German firms confident in Chinese economy
Continual optimization of business environment and huge market potential prove irresistible
In recent developments, China and Germany have taken significant strides to bolster their economic and trade cooperation, fostering a robust partnership that extends across various sectors and industries.
Bilateral relations between the two countries have witnessed a substantial surge in investment and trade volume. Data from the German Institute for Economic Research show that in 2023, direct investments from Germany to China increased by 4.3 percent compared to 2022, reaching a record 11.9 billion euros ($12.89 billion). At the same time, the proportion of German investments in China compared to total foreign investments increased to 10.3 percent, the highest level since 2014. Direct investments from Germany to other regions in Asia remained at around 8 percent.
Statistics from China’s General Administration of Customs show that the bilateral trade value between China and Germany reached 1.45 trillion yuan ($200.4 billion) in 2023. Since 2016, China has been Germany’s largest trading partner for eight consecutive years. During the China (Ningxia)-German Week for Friendship and Cooperation in February, 41 German companies and more than 300 domestic companies in the Ningxia Hui autonomous region signed a total of 19 cooperation projects, with a contractual value of 157 million yuan ($21.66 million), involving areas such as elderly care services, equipment manufacturing, education and culture.
Susanne Rademacher, board member of the German Chamber of Commerce in China, said that German companies in China are optimistic about the country’s economic growth over the next five years, indicating their confidence in the potential of the Chinese market.
Ningxia has abundant green energy resources such as solar, wind, hydro and hydrogen power, and there is significant demand for these from German companies. Many areas of China’s green industry provide opportunities for Sino-German cooperation, she said.
Germany has rich experience in the development and utilization of renewable energy such as solar, wind and biomass, which can help China achieve diversified development of its energy structure, enhance energy security and reduce its carbon footprint, Rademacher added.
Yang Ming, chief representative in China of the Summit of World Market Leaders, said that economic and trade cooperation between Germany and China has been ongoing for decades. Large multinational companies have laid a solid foundation for development in China, and many small and medium-sized enterprises, especially hidden champion enterprises, have strong investment and business development needs. Hidden champion enterprises refer to SMEs that hold a leading position in niche markets but are typically overlooked.
Yang believes that the significance of China in the minds of German companies is self-evident. “China not only has a huge market and consumer base but radiates throughout Asia, for example, through the China-ASEAN Free Trade Area, providing German companies with the opportunity to access a broader market,” he said.
Germany has more than 1,300 hidden champion enterprises, accounting for nearly half of such enterprises worldwide. These SMEs have become an important force in driving the economic and social development of Germany.
Held since 2011, the summit has gathered participants to discuss various topics related to global industry and enterprise development. The summit took place from late January to early February in Germany this year, with more than 500 representatives from German and other European companies in attendance.
Yang continues to pay close attention to the evaluations and demands of hidden champion enterprises regarding the Chinese market made at previous summits. Surveys conducted during the latest summit show that German SMEs in sectors such as trade and manufacturing have high intentions to cooperate with China.
Recently, the General Office of the State Council issued the Action Plan for Solidly Advancing High-level Opening-up and Further Attracting and Utilizing Foreign Investment. It proposed 24 measures in five areas: expanding market access and increasing the level of liberalization for foreign investment, strengthening policies to enhance the attractiveness of foreign investment, optimizing the fair competition environment and providing services for foreign-invested enterprises, facilitating the flow of innovative resources and promoting innovation cooperation between domestic and foreign-invested enterprises, and improving domestic regulations to better align with international high-standard economic and trade rules.
The Government Work Report this year proposed to expand high-level opening-up and promote mutually beneficial cooperation. China will regard stabilizing foreign investment as an important focal point for this year’s economic work. Efforts will be intensified in optimizing the fair competition environment, assisting the flow of innovative resources, and providing more comprehensive and highquality service guarantees for foreigninvested enterprises.
The country is also addressing key issues of concern to foreign-invested enterprises. For example, the National Development and Reform Commission has established a special team for major foreign investment projects; since February, the Ministry of Commerce has been holding a roundtable meeting for foreign-invested enterprises every month to listen to the opinions and suggestions of these enterprises; and over the past two years, the China Council for the Promotion of International Trade has collected more than 8,300 demands from foreign-invested enterprises and has resolved or effectively responded to more than 6,500 of these.
China is accelerating the cultivation and development of new quality productive forces as this is an inherent requirement and an important focal point to drive high-quality development.
“Where new quality productive forces emerge, investment should be directed there and macro policies should shift in that direction,” said Liu Qiao, dean of the Guanghua School of Management at Peking University.
Since the end of February, Shen Yafeng, operations manager at Thermofin Heat Exchanger (Pinghu), has been involved in the construction of a new factory. The company is Germanfunded and specializes in high-end heat exchangers. Its products are mainly used in indoor ski resorts, high-end cold storage and other industries. In 2018, the company invested to establish a factory in Pinghu city, Zhejiang province.
“At first, we rented a standard factory of 5,000 square meters in the Pinghu economic and technological development zone, hoping to gradually open up the Chinese market through local production,” Shen said. The company achieved a production value of 20 million yuan in 2018. Since then, the annual output value of the enterprise has grown rapidly, almost doubling on average each year.
In 2023, Thermofin initiated a plan to build new factories and its Asia-Pacific regional headquarters in China, with an estimated investment of 155 million yuan. Shen said the sales proportion in the Chinese market has now reached 40 percent and is expected to reach 80 percent in the future.
Analysts believe that China, which has achieved more than 40 years of economic growth under open conditions, will inevitably promote highquality development due to high-level opening up.
The emerging market potential, improving industrial system and the ongoing optimization of the business environment in China have sent a clear signal that the country will continue to share opportunities and grow together with enterprises from various countries.