French Trade-Off May Give China Military Boost
French president Nicolas Sarkozy and Chinese counterpart Hu Jintao will be working on a major trade-off that sources say might see France make significant security concessions to Beijing and elevate its status as a responsible military power.

On the cards are business deals worth $10 billion that China is expected to offer the new French president. In return, the Chinese leadership will persuade Sarkozy to apply greater pressure on the European Union (EU) to lift its arms embargo on China.

Sarkozy arrived on Sunday in the north-western city of Xian on a three-day tour of China. He started off by asking Beijing to revise the value of the yuan, claiming that the undervalued currency gives the Chinese industry an unfair advantage.

The embargo, imposed on China in 1989 after its troops crushed the pro-democracy student protests that centered on Beijing's Tiananmen Square, is a constant reminder of China's poor human rights record. Beijing desperately wants to wash off the taint imposed by the embargo because it would elevate China to a higher level of respectability and enhance its influence on world issues like the Indo-US nuclear deal.

"We must make progress in our dialogue on currency questions," Sarkozy said. "I hope for fair and harmonious relations among the major currencies - the euro, dollar, yuan and yen. This is a necessary condition for balanced international relations," he added.

Several French companies including Areva, EDF, Alcatel-Lucent, Alstom and Airbus are expected to bag Chinese deals exceeding $10 billion during the visit by the French president, sources said.

In turn, Sarkozy is expected to reassure Chinese leaders that France would do whatever is necessary to lift the arms embargo.

China is far more comfortable with France than it is with many countries in the western world. For instance, France recently became one of only three countries in the west to sign a treaty to extradite corrupt Chinese bankers and officials hiding in those countries to escape punishment at home.