TüV Rheinland Looks Closer at China Market

Lutz Frankholz, chief operating officer of TüV Rheinland Shanghai, China. [Provided to chinadaily.com.cn]

German testing and certification company TüV Rheinland is focusing more on China's domestic market as the world's second largest economy shifts away from an export-oriented growth mode.

Lutz Frankholz, chief operating officer of TüV Rheinland Shanghai, said domestic market now accounts for about 20 percent of the company's revenue in China, up from nearly zero two decades ago, and the share of the domestic part is expected to grow even larger in the years to come.

TüV Rheinland has achieved total revenue of $1.78 billion China in 2013. The company currently has 25 branches in Chinese mainland, Taiwan and Hong Kong, and 69 laboratories nationwide.

The larger domestic share is in line with a weakening foreign trade growth faced by the country. Frankholz said TüV Rheinland used to be heavily dependent China's outbound products, but this strategy is changing in the wake of a transformation of Chinese economy.

On the other hand, China's domestic demand remains robust, as social consumption maintains a double-digit growth.

"China's domestic Product certification market used to be closed to foreign testing companies, but now we're seeing positive changes," said Frankholz.

Premier Li Keqiang said in a meeting earlier that the country will encourage outsourcing of testing and certification businesses, which suggests huge potential for private and foreign companies in the sector.

As government shows its determination and in opening the domestic market, TüV Rheinland is also actively taking part in some government procurement program, and has secured the first several projects with some local authorities in East China.

By the end of 2013, there are more than 28,000 testing organizations in the country, among which government-owned institutions accounts for more than half.

As China gradually opens the testing and certification market, Frankholz said there will be greater potential for cooperating with domestic counterparts.

China has become a pillar market in TüV Rheinland's global strategy. While maintaining our leading position in export certification market, we will carefully select domestic partners, and steadily explore the domestic market, he said.

In the meantime, although exports remain a dominating share in TüV Rheinland's China business, there has been a change in the structure as well.

"China's export used to be mainly consumer products such as textile, but that part is under pressure, since some production facilities move to other countries." Frankholz said. "As Chinas products climbs up the value chain, testing and certification is growing for higher-value added products such as medical apparatuses, or international approval for systems used in transportation and in industrial manufacturing," he said.