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German companies complain about disadvantages in China

According to a survey, two thirds of German companies operating in China feel that they are being treated unfairly there. The Chamber of Foreign Trade is therefore calling for support during Chancellor Scholz's visit to the People's Republic.

A large majority of German companies see themselves at a significant disadvantage on the Chinese market. Two thirds of the companies surveyed by the Chamber of Foreign Trade (AHK) in China say that they are exposed to “unfair competitive conditions”. This emerges from a survey of 150 member companies.

80 percent expect higher cost pressure

At the same time, almost 80 percent of companies justify new investments in China by saying they want to remain competitive in the billion-dollar market. Chinese companies are increasingly becoming drivers of innovation.

Only five percent of those surveyed see their Chinese competitors as already playing a technological leadership role. However, 46 percent expect this to happen in the next five years. In the automotive industry the number is even higher: 58 percent expect domestic competitors to make technological leaps in the next five years.

It is also striking that the survey primarily sees private Chinese companies, but not state-owned companies, as the main competitors. As a result of increased competition, more than 80 percent also expect increased cost pressure. In addition, profit margins in the China business are expected to fall. At least 70 percent even expect a declining market share.

Government subsidies are omnipresent in China

In addition to competitiveness, 47 percent of companies say the reason for investing in China is that local customers and partners are pushing for more local production. This also has to do with the security of supply chains for sales in China. 37 percent say they have high expectations for the development of the Chinese market despite weak domestic demand.

The main disadvantages for foreign companies are informal access restrictions. The most frequently mentioned answers relate to the poorer access to networks or universities in China. Disadvantages compared to Chinese competitors are also seen in terms of standardization and tax breaks. This is followed by discrimination in public tenders, tax incentives in China and market access, which has also been criticized by business associations.

Whether electric cars or wind power: According to a study, China actually massively subsidizes domestic companies, especially manufacturers of green technologies. More than 99 percent of listed companies received direct government subsidies in 2022, according to an evaluation by the Kiel Institute for the World Economy (IfW) today. The People's Republic often uses the funds in a very targeted manner in order to bring key technologies to market maturity.

Companies expect support from the Chancellor

All of these topics are likely to play a role in Olaf Scholz's talks in China. He will travel to China on Saturday with a business delegation. From the AHK's point of view, the Federal Chancellor must find clear words for companies from Germany. “The expectation is, of course, that we hope that Chancellor Scholz will make the challenges we have here understandable,” said Maximilian Butek, executive board member of the German Chamber of Commerce in East China.

The Chinese party leadership must understand at the highest level that German companies have problems in China. They would stand in the way of another success story in the German-Chinese relationship in an economic sense. Butek admitted that Scholz could not address every problem in detail. However, he expects that regular exchanges between the authorities on both sides will be revived.

Scholz is traveling to the People's Republic for three days and wants to meet China's head of state and party leader Xi Jinping there. It is the Chancellor's second trip to the People's Republic since taking office in December 2021. His inaugural visit in November 2022 was only a day trip due to the ongoing corona pandemic.

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