Continuous Recovery of Chinese Business of German Companies
Despite Covid-related declines in turnover in the first half of 2020, 39 percent of German companies in China managed to increase their turnover and 42 percent their profits in 2020, according to the survey. In addition, in 2020, around 25% of the surveyed German companies in China managed to achieve turnover and profits roughly at the same level as in the previous year. China is the only large economy that has managed to grow -even if only by about 2 percent in 2020. German companies also benefited from this and could partially compensate for the declines in the EU and the USA due to the recovered business in China in the second half of the year.
Expectations for the upcoming EU-China Investment Agreement (CAI) are high: the companies surveyed by the German Chamber of Commerce in China and KPMG Germany stated that market access (40 percent) and equal treatment of all market participants in China (39 percent) were the main expectations for the agreement. However, the study results also showed quite positive assessments of formal market access. Compared to the previous year, fewer companies reported to fail at this first hurdle (30 percent). On the other hand, the challenges remain clearer at the indirect level. Summing up the regulatory challenges of German companies in China, administrative and bureaucratic hurdles are among the biggest obstacles: Customs regulations and procedures, obtaining the necessary licenses, the requirements of the Cyber Security Act, the Corporate Social Credit System, as well as capital transfers and cross-border payments.
Optimism for 2021 is evident: 77 percent of respondents expect their industry to perform better in China than in other markets. As a result, 72% of respondents expect rising sales in China and 56% higher profits in 2021. This is also reflected in a strong commitment to the Chinese market: Almost all companies surveyed (96%) stated that they had no plans to leave China and 72 percent planned further investments in production facilities (44%) and machinery (34%) as well as in research and development (32%). Many key industries in China are setting the course for future developments. A local presence is important to generate sales in the Chinese market, enter into local partnerships, or closely observe tomorrow’s competitors in their home market. The German companies surveyed see great business opportunities in China, especially with innovative technologies (58%) and digital solutions (51%).
To read the original report from AHK Greater China, please click here0202_BCS_Report_web.pdf