Study China: German mid-sized businesses expand their presence in the chinese market

Author Stéphane Itasse

Despite the slowdown in economic growth, the German companies want to strengthen their business in China: 35 % of the companies already active in China are planning new branches there in the coming three years, reports a new study by the German Centre Shanghai and Chinaforum Bayern. These companies will move away from the major cities.

German mid-sized companies are investing further in China but want to move out of the big cities.
German mid-sized companies are investing further in China but want to move out of the big cities.
(photo: Siemens)

Of the remaining companies 32 % are undecided and 33 % don’t have any such plans, reported the German Centre Shanghai and Chinaforum Bayern. Christian Sommer, managing director of the German Centre Shanghai says, “When it comes to setting up a business in a new area, it is not just about the construction of production plants” any more. “Machines purchased in the past years need spare parts and repairs. Accordingly, service offers and after sales offers are very popular. However, companies from other branches are also increasingly searching for further locations in China. These include logistics providers, lawyers, consulting houses or tax consultants. We know this from the survey and our experiences in China.”

German companies want to tap into the Chinese market with investments

Independent of the field of activity and the branch, the companies are mainly focussed on being successful in the local market. According to German companies China is nothing but an extended workbench of the world. So the factor of personnel expenses in the location is not really important. On the contrary, the access to qualified workers is decisive. Stefan Geiger, managing director of China forum Bayern e.V. says, “Most German companies have to struggle to find the right workers”. “They have a high demand for qualifications. “Mid-size companies alone cannot fulfil this demand.” 74 % of the companies want cooperation for training and advanced training of their personnel. 58 % would like to make agreements which provide for renouncement of reciprocal poaching of employees.

“Companies meticulously explore where they want to set-up a branch. And they have become more selective in choosing a location for their business”, in the experience of Sommer. In particular, production and purchasing branches are increasingly built outside Shanghai, Beijing or Guangzhou unlike earlier times. Small cities surrounding the big metropolitan cities are preferred.

German Centre Shanghai expands to Taicang

According to a statement given by The German Centre Shanghai, a subsidiary of BayernLB, they are planning their own branch in Taicang. Taicang is a city in the Jiangsu province in the East of the People’s Republic of China lies about 50 km to the north west of Shanghai and is a popular location for companies from Germany. The German Centre Taicang will offer infrastructure and support to companies from all branches in Taicang from the end of 2015. “Mainly for medium-sized companies the offered combination of office rentals, provision of a reliable infrastructure and access to local networks is really important” says Sommer.

For “China Poll” more than 180 German companies active in China were surveyed according to the creators of the study.