of the French Cabinet. These are the fruits of our preliminary economic reforms, especially those related to taxation and labor laws. Believe me, we have continued and deepened the reform since then.

In 2017, China's investment in France increased by 17%, and some 600 Chinese companies employed a total of 31,000 workers in France. We encourage this momentum, and the ambitious agreement on bilateral investment between China and the EU will undoubtedly be a catalyst. Personally, during my visits to China, I will meet with Chinese investors wherever I go, discuss their projects, explain to them our reform, and tell them why they should choose France.

Secondly, in the EU, there are certain restrictions on foreign investment in areas involving national security and sovereignty and public order for China and many other countries, and it is explicitly stipulated that foreign investment in such areas requires prior approval. What the EU is doing is establishing a framework as harmonious as possible among its member countries to provide more predictability for investors. This solution is not discriminatory and does not specifically target a particular country or region. This does not affect at all France's overall commitment to encouraging foreign investments that create growth and employment opportunities. Besides, we will, as always, attach high importance to making public the situation in advance and as clearly as possible. We hope to instill predictability in through the China-France relationship, which we need more than ever today.

Yicai Global: How do you view the "America First" policy of the US government and its impact on EU countries' steel and aluminum tariffs and future China-France/EU partnerships?

Philippe: As a member of the EU, France advocates free and fair trade. France rejects unilateralism because it cannot solve any problem. We certainly hope that various disputes that currently exist among China, the US, and the EU can be resolved within the WTO framework. As the world's largest trading entity, the EU will endeavor to safeguard the interests that it needs to defend. The EU will work together with all countries that wish to avoid trade wars, reform multilateral organizations and seek solutions to the structural causes of the rise of protectionism.

After Macron's visit to China in January and German Chancellor Merkel's visit to China last month, my visit to China and the simultaneous visit of Mr. Katainen, Vice-Chairman of the European Commission, it will be a good opportunity to resolve these issues. Like China's largest trading partner -- the EU, France will continue to pay close attention to the bilateral discussions between China and the US, and is concerned about whether the outcome of these discussions will be at the expense of the EU's interests, and whether these discussions will lead to differential treatment of US companies and EU companies in the Chinese market. Otherwise, it will encourage others to use trade protectionism to make threats in trade agreement negotiations.

France's Reform Drives National Transformation

Yicai Global: Which of the French government's reforms can promote sustained growth of France's economy?

Philippe: As I have said, it is not so much a reform but a national transformation. In order to cope with the changes brought about by the 21st century, we must restore and prepare France. Therefore, the French government has taken strong measures. The new labor law passed last September was the first signal. France has also drawn up a large-scale investment plan, taking EUR57 billion to rise to important challenges in the future, such as ecological transformation, training, and innovation. In terms of taxation, France has passed a five-year plan that provides economic participants with all necessary visibility and plans to reduce the corporate tax rate from the current 33% to 25% within five years. The Plan d'action pour la croissance et la transformation des enterprises bill will soon be submitted to the National Assembly for discussion, which includes a large number of reforms to facilitate business activities in France.

The French government has also passed an ambitious public finance plan as history has proven that a lasting and powerful economy is always based on sound public finances. The plan sets out to reduce public spending by 3 percentage points and public debt by 5 percentage points of the gross domestic product by 2022, and reduce mandatory taxes. Meanwhile, ambitious and necessary railway model reform has just been passed. We hope to transform and rejuvenate our country and invest in the future.

Yicai Global: China has repeatedly reiterated its determination to maintain the reform and opening up policies. What do you really expect in this regard?

Philippe: This year China celebrates the 40th anniversary of reform and opening-up. Both China and France as well as Chinese and French enterprises have strong expectations for China. News released by China's top leaders on the continued opening of foreign investment and the strengthening of intellectual property protection is a positive signal to be confirmed in the coming months and years. However, there is still room for improvement. For example, foreign banks in China occupy a market share of only 1.3%. Foreign companies expect the broadening of market access to foster an investment environment of fair competition. The China International Import Expo to be held in Shanghai this fall will be a new milestone on this issue.

Editor: William Clegg