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France: Market Profile

 

Table: Major Economic Indicators
Table: Major Economic Indicators

 

Recent Developments

  • 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.
  • Upon the expiry of the textile safeguard quotas by the end of 2007, a joint system with China had been established to monitor EU imports of Chinese textiles and apparel, which was scheduled to operate for one year, covering 8 out of the 10 previously restricted categories. Starting 1 January 2009, textile and clothing products originating in China no longer require any import licence or surveillance document before entering the EU.
  • 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, candles, 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 slid by 11% to US$2.2 billion in the first half of 2015, while its imports from France fell by 4% to US$2.6 billion.
  • The total stock of French direct investment in Hong Kong amounted to US$7.4 billion (or HK$57.1 billion) as at the end of 2013.
  • The French economy has fared well in line with the sustained wage growth, business-friendly government measures and an accommodative monetary policy stance, although external trade has been dragged by the slow EU recovery. Taken together, the French economy is expected to grow by 1.1% in 2015, and by a further 1.5% in 2016.

Current Economic Situation

The French economy is regaining momentum after three years of economic standstill. Private consumption has accelerated, supported by buoyant household confidence and sustained wage growth. Falling oil prices, on-going policy measures to reduce labour costs, favourable credit conditions under an accommodative monetary policy stance, have also encouraged investment.

On the other hand, structural reforms continue only slowly, while government spending remains tight given the lingering fiscal austerity across the euro zone. Externally, the slow recovery in the EU has limited the contribution from exports. In all, the French economy is expected to grow by 1.1% in 2015, before moving on a faster track of a 1.5% expansion in 2016.

Trade Policy

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, has adopted the euro as their legal tender. 

Textiles and Clothing

Hong Kong’s textiles and clothing exports to the EU were previously subject to the World Trade Organisation (WTO) Agreement on Textiles and Clothing (ATC), under which quantitative restrictions on textiles and clothing were eliminated completely on 1 January 2005.

Likewise, the previous quotas imposed by the EU on textiles and clothing products originating from the Chinese mainland were removed on 1 January 2005. However, as a result of the EU-China agreement reached in June 2005, the EU imposed safeguard quotas on 10 categories of Chinese textile products for the period of 2005-2007. Upon the expiry of the textile safeguard quotas by the end of 2007, a joint system with China was established to monitor EU imports of Chinese textiles and apparel for one year, covering 8 out of the 10 previously restricted categories.

Starting 1 January 2009, textile and clothing products originating in China no longer require any import licence or surveillance document before entering the EU.

Non-textile Manufacturing Products

Previously, the EU also imposed Union-wide quotas on three categories of non-textile products originating from the Chinese mainland, including certain footwear, porcelain and ceramic tableware/kitchenware. But these quotas were liberalised on 1 January 2005.

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.

Anti-dumping Measures

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, candles, ceramic tiles, ceramic tableware and kitchenware, fasteners, ironing boards and solar glass, which are of interest to Hong Kong exporters. As at end-June 2015, the EU did not apply any AD measures on imports from Hong Kong.

Other Measures

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 [1]

Hong Kong’s total exports to France slid by 11% to US$2.2 billion in the first half of 2015, after decreasing by 4% to US$5.1 billion in 2014. Major export items in January-June 2015 included telecommunications equipment and parts (shared 19% of the total), semi-conductors, electronic valves/tubes (8%), articles of apparel, of textile fabrics (7%), jewellery (7%), pearls, precious & semi-precious stones (7%), electrical machinery & apparatus (5%), electrical apparatus for electrical circuits (3%), travel goods and handbags (3%), watches and clocks (3%), optical goods (3%), computers (3%) and toys, games & sporting goods (3%).

Meanwhile, Hong Kong’s total imports from France fell by 4% to US$2.6 billion in the first half of 2015, after shrinking by 11% to US$5.6 billion in 2014. Major import items in January-June 2015 included travel goods and handbags (shared 17% of the total), aircraft & associated equipment; spacecraft; & parts (15%), alcoholic beverages (9%), perfumery and cosmetics/toilet preparations (excluding soaps) (7%), jewellery (6%), pearls, precious & semi-precious stones (3%), footwear (3%) and works of art, collectors’ pieces and antiques (3%).

Table: Hong Kong Trade with France
Table: Hong Kong Trade with France


French Involvement in the Hong Kong Economy

France has a substantial investment in Hong Kong. The total stock of direct investment amounted to US$7.4 billion (or HK$57.1 billion) as at the end of 2013.

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 2014, there were 68 French companies with regional headquarters in Hong Kong, while another 110 had regional offices here. Reflecting France’s diverse activities, there were 2,970 French nationals resided in Hong Kong as at the end of 2014.


[1] 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.

Content provided by Picture: Louis Chan