German firms bullish on China

Date: 18 / 11 / 2015     Author: Worldcargo

German companies are looking to increase their investments in China's modern manufacturingsector as the country transitions to a more moderate phase of growth, the German Chamber ofCommerce in China said on Tuesday.
Sixty-five percent of German companies are planning new investment activities in China'sautomotive, machinery and chemicals sectors, according to the Business Confidence Survey2015, conducted by the chamber between May 11 and June 12.
The survey interviewed 439 companies on issues related to business outlook, investment climateand market conditions.
Lothar Herrmann, chairman of the northern division of the chamber, said this indicates thatGerman companies are eager to strengthen their position in modern technology-drivenmanufacturing as China undergoes an industrial upgrading.
"Similarly, more than half of German companies which engage in global research anddevelopment, engage in such activities at their locations in China," said Herrmann.
"They are more reliant on skill-based sectors rather than low-wage and low-skill industries asChina continues to modernize its economic structure."
Founded in 1999, the chamber has more than 2,600 members throughout the Chinese mainland.
After a strong performance in 2014－despite the fact that growth rates had already beenadjusted to lower levels－China's continuous economic slowdown in the first half of this year hasled German companies to lower their business outlook for the full year.
However, more than half of the companies still expect to achieve their business targets this year.Most German businesses continue to enjoy healthy growth in turnover and profits, indicating thatrather than experiencing a sharp decline, they are easing into lower growth levels.
Alexandra Voss, a member of the chamber's all-China board, said while investment activity byGerman companies at their current locations has fallen slightly, the share of companies planningto invest in new locations in China has remained stable compared to previous years and there isno indication that investment is being relocated to other countries.
The survey shows that the vast majority of investment continues to be concentrated in China'sthree main economic centers. Nearly 90 percent of companies are located around Shanghai andthe Yangtze River Delta; Beijing and the Bohai Rim; and Guangzhou, Shenzhen and the PearlRiver Delta.
German investment in China amounted to $710 million in the first quarter of the year, an increaseof 21 percent compared to the same period in 2014. Germany has consistently been amongChina's top 10 foreign investors, with direct investment flows nearly doubling from its value in2010 to $2.1 billion in both 2013 and 2014.
Voss said a shortage of skilled employees, rising labor costs and retaining qualified staff are thetop three challenges for German firms. Finding qualified staff is the biggest challenge thatGerman companies face this year.