German firms optimistic on Chinese market

Plenty of opportunities created by national policies and incentives, say chief executives

Strengthening economic and trade relations between China and Germany will prove mutually advantageous, infusing the global economy with positive elements amid escalating recession concerns, said business leaders and government officials.

They said that the economic complementarity between China and Germany signifies vast potential for expanding trade and investment collaboration between the two of the world's manufacturing powerhouses.

China's unwavering opening-up and enormous domestic market will provide unparalleled opportunities for German business, while the two countries are also likely to upgrade cooperation in industrial chains, especially in high-end manufacturing sectors, said Zhang Jianping, head of the Center for Regional Economic Cooperation at the Beijing-based Chinese Academy of International Trade and Economic Cooperation.

Aside from benefiting from China's technological advancements, many German companies, including Siemens and Henkel, see China as a gateway to the broader Asia-Pacific region. They view investing in China as a means of gaining access to the country's vast network of supply chains and distribution channels, said Zhang.

Confronting a torrent of global challenges, including weakening goods demand and geo-economic fragmentation, China and Germany saw their total trade value drop 6.2 percent year-on-year to $69.43 billion in the first four months of 2023, data from China's General Administration of Customs show.

China exports mainly computers, mechanical and electrical products, base metals, chemical products, textiles, garments and household appliances to Germany.

In addition to vehicles and auto parts, mechanical appliances, toolmaking machines, precision instruments, motors, and electrical and pharmaceutical products, Germany's exports to China include daily necessities, excavator parts, optical instruments, sensors, steel plates and chemical products.

With an enthusiasm to enrich business ties, Shu Jueting, a spokeswoman for China's Ministry of Commerce, said in late May that China welcomes more German companies to invest in its market and hopes that Germany will provide a fair environment to boost bilateral cooperation.

Against a background of sluggish global economic recovery, deeper economic and trade cooperation between China and Germany is in the fundamental interests of the two countries and can contribute to the recovery of the world economy, said Shu. She said that the Chinese government will remain committed to expanding opening-up and continue to create a market-oriented, law-based and international business environment.

Germany's investment in China reached $2.57 billion in 2022, soaring 52.8 percent year-on-year, according to the Ministry of Commerce.

Major German-invested projects include BMW's capital increase in its joint venture in Shenyang, Liaoning province; BASF's integrated production base in Zhanjiang, Guangdong province; and Audi's new energy vehicle facilities in Changchun, Jilin province. These are all proof that German enterprises are optimistic about the prospects of long-term development in China.

German business leaders said that Chinese market remains important to their businesses and many are willing to add investment in the country to remain competitive and leverage their potential.

According to the German Chamber of Commerce in China, more than half of 288 businesses that participated in a poll in May said they plan to invest more in the country over the next two years. The study was published in early June and reflects the business outlook of German companies in China.

Jens Hildebrandt, executive director and board member of the German Chamber of Commerce in China, said that geopolitics has a profound effect on companies on the ground, prompting them to drive forward localization and diversification strategies as risk management measures. German companies will sustain investments in the Chinese market as a means of maintaining a competitive edge and leveraging potential.

Hildebrandt noted that some large and medium-sized German companies have carried out their original investment plans in China in the past few months. Some carried out localization strategies for research and development departments in the country, while others transferred their supply chains to China.

Echoing that sentiment, Hubertus Troska, a member of the board of management at Mercedes-Benz, said other markets cannot replace the Chinese market. For many sectors, decoupling from China is unrealistic.

After seeing its sales revenue grow by nearly 3 percent on a yearly basis to 132.1 billion yuan ($19.11 billion) in 2022, Chen Yudong, president for China of Bosch, a German industrial and technology group, said the Chinese market has enormous potential in the areas of artificial intelligence, electrified mobility, smart manufacturing and carbon neutrality.

Chen emphasized that innovation and profitability are the two crucial points for further development. It means, on the one hand, Bosch has to mobilize the creativity of staff and invest in engineering centers, factories and infrastructure worldwide. On the other hand, it has to maintain a balance between economic performance and environmental and social goals to achieve profitability.

Bosch's long-term development strategy in China is centered on enhancing local production, R&D capabilities, as well as prioritizing customer needs, he added.

To capitalize on business potential, Bosch has invested 50 billion yuan in China over the past decade, said Chen. He added that the group's R&D expenses reached 10 billion yuan in the country in 2022.

Bosch currently operates 34 manufacturing sites and 26 technical centers across China, employing more than 58,000 associates, including nearly 10,000 researchers and project developers.

Eager to expand its market presence in China, Dekra Group, a German testing, inspection and certification group with more than 48,000 employees globally, will expand its laboratory space in Hefei, Anhui province this year, to serve the rapidly expanding information technology, household appliances and electric vehicle industries in China's eastern region.

Many opportunities come from China's pursuit of sustainable growth, the introduction of foreign trade and consumption stimulus packages, and rapid industrial upgrading pace, said Mike Walsh, executive vice-president of Dekra and the group's head of the Asia-Pacific region.

Attracted by fast-growing industries like IT and electric vehicle manufacturing, the Stuttgart, Germany-based group will increase investment in inland cities, including Wuhan, Hubei province; Xi'an, Shaanxi province; and Chongqing municipality in the years ahead.

"These cities have strong industrial and educational resources from excellent universities that can support both our market and recruitment needs," said the executive.

As China ushers in a new era of growth propelled by its '30-60' decarbonization goals and innovative activities, Walsh emphasized that the country has exerted significant efforts to bolster industrial and business development.

The German company has reaped substantial benefits from these endeavors, particularly in sectors such as renewable energy, automotive manufacturing and green development, as well as high-tech fields like semiconductors.