The problems for German companies in China are not getting any less. Before Habeck’s visit, the German Chamber of Commerce is calling for more support. Some are pessimistic about the future.
Before the visit of Federal Minister of Economics Robert Habeck to China, German companies in the People’s Republic called for more support from Berlin and drew attention to problems. According to a survey by the German Chamber of Commerce Abroad (AHK), 61 percent of more than 180 member companies currently rated price pressure as the greatest challenge. The reason for this is the intense competition, which is being exacerbated by weak demand in China and globally, said Clas Neumann, Chairman of the Board of the German Chamber of Commerce in East China, in Beijing.
According to the survey, the companies’ main demand from the Green politician, who is visiting China this week, is that he should work towards equal treatment of Chinese and foreign companies in China. They hope that the EU’s recent threat of punitive tariffs on electric cars from China will not be the only topic of discussion, said Maximilian Butek, executive board member of the East China Chamber of Commerce. German companies there have long been complaining about unfair competitive conditions and difficult market access.
Overcapacity puts pressure on business
In the survey, 75 percent of companies also stated that they were seeing overcapacity in their industry. For almost all of them, this had an impact on their business. China has long been accused of producing overcapacity with state support, for example in the battery manufacturing and solar industry, i.e. producing more than demand allows. Beijing denies the accusations. It is said again and again that these industrial sectors are driven by innovation.
According to Butek, the market will resolve the problem of overcapacity on its own. “We believe that this is more of a medium-term effect, but it will not be resolved in the next two or three years until there is consolidation and the overcapacity is reduced,” he said. The AHK also hopes for higher demand worldwide.
Outlook of companies cautious
Despite many problems inside and outside China, more than a third (38 percent) of German companies remain optimistic and expect the economic situation to improve, according to the survey. Almost half do not expect any change and 16 percent see a deterioration. Only around a quarter expect profits to rise this year. In the next two years, only just over half plan to invest more in China.
China is struggling with insufficient demand at home, while a real estate crisis, high unemployment among young people and local government debt are putting pressure on economic performance. Abroad, trade with its important partners, the USA and the EU, is struggling. According to the lobby group representing German companies in China, 186 of the 2,100 member companies took part in the AHK survey between May 21 and 29. Companies from the mechanical engineering and automotive industries were the most strongly represented.
Source: Stern
