German Companies in China Unsure about Future Prospects

German Companies in China Unsure about Future Prospects
Dec 06, 2016 By eChinacities.com

Editor’s Note: Many German companies in China saw their profits decline this year and are worried about their economic prospects for the future. Concerns include air pollution, rising labor costs, and unpredictable policy. However, most German companies in China have no plans to leave in the near future, and hope that “Made in China 2025,” will help boost business again.

“2016 was the most difficult year in recent memory for German companies in China.” On November 29, the German Embassy in China and the German Chamber of Commerce in China issued the joint “Business Confidence Survey 2016.” The report said that sales and profit for German companies in China was lower this year than in previous year. Manufacturing companies were affected the most.

The German Chamber of Commerce in China has 3,000 member companies, and publishes a similar survey every year. However, this year’s figures are particularly worrying. The report names negative factors which are affecting the investment environment in China. The first factor is air pollution, and the second factor is slow Internet speeds.

Declining Profits
“One out of every four German companies in China say their profits to have declined this year,” said Lothar Herrmann, president and CEO of Siemens China.

The number of companies looking to invest in China has hit a three-year low. Only 35 percent of companies are planning to increase their investment, compared with 50 percent and 45 percent in 2015. “Less than half of companies believe that China’s economic reforms will have a positive impact on the environment for investment,” said Herrmann.

German companies are also worried about uncertainties is Chinese laws and regulations. “What we need is a predictable policy environment,” said German ambassador to China Michael Clauss. “German companies are not the only ones who want this. I believe that American, Japanese, and European companies also hope for this.”

Also on the list of worries for German companies: increased labor costs in China, the difficulties of finding qualified employees, and concerns over China’s economic prospects.

German manufacturing companies are especially pessimistic. 35 percent reported a decline in profits in 2016.

Herrmann noted that there has been a rise in protectionism all over the world which has added to the uncertain economic climate.

No Plans to Withdraw
In recent years, foreign media has reported that foreign companies receive “unfair treatment” in China. The German Chamber of Commerce in China asked companies in their survey, “As a foreign company, do you think you are as popular in China as you were before?”

One-third of German companies answered that they are not as popular in China as they used to be. 42 percent of German companies who had been in China for more than 10 years felt the same way.

“German businesses have done much better recently in the United States and Europe,” said Herrmann.

However, half of German companies in China believe they can achieve their sales targets in 2017. 52 percent believe their profits will increase in 2017.

89 percent of German companies in China do not have plans to withdraw in the near future, despite poor performance this year. 10 percent of companies are considering leaving China but have no specific plan. Only 1 percent of companies will leave China within a year.

Investment Imbalances
“Germany is China’s most important trading partner in Europe,” said Ambassador Clauss. “We would have like to have seen the Chinese market open further this year, but unfortunately this did not happen.”

Ambassador Clauss said that from January to September 2016, China investment reached 11 billion Euros in Germany, an increase of 2000 percent from 2015. However, the EU investment in China was only 500 million Euros in 2015. “There cannot be long-term trade imbalances,” said Clauss.

More than half of German companies expect a positive outcome from the “Made in China 2025” economic plan. 67 percent believe that the plan will have a positive impact on business in the next five years.

Source: iFeng

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Keywords: German companies in China German profits in China

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