The Flash Survey reveals that although German companies operating in China are increasing their turnover expectations, optimism about the Chinese economy returns only slowly. Investment confidence took a setback with just over half of companies wanting to increase investment. German companies in China are most concerned about price pressure as a result of intense competition, which is magnified by weak demand in China and abroad. They need policymakers to take action towards establishing a level playing field and providing a transparent regulatory environment in China.
Key Findings:
- Optimism in the Chinese economy is slowly returning: 38% expect an improvement in the coming six months, while 16% expect the economy to weaken. 46% of respondents are not anticipating significant changes to China’s economic development in the coming six months compared to the previous six months.
- Business outlook is recovering at a low level: Just 38% of respondents anticipate a worsening situation for their industry compared to 2023, a significant decrease from 52% when asked the same question last year in September. Meanwhile, 29% expect their industry to improve compared to the previous year – a slight increase of 8 percentage points.
- Surging turnover, while profits remain stagnant: 39% of companies project their turnover to increase in 2024 compared to last year. When asked the same question last year, only 13 % were expecting increasing turnover. However, only 25% expect profits to increase by the end of 2024.
- Slim majority plans to keep investing: Only 53% of respondents are planning to increase their investment in China in the coming two years, down from 61% when asked the same question last year. 27% are not planning to invest further while 16% are planning to decrease investment.
- Price pressure dominates other challenges: Price pressure is cited by 61% of respondents as the biggest challenge they are facing at the moment. Weak demand in the Chinese market was also identified as a significant concern for 51% of respondents, while geopolitical tensions came in third with 37%.
- Majority observes overcapacities: 75% of German companies see overcapacities in their industry (little: 19%, medium: 36%, substantial: 20%). Nearly all (96%) of these companies state that overcapacities are affecting their business (slightly affected: 44%, strongly affected 49%, very strongly affected 3%). 49% indicate that they started observing overcapacities since last year (this year: 7%, 5 years ago: 35%, 10 years ago: 4%).
- Fair competitive environment must be a priority: 47% of respondents say that equal treatment of foreign and domestic companies should be addressed by the German government, followed by advocating for a more transparent regulatory environment (29%) and deepening cooperation formats in the area of green transformation (24%).
