F REIGN TRADE - 中国国际贸易促进委员会

Regional Trade & InvestmentEUROPEGerman Companies Confident withChinese Market amid ChallengesBy Zhu ZijunGerman companies are confidentwith the growing Chinesemarket and are aimingto further expand theirbusiness operations locally, according toa recent report by Euro Asia Consulting(EAC) and the German Chamberof Commerce in China (GCC).The further expected growth inChina is fueled by an increased demandfrom Chinese customers. 70 percentof the German companies interviewedexpect a growing demand, either dueto the Renminbi appreciation or overallgrowing economy and increasing wealth,said the study based on 30 Germancompanies doing business in China.However, they also realize thatdomestic competition will increase significantly,mainly due to a better accessto foreign markets and technologiesand improved domestic cost structures.Domestic companies have gainedin number and size and have also beenable to significantly improve their productquality in the past.“Local companies are getting betterand better (often through trial anderror) and also more innovative. Theyhave managed to greatly improve theirquality level already,” said a companyrepresentative of the chemical industry.The Renminbi appreciation forcesChinese enterprises to become morecompetitive in an international comparison.“Made in China” can no longeronly be competitive based on costadvantages due to rising prices abroadcaused by the strengthening Renminbi.Local companies can also benefitfrom the Renminbi appreciation bygetting cheaper access to foreign technologyas well as potential acquisitiontargets and international markets.58Investments of Chinese companiesabroad will increase significantly toget more presence in and access to internationalmarkets as well as to acquiremore technology and know-how.“Local competitors have lookedat a number of different technologiesabroad and have applied them to theirown processes afterwards,” said a companyrepresentative of the electricalindustry.Apart from the domestic competition,the foreign competition is alsoexpected to increase in China. Theinterviewed company representativesexpect growing foreign investments inthe Chinese market. Many also see themarket saturated to a certain extent already,said the report.As such, the companies involvedin the study agreed that they have tobecome both, more efficient and innovativein the future to stay competitive.Being highly localized, manyGerman companies in China have adjustedtheir China strategies to the localmarket and do therefore barely see anymeasures to be taken due to the past,present and future Renminbi appreciation.Due to the growing market inChina however, many see the need tonot only focus on the high-end marketsegments anymore, but rather move towardsa broader mid-end market.Most companies talked to in thesurvey are also strongly focusing onfurther increasing their market sharein China. They all see a huge growthpotential of the Chinese market, wantto be a part of it and further profit fromsuch development.In order to realize such goals, anumber of strategies measures havebeen introduced by the companiesincluded in the survey. Such strategicmeasures include a variety of differentattributes, covering aspects of localadaption, process improvements andexpansion.However, many enterprises talkedto in the course of the study realizedthat in the past they have not alwaysworked on constant improvement oftheir China strategy. For many years,the operations in China grew simplybased on the significant economicgrowth in China. With rising operationalcosts described earlier however,those companies have in the past 2 – 3years again focused on China as theirmajor growth engine, the report said.“We have been in this market formore than 10 years already, but didn’treally focus on actively growing untilthe last 3 years. Now we have a realstrategy and are trying to achieve anannual growth of about 20 per cent,”said a company representative of themachinery industry:However German companies arestill confident of themselves with theiridentified specific advantages, such ashigh quality, service & reliability, highbrand image, technological know-howand innovation. Many German companiesinvolved in this study still seethemselves ahead of local competitorsby at least 2 years and up to 10 yearsdepending on the industry.“China will gradually move awayfrom its image of being a low-cost/low-wage country, and will increasinglydevelop towards a country focusing onR&D and innovation. Hence, over thelong-term, China will catch up, for nowhowever, made in Germany still wins,”said a company representative of theautomotive industry.