"Chinese enterprises are still at a trial stage in their foreign ventures. They are still learning, sometimes the hard way, and cross-border acquisitions remain daunting to many Chinese companies," Francoise Nicolas, a senior researcher at the French Institute of International Relations, wrote in a report.

"Most executives have little experience of mergers and acquisitions. They also lack experience in assessing the potential costs and benefits of cross-border acquisitions and to manage business cross cultures," she says.

Future prospects

Language, the complexity of French bureaucracy and immigration policies as well as the rigidity of labor regulations are often cited as the main challenges for Chinese companies wishing to invest in France.

Low growth prospects for the French economy and the overall worsening economic condition in the eurozone are also posing risks for Chinese investors, analysts say.

In Ernst & Young's 2012 European attractiveness survey, France was ranked the fifth most attractive country in Europe, even behind Poland, by investors from emerging economies.

"France's high public debt, reluctance to slash public spending and lack of small businesses, especially compared with Germany, will be formidable challenges for the next five years if the country wants to remain a global competitor for foreign inward investment," the report said.

Yves Zlotowski, chief economist of French credit insurance group COFACE SA, says that although France remains an attractive investment destination, the risks in its corporate sector are increasing.

"French corporates are especially vulnerable in sectors like services and agro-food sectors as they are heavily oriented toward the languishing domestic and European markets," he says.

But unlike Italy and Spain, France will maintain the strong level of attraction for foreign investment because of its economic and political stability and its transparent business environment, Zlotowski says.

"Although there is fragility in the corporate sector, France still has the advantages of being the center of Europe and a very predictable economic performance," he says.

Analysts say the current volume of Chinese direct investment in France is far below potential and there is scope for further expansion in sectors such as urbanization and renewable energy.

"There is great potential in sectors like urbanization, alternative energy, sustainable development and environmental conservation, for which China has and will have a lot demand," says Wu Xilin, commercial counselor of the Chinese embassy in Paris.

Chinese companies should continue to increase direct investment in France, taking advantage of the stronger yuan and the wider use of the currency in the world, Wu says.

Sun from the Grandall Law Firm says: "Future Chinese investment in France will be more technology and capital intensive. Now we are seeing an increasing number of business activities in French real estate, cosmetics and pharmaceutical sector, as well as the financial sector.

"Private companies, instead of state-owned companies, are also becoming the main driver of future Chinese investment in France."

lixiang@chinadaily.com.cn