VZCZCXYZ0041
RR RUEHWEB

DE RUEHFR #7201/01 3071345
ZNR UUUUU ZZH
R 031345Z NOV 06
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 2826
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RUCNMEM/EU MEMBER STATES
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RUEHBJ/AMEMBASSY BEIJING 1353
RUEHBS/USEU BRUSSELS 1797

UNCLAS PARIS 007201 
 
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DOE FOR ROBERT PRICE PI-32 AND KP LAU NE-80 
 
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TAGS: ENRG EPET EIND EINV ELAB PREL PGOV FR CH
SUBJECT: PRESIDENT CHIRAC'S VISIT TO CHINA-STRENGTHENING THE 
FRANCO-CHINESE ECONOMIC AND POLITICAL RELATIONSHIPS 
 
REF: PARIS 1697 
 
NOT FOR INTERNET DISTRIBUTION 
 
Summary 
------- 
¶1. (SBU) French President Jacques Chirac's most recent four-day 
visit to China on October 25th through the 28th was notable due to 
the signing of trade deals worth approximately 5 billion euro and 
for his personal efforts to improve Franco-Chinese political ties. 
 
 
¶2.  (U) "Never have we been so confident in our relationship, both 
in the political arena as well as in the economic arena," was how 
Chirac summed up Franco-Chinese relations in a briefing to 
journalists on October 28 in the central city of Wuhan.  Chirac, in 
remarks made to the 30 CEOs of French industrial groups traveling 
with him, also reportedly noted China's poor human rights record. 
Thirteen economic and technical cooperation agreements were signed 
between the two countries during this visit, in areas as diverse as 
nuclear power, agriculture and preventing infectious diseases, and 
aviation and rail transport.  President Chirac also used his visit 
to engage with President Hu Jintao on issues of shared security 
concerns and to urge China to assume the responsibilities that come 
with its increasing role as a global power.  End Summary. 
 
More Trade Deals... 
------------------ 
¶3. (U) Headlining the new contracts was China's multi-billion-dollar 
order of 150 Airbus A320 aircraft, along with an option to buy 20 of 
the European aerospace giant's new wide-body A350 planes.  While no 
figures were released about the value of the contract, Airbus 
officials said the average list price for one A320 was between 50.5 
million and 78 million dollars.  China placed an earlier order in 
December 2005, when Chinese Premier Wen Jiabao visited France, for 
150 Airbus planes with a list price of nearly 10 billion dollars. 
As part of the deal, Airbus gave a final green light to the building 
of an A320 assembly plant in the northern Chinese port city of 
Tianjin -- the first of its kind outside Europe.  The new plant will 
complete its first aircraft in 2009 and will subsequently 
manufacture four per month, the aircraft maker said. 
 
¶4.  (U)   In Wuhan, Chirac laid the foundation stone for a new 
Peugeot-Citroen factory, while urging French industry chiefs to 
further expand their "strategic alliance" with China.  The new 
Peugeot-Citroen factory, a 50-50 joint venture with China's 
Dongfeng, is expected to begin production in 2009 and will tap into 
China's voracious appetite for new cars with an eventual annual 
production capacity of 150,000 vehicles. 
 
¶5.  (U)   The two countries also signed a 1.5-billion-euro contract 
involving Alstom SA helping to build 500 Chinese freight 
locomotives.  The French group will only claim 340 million euro, 
however, while the Chinese partner, Datong Electric, will keep the 
rest.  A second contract was signed in which Alstom SA will provide 
hydroelectric equipment to China. 
 
¶6.  (U)   Chirac also pressed the French bid for the multi-billion 
dollar four nuclear reactor sale to China.  However, in commentary, 
Chirac noted that it was "a difficult case" for Franco-German 
nuclear reactor supplier Areva/Siemens.  (Comment: China launched 
the bidding for the third-generation reactors in September 2004 with 
France's Areva, Westinghouse and Russia's AtomStroyExport seen as 
the front runners.  A  Chinese official said in June 2006 that no 
decision on the bid had been made.   Commenting on the French 
proposal, Chirac noted the "political dimension" of the bid.  The 
bid was originally thought to be valued at about eight billion 
dollars for the four reactors, but China may be trying to lower the 
costs by buying the reactor designs and building the plants itself, 
according to French media.  However, Chirac underscored that Areva 
was building a version of its third generation reactor (the European 
Pressurized Reactor) in Finland, while Westinghouse's proposed model 
existed only on paper.  France's nuclear industry has long been 
engaged in supplying reactors to China with four of the country's 
currently operating 11 nuclear reactors French-made.  End Comment) 
 
¶7. (SBU) GOF officials tell us one sour note occurred during a 
session of the Intergovernmental Commission on Trade on the eve of 
Chirac's arrival.  Trade Minister Christine Lagarde apparently was 
treated to a long harangue on French protectionism by her Chinese 
counterpart, prompted in part by the EU's recent decision to impose 
 
tariffs on footwear. 
 
A few political issues 
 
----------------------- 
¶8. (U) Chirac's primary political priority in China was to discuss 
the North Korean nuclear tests and insure that China would continue 
to take a firmer stand toward North Korea than it has in the past. 
In a press conference following conversations with Hu Jintao, Chirac 
announced that he "had not observed today any divergence of view 
between the Chinese authorities and the international community" on 
the question of sanctions.  According to press reports, the Chinese 
in private meetings expressed their frustration with North Korea's 
stubborn attitude and their lack of receptivity toward the Chinese 
presidential envoy that went to Pyongyang on October 9, the day 
after the nuclear tests.  The Chinese told Chirac that the North 
Koreans wanted direct talks with the US, according to press 
reports. 
 
¶9. (U) Chirac further hoped that encouraging China to demonstrate 
its strong stance toward North Korea would set an example for Iran 
of unanimous opposition to nuclear testing.  Chirac argued in 
meetings with Chinese leaders that Tehran closely watches the 
Security Council's response to North Korea, and could be positively 
influenced by China's support for sanctions.  Chirac also took 
advantage of a press conference in Wuhan on October 27 to speak out 
publicly in support of "reversible" sanctions against Iran. 
Although he conceded that he himself has never been a great advocate 
of sanctions, he said that "the international community, and notably 
China, but also Russia, the Europeans, and the U.S., recognize that 
Iran's ambitions are not compatible with our idea of 
non-proliferation." 
 
¶10. (U) On the question of human rights, Chirac offered a muted 
reproach, but reserved his strongest criticism for private 
discussions.  He noted that with the 2008 Summer Olympics in 
Beijing, China will find itself "at the heart of international 
observation" and should "bend to reality, notably in regard to human 
rights."  He later added that France and China agreed to move 
forward with discussions on human rights.  On September 30, Chinese 
border police were caught on tape while opening fire on a group of 
Tibetans trying to cross the border into Nepal, killing a Buddhist 
nun, and eliciting an international outcry against China's 
administration of Tibet and its human rights policy. 
 
¶11. (U) Finally, Chirac reiterated his opposition Q the European 
Union's arms embargo on China.  In a joint statement issued October 
26, Chirac and Hu Jintao announced that "the time has come for the 
European Union to embrace the consequences of the developing 
partnership between the EU and China, notably by lifting the arms 
embargo, which is no longer pertinent." 
 
COMMENT 
------- 
¶12. (SBU) As expected, Chirac did not take a hard line on any 
particularly sensitive issues during his visit because his primary 
goal was to court Chinese business and secure contracts for French 
companies.  On the economic front, the contracts between the French 
and Chinese should help alleviate France's 15 billion euro deficit 
with China.  This is just under half of France's overall trade 
deficit.  France is pushing for its share of the Chinese market to 
increase from its current 1.4 percent to 2 percent, which is about 
half of Germany's market share.  Also, French exports to China, 
which measured 5.7 billion euros last year, grew by 27.5% in the 
first half of 2006 supporting an upward trend in French/Chinese 
trade relations. 
 
Stapleton