Report: German firms to strengthen investments

China's market remains quite important to most German companies and many are willing to increase investment in the country to remain competitive and leverage their potential, said the German Chamber of Commerce in China.

A new report surveying 288 German companies operating in China in May regarding their business sentiments in the post-COVID period found that 55 percent of German companies plan to increase investment in the country in the coming two years, which is 4 percentage points higher than last year, but far behind pre-COVID levels. The survey was released by the German Chamber of Commerce in China on Thursday.

In the long term, German companies expect Germany and China to further strengthen cooperation, especially in the fields of electric vehicles, intelligent manufacturing and decarbonization, the chamber said.

"Geopolitics has a profound impact on companies on the ground, prompting them to drive forward localization and diversification strategies as risk management measures. German companies will sustain investments in the Chinese market as a means of maintaining a competitive edge and leveraging its potential," said Jens Hildebrandt, executive director and board member of the German Chamber of Commerce in China.

In the past few months, some large and medium-sized German companies carried out their original investment plans in China. Some carried out localization strategies for their research and development departments in the country, while others transferred their supply chains to China, Hildebrandt said.

The chamber said different sectors have witnessed different business opportunities in China and some companies are re-evaluating their business models to become more competitive. The chamber didn't see any obvious trends of increasing or reducing investments based on industries.

Hubertus Troska, a member of the board of management at Mercedes-Benz Group, said other markets cannot simply replace the China market. For many sectors, decoupling with China is unrealistic. The chamber observed that difficulties could be quickly tackled in China, as the market boasts huge potential, he said.

China has been Germany's largest trading partner for seven consecutive years. Germany stands as China's largest trading partner in Europe and an important investment destination. Last year, Germany's investment in China reached $2.57 billion, up 52.8 percent year-on-year, according to the Ministry of Commerce.

German chemical and automobile companies have been investing in China on a large scale in the past few years. In the latest development, Henkel AG & Co, a German industrial and consumer goods manufacturer, broke ground on a new adhesives technologies manufacturing facility on Thursday at Yantai Chemical Industry Park in Yantai, Shandong province.

With an investment of approximately 120 million euros ($129 million), the new plant will enhance Henkel's production capacity of high-impact adhesive products in China, and further optimize the supply network to meet growing demand in domestic and international markets, it said.