German companies remain optimistic in China

Despite China's economic slowdown, German companies operating in the nation expect increased profits and sales this year, according to a survey released on Monday.

Finding qualified employees remained the biggest challenge, in addition to concerns in the protection of intellectual property, the survey by a German business organization found.

"The interviewed German companies generally held that the economic environment this year will significantly improve from last year," Joerg Mull, chairman of the German Chamber of Commerce in China and executive vice-president of the finance department of Volkswagen (China) Investment Co Ltd, told a news conference on Monday.

"Companies in South China and Southwest China are especially optimistic and Chinese exports are somewhat picking up after a two-year slowdown."

In the survey, 47.7 percent of German companies, compared with 30.2 percent in 2012, held a "significantly improving" or "improving" business outlook for the remainder of 2013.

The expected improvement in South China and Southwest China jumped to 50.7 percent from 19.6 percent in 2012, outstripping the 17-point increase in East China and the 6.9-point rise in North China, according to the survey, German Business Confidence 2013.

The annual survey, conducted from May 13 to June 7, received responses from 502 companies, or 22.8 percent of the chamber's 2,200 members in China.

"German companies have specialized know-how, especially those in the public safety and environmental protection fields. They adopt long-term development strategies in China," said Rolf Koehler, vice-chairman of the German Chamber of Commerce Shanghai, at a news conference in Shanghai on Monday.

Up to 69 percent of the surveyed companies anticipated higher turnover in 2013, compared with 65 percent in 2012 and 67 percent in 2011.

Also, 54 percent of the companies projected profit increases in 2013, slightly higher than the 53 percent that had this outlook in the past two years, according to the survey.

Only 8 percent of the companies, in contrast with 12 percent in 2012 and 17 percent in 2011, envisioned profit increases of more than 25 percent.

"It seems that the fast growth period of turnover and profit is gone, but that is in line with China's economic performance," Mull said.

Koehler added that 90 percent of the surveyed companies plan to maintain or increase investment in China in 2013.

China is among the top three markets worldwide for 60 percent of the interviewed companies in terms of turnover and for more than 50 percent of the companies in terms of revenue.

"The future investment outlook is the most attractive for the electronics, automotive, chemical, plastics and metal industries.

"Following key customers in China is the main reason for new investments, most significantly for the automotive sector, while regional diversification was listed as the second most important reason, mostly for the consulting and plastic and metal industries," Mull said.

The survey also showed that Shanghai, Chengdu and Beijing are the most attractive locations for future investments by German companies.

Shenyang and Nanjing were new entrants among the top 10 locations.

More than half of the companies said that local governments supported them adequately.

German investment in China reached $1.22 billion in the first five months of this year, up 57.3 percent from a year earlier and compared with the 1.03-percent gain in China's overall inflow of foreign direct investment into the non-financial sector, according to the Ministry of Commerce.

"We have to note that the Chinese market is much less open to German investors compared with the European Union's market openness to Chinese investment .... Many German companies in China expect fair treatment in market access," said Beate Grzeski, head of the economics department at the Embassy of the Federal Republic of Germany in Beijing.