China, Germany celebrate 40 years with new business plans

On any given day in the late 80s and early 90s, the vast majority of cars on China's major city roads, were Volkswagens. The VW Jetta and Santana models were everywhere, as taxi's, private vehicles, company and Government cars, made in Shanghai，born of the very first VW Chinese German joint venture.

Fast forward to 2012 and the best seller list in China's mid-sized car market shows China's appetite hasn't changed, with the newest VW, the Passat, leading by a big margin.

China buys around 1.28 million cars a month and the most popular brands are German, with BMW, Audi and Mercedes-Benz all either leading or close to the pole position in their categories.

China's German influence crosses many industries

It's not just China's car market that has a distinct German accent. In heavy industries, pharmaceuticals and beyond, German brands continue to pepper the leader boards.

Siemens delivered its first piece of technology, a pointer telegraph, to China in 1872 and now has 64 regional offices and around 29,000 employees in China. Pharmaceutical and chemical producer Bayer AG plans to double its sales in the Chinese market to EUR6 billion by 2015.

Allianz entered China in the 80's and became the first European life insurance company to gain direct access to the market in 1999. BASF products began selling in China from 1982 and successful JVs have followed since then. Bosch technology continues its long China history generating RMB 42.3 billion in sales in China in 2011, 13 percent up on 2010.

How have German businesses managed to achieve such a foothold in China?

According to Christopher Hock, German Desk Manager for International audit and advisory firm Mazars in Beijing, the success of German businesses in China is due partly to good fortune and partly to industrial similarities.

Christopher Hock

"The German economy has long specialised in heavy industry, producing machinery of the kind China needed as its economy grew. There are also similarities in the characteristics of the Chinese and German economy. Both have a focus on owner managed businesses and this has helped the two to work together."

But Hock also believes German ingenuity also played a role the nations businesses getting a head start on the rest of the world in China. "German companies realized very early the value of the China market - and part of the reason for Volkswagen's success is that the company brought in the very same equipment to build the cars that was being used in other countries. As a result there was never any compromise in quality standards. Whereas some other international car makers decided to use locally sourced materials, processes and equipment."

It also seems that German businesses that have enjoyed a head start in China could have a forward thinking German Government to thank.

Annual German Meeting

"Forty years ago, German Foreign Minister Walter Scheel and Chinese Foreign Minister Ji Pengfei signed an agreement to establish diplomatic relations. That political relationship has evolved to become exceptionally close and continues to reap wide ranging political and trade successes. This relationship has continued to blossom, even at the highest levels" remarks Hock.

A joint declaration issued by Federal Chancellor Merkel and Prime Minister Wen Jiabao in July 2010 elevated bilateral relations to a new level, allowing the two nations to coordinate policy via annual intergovernmental consultations. The first was held in Berlin in late June 2011 and produced a total of 19 signed agreements for co-operation between the nations in various areas

Wen calls for doubling of trade in continued cooperation

Germany's vast Hanover Fair was jointly opened in April by German Chancellor Angela Merkel and Chinese Premier Wen Jiabao, China being this year's Guest of Honour. At a China-Germany Business Summit in May, Wen called for continued cooperation, proposing the nations strive to double their bilateral trade to USD 280 billion U.S. dollars by 2015.

The Chinese leader described Sino-German cooperation as being at its most vibrant and fruitful period. "We must cherish our hard-won achievements, and with more active attitudes, expand our pragmatic cooperation to more fields and take it to a higher level," Wen said.

Extending cooperation into the future

The future challenge for the two countries is to extend cooperation into environmental protection, formulating energy-saving standards, developing new energy technologies, green architecture and urban planning.

Christopher Hock meanwhile is seeing both sides of the two nations business needs. "The Mazars German Desks in China assist German-speaking companies with their China development, from feasibility studies to M&A and we are seeing continued interest by German businesses in entering China."

"On the other hand, in Germany, Mazars China Desks help Chinese companies expand into Germany and other European territories through investment analysis, identifying acquisition targets and related compliance and tax issues. Initial enquiries often begin here in China. Partly due to the long standing relationship, China does see Germany as something of a gateway to Europe"

As for Volkswagen, they have announced plans to nearly double production in the coming years to raise capacity to 4 million cars a year. And the good news for China's drivers is the VW Santana, designed 25 years ago, is still selling in China today.