China creating ‘unfair competition’ for foreign players, German firms say in survey

China creating ‘unfair competition’ for foreign players, German firms say in survey

China creating ‘unfair competition’ for foreign players, German firms say in survey

German businesses in China have reiterated their calls for a level playing field, with two-thirds of those surveyed seeing themselves in “unfair competition” when operating there – findings which add to pressures on Beijing from foreign investors over persistent struggles related to market access and overcapacity.

The survey, conducted by the German Chamber of Commerce in China, was released ahead of German Chancellor Olaf Scholz’s visit to China next week. It comes at a time when the two countries have continued to stress the importance of economic ties, despite Berlin’s overtures towards de-risking and complaints from the West over the Chinese state subsidies it has claimed create an overcapacity of industrial products.

“Chinese and German companies are increasingly becoming close competitors – both in China itself and in global markets. This is the reality that German companies must prepare for,” said the report, released on Wednesday afternoon.


‘Overtaking on a bend’: how China’s EV industry charged ahead to dominate the global market

‘Overtaking on a bend’: how China’s EV industry charged ahead to dominate the global market

“The sluggish development of the Chinese economy coupled with the emergence of local competitors has made the issue of unfair competition in China more pronounced.”

Two-thirds of the 150 companies surveyed from February 22 to March 6 said they face “unfair competition” operating in China, Germany’s largest trading partner, reflecting the latest difficulties perceived by foreign businesses in the country – a topic likely to take precedence in the German leader’s meetings next week.

The German businesses surveyed – 29 per cent from the manufacturing sector and 20 per cent from carmakers – said they are most confident in their product quality, technological leadership and strength in innovation compared to Chinese competitors. However, they see weaknesses in cost efficiency, time to market readiness, and innovation speed when measured against local firms.

China-Germany ties are resilient despite EU push to ‘de-risk’: Beijing envoy

Market access – particularly access to lucrative networks like government authorities, universities, and public tenderers – were seen by respondents as the most pressing competitive disadvantages.

Over 52 per cent of those surveyed said their primary competitors were private Chinese companies, 37 per cent named other foreign companies and 11 per cent said Chinese state-owned companies were their strongest rivals.

The most frequently mentioned downsides to heightened competition within China were increased cost pressures, reduced profit margins and lower market share, but 79 per cent of the respondents said they still plan to keep up their investments.

Beijing has attempted to bring in foreign investment to buoy confidence after a slower than expected economic recovery last year. A number of foreign chambers have flagged market access, vague regulations and tensions with the US as top concerns when considering new or deeper involvement in China.

Berlin introduced a China strategy last summer that urged businesses to “de-risk” from China, a change from previous policy following similar shifts among its allies in the Group of Seven and European Union. Beijing has called the strategy “counterproductive” and accused the German government of “protectionism.”

Bilateral trade for goods between the two economies crested €250 billion (US$271.5 billion) in 2023 according to official figures – with China retaining its status as Germany’s top trading partner – but that sum represented a decrease of 15.5 per cent from the previous year.

However, German direct investment in China rose to a historic high of €11.9 billion last year, according to a report from the German Economic Institute (IW) think tank.

Berlin has been on the forefront of several of the economic and trade issues that have contributed to increasingly frosty relations between the West and China.

Last year, the EU launched an anti-subsidy probe into China’s electric vehicle industry, leading German carmakers to voice worries Beijing would launch retaliatory tariffs and erode its position in the market thanks to a production chain that is highly reliant on China.

Those tariffs have not yet manifested, but the automotive trade is still inching in China’s direction. Imports of Chinese vehicles and parts to Germany jumped 75 per cent in the first half of the year while trade the other way slumped, according to another IW report from last September.

Scholz will hold talks with President Xi Jinping and Premier Li Qiang in Beijing on April 16 as part of a four-day trip to China, said his chief spokesman Steffen Hebestreit on Monday. The chancellor will arrive in Chongqing on Sunday and visit a German-operated hydrogen facility before travelling to Shanghai and Beijing.

A German business delegation including Roland Busch, chief executive of Siemens, BMW’s Oliver Zipse and Bayer CEO Bill Anderson will accompany Scholz, according to a report from Reuters.

The trip will be Scholz’s second sojourn in China as chancellor, following his first visit in November 2022.

Source link