France, investment gateway to Europe

France's geographic advantage and historic links with African countries also boosts its attractiveness to Chinese investors, as gaining a foothold in France could mean gaining access to a broader market in Europe and North Africa, analysts say.

"A major part of our business in France is to provide corporate clients services that facilitate their trade and investment in the African markets," says Sun Tao, a lawyer at the Paris office of Grandall Law Firm, a Chinese legal entity.

Sun says that many Chinese companies consider France as a gateway to gain market and resources in Africa, and such advantage is likely to spur more Chinese investment in France.

Industries like nuclear and aviation, in which France plays a leading role, along with others like real estate, consumer goods and the financial sector, are all emerging as new targets for inflow of Chinese capital.

"This is being driven by the increasing demand for high-quality goods and the lifestyle of China's rising affluent middle class," says Xu Qinghua, head of China business services at accounting firm Ernst & Young in France.

Economic difficulties and a domestic tax hike on the wealthy enacted by the French Socialist government have prompted many French companies and individuals to sell off their underperforming or non-core assets, which has provided Chinese companies the opportunity to enter the French market.

"The crisis in Europe offers Chinese companies the opportunity to acquire some good-quality assets at an attractive price, which is something that Chinese investors would not have even thought about in the past," Sun says.

Several wine chateaus and vineyards in France's renowned wine regions such as Bordeaux and Burgundy have also been acquired by Chinese investors.

Learning curve

Though some of the deals in France have been unsuccessful, it has been a great learning opportunity for Chinese investors.

In 2004, China's leading TV set manufacturer TCL Corporation acquired the TV business of French electronics firm Thomson for 230 million euros and the two companies set up a joint venture in France.

The motivation of TCL's acquisition was to gain the research and development capabilities of Thomson to increase its market share in high-end markets such as Europe.

The senior management team of TCL believed that the acquisition of Thomson's TV business would help TCL strengthen its competitiveness globally and allow it to become a leading player in multimedia electronics in the global market.

However, the deal turned out to be a failure, leaving TCL with losses of more than 2 billion yuan ($321 million; 252 million euros) by the end of 2006. In 2007, the joint venture filed for bankruptcy.

Europe's high operational and labor costs and the rising competition in the industry are often the reasons cited by analysts for the failure of the deal.

In addition, TCL also failed to adjust to the new trends in the TV industry and was far behind others in offering flat-panel TVs, which later became the fastest-growing business for TV makers.