High-tech product growth to boost ties

Two visitors at the stand of Midea Group, a home appliance maker in China, during an industry expo held in Berlin, Germany. [Photo/Xinhua]

Investment in technology-based services and high-end product trade, such as cloud platform systems, smart manufacturing pilots and demonstration projects, and sensors and industrial automation goods, is set to account for an even greater proportion of Sino-German bilateral trade, said officials and experts.

Chinese investment in Germany has no longer been heavily concentrated in regular manufacturing and greenfield sectors in the past few years. It has started to be targeted at more high-tech companies for acquisitions, such as leading robotics manufacturer Kuka AG, which received a takeover offer from Chinese consumer products company Midea Group in 2016.

Feng Yaoxiang, spokesman for the China Council for the Promotion of International Trade in Beijing, said Chinese companies are eager to have the most modern technologies.

"With the advent of Industry 4.0, launched in Germany in 2013, we will see new players－especially from the internet field－entering the manufacturing sector, where they will change the customer-supplier relationship in both China and Germany," said Feng.

Bilateral investment remains robust. China pumped more than $2.95 billion into Germany in 2016, a 258.6-percent increase year-on-year, while Germany invested in 392 projects in China with an investment volume of $2.71 billion.

"The dramatic surge in Chinese outbound investment last year triggered a noticeable rise in protectionism, such as the blocking of a Chinese consortium's attempt to acquire German chip maker Aixtron SE," said Terence Foo, co-managing partner for China at London-based law firm Clifford Chance.

To protect their own interests, France, Germany and Italy requested the European Commission to give them the right to veto high-tech takeovers in February.

"Some lessons certainly can be learnt from the deals which were successfully completed in 2016. Midea completed its acquisition of Kuka. The Chinese company won over the sellers by offering commitments to allow Kuka to operate independently, to preserve jobs and the current management and keep its public listing," said Foo.

In the same year, a consortium of Chinese investors successfully acquired Osram's lamp business. Although the German government was initially hesitant about approving the deal, it was persuaded that it did not involve sensitive technologies. The buyers also promised to continue using the Osram brand.

Joe Kaeser, chief executive officer of Siemens AG, said China is making progress on the path to becoming an advanced and competitive economy, but it will take time for these changes to have an impact. Patience and consistency will be required, as well as continuous reforms along the way.

"As the United States has been pressing both China and Germany to appreciate their currency exchange rates to maintain competitiveness in manufacturing, both countries have been keen to upgrade the content of their partnership, especially in services and high-end product trade," said Xue Rongjiu, deputy director of the Beijing-based China Society for WTO Studies.

Germany is China's biggest trade partner in Europe. Trade between the two countries totaled $151.29 billion in 2016, accounting for one-third of the total volume between China and the European Union.