France: Market Profile
07 April 2017
Major Economic Indicators
- As France is a member of the European Union (EU), its trade relations with Hong Kong/the Chinese mainland are affected by EU’s common external trade policy and measures. As a euro-zone member, it has also adopted the euro as its legal tender from 1 January 2002.
- The EU’s new scheme on generalised system of preferences (“GSP”) entered into effect on 1 January 2014. Under the new scheme, tariff preferences are removed for imports into the EU from countries where per-capita income has exceeded US$4,000 for four years in a row. As a result, the number of countries that enjoy preferential access to EU markets was reduced from 176 to less than 80. While the Chinese mainland remains a beneficiary, many of its exports such as toys, electrical equipment, footwear, textiles, wooden articles, and watches and clocks have already been “graduated” from the preferential treatment.
- A number of Chinese mainland-origin products are subject to EU’s anti-dumping duties, including bicycles, bicycle parts, ceramic tiles, ceramic tableware and kitchenware, fasteners, ironing boards and solar glass, which are of interest to Hong Kong exporters.
- Hong Kong’s total exports to France decreased by 1% to US$4.5 billion in 2016, while its imports from France rose by 8% to US$5.3 billion.
- As one of the most popular investment destinations, the inflows of foreign direct investment (FDI) to France amounted to US$42.9 billion in 2015, with China’s contributing US$328 million. As of the end of 2015, China’s total stock of FDI in France exceeded US$5.7 billion, up from US$45 million in 2006. Investment from Hong Kong, however, is far from significant.
- The French government is making unprecedented efforts in improving business competitiveness. For example, the Competitiveness and Employment Tax Credit (CICE) and the Responsibility and Solidarity Pact represent a €40 billion reduction in taxation and labour contributions by 2017. To establish the conditions for sustainable long-term growth, the French government also devises new priorities to prevent a rise in inequalities and to prepare for the future by better tackling environmental and demographic challenges. These reforms implemented by the government are thus wholly compatible with the targets set in the Europe 2020 strategy. More information on the investment environment and the relevant regulations can be found at Invest in France Agency (IFA).
- Alongside the Comprehensive Agreement for the Avoidance of Double Taxation (CDTA) effective since 1 December 2011, Hong Kong also signed an Investment Promotion and Protection Agreement (IPPA) with France in May 1997.
Current Economic Situation
The French economy has rebounded since the beginning of 2015. While low oil prices and tax cuts for low income earners has been favourable to private consumption, easing credit conditions as well as the recent supportive economic strategies such as the progressive reduction of the corporate income tax rate from 33.3% to 28% and the increase of the tax credit for employment and competitiveness (CICE) are conducive to private investment. Aided further by improving exports, the French economy is projected to have grown by another 1.3% growth in 2016. However, the heightened risk of terrorist attacks can compromise the growth prospects as it may caution local consumers and tourists in face of greater security concern. Taken together, the French economy is forecast to maintain similar pace of growth in 2017.
France is a member of the EU, and it follows EU’s common external trade policy and measures. As a euro-zone member, it has also adopted the euro as its legal tender from 1 January 2002. As it now stands, a total of 19 EU members, namely Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain, have adopted the euro as their legal tender.
No quotas are imposed on textiles and clothing exports, as well as non-textile products exports from Hong Kong and the Chinese mainland at present.
Scheme of Generalised Tariff Preferences
The EU’s new scheme on generalised system of preferences (“GSP”) entered into effect on 1 January 2014. Under the new scheme, tariff preferences are removed for imports into the EU from countries where per-capita income has exceeded US$4,000 for four years in a row. As a result, the number of the countries that enjoy preferential access to EU markets was reduced from 176 to less than 80. While the Chinese mainland remains a beneficiary, many of its exports such as toys, electrical equipment, footwear, textiles, wooden articles, and watches and clocks have already been “graduated” from the preferential treatment. Regarding Hong Kong, the territory has been fully excluded from the EU’s GSP scheme since 1 May 1998.
The EU has initiated anti-dumping (AD) proceedings against certain mainland-origin products. Currently, there are a number of Chinese mainland-origin products are subject to EU’s anti-dumping duties, including bicycles, bicycle parts, ceramic tiles, ceramic tableware and kitchenware, fasteners, ironing boards and solar glass, which are of interest to Hong Kong exporters. As at end-December 2016, the EU did not apply any AD measures on imports from Hong Kong.
To combat the spread of the Asian longhorn beetle, the EU introduced in July 1999 emergency controls on wooden packaging material originating in the Chinese mainland. Wood covered by the measures must be stripped of its bark and free of insect bore holes greater than 3mm across, or have been kiln-dried to below 20% moisture content.
For health reasons, the EU has adopted a Directive on the control of the use of nickel in objects intended to be in contact with the skin, such as watches and jewellery. Following the emergency ban adopted in December 1999, the EU has adopted a Directive to ban the use of some phthalates in certain PVC toys and childcare articles on a permanent basis, which came into effect from 16 January 2007. In addition, the EU has adopted a Directive to prohibit from September 2003 the trading of clothing, footwear and other textile and leather articles which contain azo-dyes, from which aromatic amines may be derived.
On the other hand, the EU has adopted a number of Directives for environmental protection, which may have an impact on the sales of a wide range of consumer goods and consumer electronics. Notable examples include the Directive on Waste Electrical and Electronic Equipment (WEEE) implemented in August 2005, and the Directive on Restriction of Hazardous Substances (RoHS) implemented in July 2006. On 3 December 2008, the European Commission (EC) presented two proposals: one for a recast RoHS Directive and the other for a recast WEEE Directive.
The recast RoHS Directive was published on 1 July 2011 and entered into force on 2 January 2013. The new Directive continues to prohibit EEE that contains the same six dangerous substances as the old RoHS Directive. Nonetheless, the new Directive will widen, as from 22 July 2019, the current scope of the previous RoHS Directive, by including any EEE that will have fallen out of the old RoHS Directive’s scope, with only limited exceptions.
Another important law for Hong Kong companies to grapple with concerns waste EEE, i.e., the WEEE Directive. With the formal approval on 7 June 2012, the recast WEEE Directive entered into force on 13 August 2012, while Member States have until 14 February 2014 to transpose the new directive into national law. In brief, the recast WEEE Directive will see Member States subject to higher collection/recycling targets (i.e. 45% collection rate as of 2016 and 65% as of 2019) and a wider scope of measure covering essentially all electric and electronic equipment, while establishing producer responsibility as a means of encouraging greener product designs.
On the heels of the recast RoHS and WEEE Directives, the EU’s new framework Directive for setting eco-design requirements for energy-related product (ErP) is now in place. The ErP Directive is no longer limited to only EEE (as it was under its predecessor, the energy-using product, or EuP, Directive), but potentially covers any product that is related to the use of energy, including shower heads and other bathroom fittings, as well as insulation and construction materials.
Moreover, REACH, an EU Regulation which stands for Registration, Evaluation, Authorisation and Restriction of Chemicals, entered into force in June 2007. Among others, it requires EU manufacturers and importers of chemical substances (whether on their own, in preparations or in certain articles) to gather comprehensive information on properties of their substances produced or imported in volumes of 1 tonne or more per year, and to register such substances prior to manufacturing in or import into the EU.
Following the entry into force of the new Toy Safety Directive (Directive 2009/48/EC) on 20 July 2011, the Official Journal of the EU published on 11 August 2011 references to two important safety standards concerning electric toys (EN 62115:2005 and its amendment EN 62115:2005/A2:2011) and two previous standards on the mechanical and physical properties of toys and a standard on the flammability of toys.
Hong Kong's Trade with France 
Hong Kong’s total exports to France decreased by 1% to US$4.5 billion in 2016, after sliding by 11% to US$4.5 billion in 2015. Major export items in 2016 included telecommunications equipment and parts (shared 27% of the total), semi-conductors, electronic valves/tubes (8%), jewellery (7%), pearls, precious & semi-precious stones (6%), articles of apparel, of textile fabrics (5%), electrical machinery & apparatus (4%), computers (3%), watches and clocks (3%), electrical apparatus for electrical circuits (3%), travel goods and handbags (3%) and toys, games & sporting goods (3%).
Meanwhile, Hong Kong’s total imports from France rose by 8% to US$5.3 billion in 2016, after shrinking by 12% to US$4.9 billion in 2015. Major import items in 2016 included aircraft & associated equipment; spacecraft & parts (shared 20% of the total), travel goods and handbags (16%), alcoholic beverages (9%), jewellery (8%), perfumery and cosmetics/toilet preparations (excluding soaps) (7%) and pearls, precious & semi-precious stones (4%).
French Involvement in the Hong Kong Economy
France has a substantial investment in Hong Kong. The total stock of direct investment amounted to US$8.4 billion (or HK$65.1 billion) as at the end of 2015.
Over 600 French companies are operating in Hong Kong, including BNP Paribas, Credit Lyonnais, Credit Agricole and AXA (banking and finance), LVMH Asia Pacific Ltd and Parfums Christian Dior Far East (trading/distribution), Renault (automobile), Air France (transport), Agence France-Presse, Maya Press, COTE Magazine (media), BSO Network Solutions and TheTMSway (information and communications technology), Maltem, Freelog, Digitalin and BuyMeDesign (business planning and consultancy), Gameloft (video game publisher), Caudalie, L'Occitane and DESSANGE Paris (beauty care), Paul Lafayet (French pastry and desserts), Christofle (silverware), Qeelin (jewellery), The Chinese Timekeeper (timepieces), Bacchus & Century, Baron Edmond de Rothschild Group and Pont des Arts (wine).
As of June 2016, there were 73 French companies with regional headquarters in Hong Kong, while another 109 had regional offices here. Reflecting France’s diverse activities, there were 2,600 French nationals resided in Hong Kong as at the end of 2016.
 Since offshore trade has not been captured by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.
- Western Europe