France probes China link in Renault spy scandal

French intelligence services are investigating a possible Chinese connection in an industrial espionage scandal at carmaker Renault, a government source said on Friday.

Industry minister Eric Besson, who spoke earlier this week of a case that smacked of "economic warfare", said no official inquiry had been opened and this would happen only if the carmaker lodged a formal complaint.

Three Renault executives, including one member of its management committee, were suspended on Monday in the case, which has prompted the French government to warn of a widespread risk to French industry.

The executives are suspected of leaking information related to the high-profile electric vehicle programme, a key plank of the carmaker's strategy in which, together with its Japanese partner Nissan, it is investing billions of euros.

Renault, which declined to comment, is 15% owned by the French state. None of the executives has a high profile among investors or in the media.

"The DCRI (intelligence service) is working on this case. It is in contact with Renault," said the government source, adding the China connection was a possibility being explored but not for now in any way substantiated.

Relations between France and China hit a low two years ago when French President Nicolas Sarkozy criticised Beijing's policy on Tibet.

But a visit by Chinese President Hu Jintao to Paris late last year helped forge closer ties as France seeks to secure Chinese support for reform of the global monetary system under its presidency of the Group of 20 club of economic powers.

Bernard Carayon, a lawmaker, told Reuters France needed tougher laws to defend itself in a "war" against fast-growing emerging economies hungry for new technology.

"This is a war which does not stop worsening and which has intensified even more with the emergence of industrial powers like China," said Carayon, a member of the ruling UMP party who is drafting a law on the protection of economic information.

Most at risk from spying were sectors with long development times such as cars, pharmaceuticals and defence, he said.

"There is a big temptation to cheat to win the race when you are behind," he said.

This is not a first for France's car industry.

In 2007, a Chinese student on a work placement at car parts maker Valeo, was given a prison sentence for obtaining confidential documents. A court stopped short of an industrial espionage verdict, instead finding she had "abused trust".

Christian Harbulot, head of France's School of Economic Warfare, which trains students in economic intelligence, told Reuters TV: "It's a new world. In this new world there are players with completely different behaviour".

Claude Moniquet, head of the European Strategic Intelligence and Security Centre in Brussels, said it was also possible that the case involved straightforward industrial espionage conducted by a commercial rival of Renault.

"It is not surprising that Renault and in particular its electric car programme has been targeted because it is an enormous company and it is an enormous project. Everyone wants to develop a viable electric car," said Moniquet.

"But what's surprising is the level of penetration... Usually in cases of this kind the actual spying involves people at a much lower level."

While China has been known since the 1980s for commercial espionage, particularly in industries where it believes it is lagging the West, no country is considered clean.

"It's actually quite rich for France to be accusing any other country of commercial espionage given the French state's own long and less than edifying efforts in this regard," said one former British defence official, who requested anonymity.

"Of the major European powers, France is the only one which historically has devoted significant intelligence resources to collection against foreign commercial corporations."

China, where car fumes account for 70% of air pollution in big cities, is pushing green vehicles hard as part of the development of its own auto industry. Chinese output of electric vehicles is expected to reach one million units by 2020, the official Xinhua news agency said late last year.

Beijing began a pilot programme in June to hand out cash to buyers of electric and hybrid cars as it stepped up efforts to cut emissions, and it is due to present a draft plan setting out billions of yuan of investment in the sector.

Worldwide, mass-market electric vehicle production is in its infancy. Nissan, Mitsubishi and PSA Peugeot Citroen have launched electric vehicles in recent months, but the numbers on the road remain negligible.

China's car market topped the US one as the largest in the world in 2009, while local Chinese brands are developing fast, with many signing partnerships with Western firms.

Renault is so far only present in China through a handful of vehicles Chinese buyers import, and via the strong presence of its partner Nissan.

Besson said on Thursday the expression "economic warfare" was appropriate in describing what was involved in the Renault case though he made no reference to China or a Chinese connection.

The carmaker has said it is examining all legal options in the case and expects to take action at some point.