Fransa - France, lı - with, yım - I am/Me.
Although, li seems to be a suffix commonly used for forming adjectives: yasli - with age - old, so I think Fransalı is "French", and all together it is I am French.
It is correct in the same way saying "I am Franceish" is correct
It follows the correct grammatical construction but a word for "French" (Fransız) already exists.