From a Rabbit’s Head to France’s Debt Crisis: Is Trade With China the Solution?


When Francois Hollande, President of France, recently visited Beijing, the French multinational fashion retailer, Kering (which owns such luxury brands as Gucci and Christie’s), returned a bronze rabbit’s head and a bronze rat’s head, two of twelve bronze Chinese zodiac statues which had been looted by the British and French armies from China’s Old Summer Palace back in 1860.



The divergence between France and Germany both in ideas and in policy practice has grown. The French want Germany to loosen tight restraints on both wages and investment spending; the Germans see that as irresponsible and shortsighted, and say the French — and other Europeans — need to become more competitive.

Peter Gumbel

Join me for a time travel back to a few months before.

Common sense tells us that the solution to bringing down a country’s deficit is either getting more money, or spending less. France’s economy is a mess; high unemployment rate, high tax rate, low consumption and investment level. The French government had even proposed a 75 percent income tax on the rich, but was later rationally ruled as unconstitutional by the court in December 2012. Hollande, in late February this year, claimed that the government would not introduce any further authority measures but instead focus on the spending cuts next year, with an attempt to bring down the deficit from current 4.8 percent to, as suggested by the regulation of the European Union, 3% of the GDP (gross domestic product).

The Economic and Monetary Union of the European Union agreed, in early May, to allow France and Spain to postpone their budget deficit reduction plans to 2015. Germany, seemingly the only country still booming even after the euro debt crisis, has insisted that EU’s countries should maintain their deficit reduction plans. The French government seems to possess a different stance. Pierre Moscovici, Financial Minister of France, said, in early May this year, that it is time to abandon the contractionary policy and instead to adopt an expansionary policy.

His speech to a very large extent revealed the conflict and divergence between France and Germany on the problem of how to tackle the euro debt crisis as well a implying that that France would like to grow its independence and be less influenced by Germany.

Hollande is the first leader of a world-leading country who visited China after the leadership transition which happened earlier this year; Hollande never hid his thirst for China’s money. He explicitly requested of China to purchase funds from European French and Chinese flagsFinancial Stability Facility and encouraged more entrepreneurs to start their business in France. China, in return, purchased sixty airbus jets, worth $8 billion. The time sequence of the events suggested that Hollande’s visit and the return of the rabbit’s and the rat’s head were not sheer coincidence.

Kering’s return of the statues was seen by critics as a political measure sticking closely to Hollande’s public relations policy. The return of the statues was regarded as a friendly and decent deal by the Chinese people and France realised China’s genuine passion in reclaiming its antique.

Nevertheless, the effectiveness remains doubtful. Balance of trade between France and China still remains at the level of $10 billion, and France explicitly said that they would like to improve this balance of trade in the next few years. China still strike to maintain the exchange rate of renmimbi (RMB, China’s official currency) at a relatively low level, regardless of the US’s constant protest.


The USA, France, Japan, to name but a few, are still in need of help from the new global financial leader. Are two animal’s head statues persuasive enough? I genuinely doubt that. Some predict that the next two countries on the battlefield are China and Germany. Let us wait and see.


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