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German companies less confident about China business

By Vera Ye | June 30, 2015, Tuesday | Online Edition

German companies are less confident about reaching business goals in China where economy is undergoing transition to a slower growth pattern, according to a survey result.

Some 50.5 percent of German companies operating in China expect to achieve or exceed their business targets this year, down from a proportion of 60.6 percent last year, according to Business Confidence Survey 2015 released today.

Only 27 percent of companies believe Chinese economic condition will improve, a sharp decline from 48.9 percent last year, with the rest of them expecting unchanged or worsening economy, the survey found.

Conducted by the German Chamber of Commerce in China, the survey collected opinions from 439 German companies between May 11 and June 12.

“The result doesn’t mean a downturn of German business in China but reflects that German companies are now adjusting to the new economic realities in China and more focusing on sustainable development,” Titus Freiherr von dem Bongart, chairman of the German Chamber of Commerce in Shanghai, said at a press conference today.

Automotive companies are most optimistic about industry outlook, with 54.4 percent of them seeing improvement, followed by 37.5 percent in chemical sector and 36.5 percent in services, according to the survey.

The survey highlights difficulties in finding and retaining qualified staff as well as increasing labor costs as top business challenges.

Other hurdles include currency risks, bureaucratic red tape, slow internet speed, internet censorship, domestic protectionism, unclear regulatory framework and intellectual property theft.

Air pollution, slow internet speed and internet restrictions are perceived as top three factors that have a negative impact on investment climate in China, said the survey.

Share of companies considering investments at new locations remains stable at about around 30 percent, motivated by intentions to follow key customers, boost regional diversification and cut costs.

Modern manufacturing is the most attractive sector for German companies, with 65 percent of respondents considering new production from automotive, machinery and chemical sectors, according to the survey.

“With a focus on high-tech industries and modern manufacturing requiring greater skill-sets of its employees, German investment is well prepared to support China as its economy moves up the value chain, and low skill, low wage industries become less important,” it said.

The chamber estimates that there are around 5,200 German companies operating in China in 2015, up from 5,000 last year and accounting for 1.1 million jobs in the country.

Nearly 90 percent of German companies are located within the three economic centers of Yangtze River Delta, Bohai Economic Rim and Pearl River Delta.

 

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