German Innovation From China Going Global Amid a Complex Innovation Ecosystem - German Chamber’s Innovation Survey 2022
Beijing / Guangzhou / Shanghai, 28 June 2022 – Today, the German Chamber of Commerce in China, in cooperation with BearingPoint, published the results of the German Chamber’s Innovation Survey 2022. Results show that while local competition is increasingly growing stronger, German companies in China are additionally facing a challenging regulatory environment as well as a lack of strategic networks and partners in their innovation activities. German companies are meeting these challenges by localizing their innovation activities and increasingly conducting R&D in China for the Chinese, as well as global markets.
Local Competition Drives Innovation of German Companies
The increasing innovation capacities of competitors is the most significant innovation driver for 87% of German companies in China. Over half of the surveyed companies consider local Chinese competitors stronger in terms of establishing and expanding local R&D capacities (55%), R&D processes driven by local teams (51%) and time-to-market of new products and services (50%). Nevertheless, most German companies (86%) consider the quality of their products and services as their strength compared to local competitors. “The high quality of German products is a precondition and competitive advantage, but faster development cycles and time-to-market product implementation is a must to keep up with Chinese competition” says Martin Klose, Executive Director of the German Chamber of Commerce in China | South & Southwest.
Travel Restrictions, IP Concerns and Lack of Partnerships: Barriers to Innovation
IP protection remains a challenge for companies’ innovation activities in China. Every 6th company (16%) is negatively impacted by IP protection in China, especially in the machinery and industrial equipment industry (21%). To avoid infringement risks, 30% develop core technologies abroad and only adapt locally. “Small and medium sized companies should focus on building up IP protection and data security standards in China to enable a safe know-how and resource exchange and competence building of the subsidiary while larger companies should maintain the high level of IP protection and data security standards and review related risks of knowledge transfer constantly” says Martin Klose.
The hampered knowledge exchange due to the ongoing travel restrictions also highly impacts innovation activities of German companies in China. 77% of the respondents report insufficient qualified staff which is severely accelerated through the travel restrictions.
For two-thirds (68%) of the surveyed companies, strategic partnerships are the most important form of open innovation. However, for 37% of German companies in China is the lack of external partners and networks a prominent innovation challenge. “Closing the prevalent local expertise gap through entering targeted partnerships to tackle innovation challenges is a successful strategic approach for German companies to enhance innovation activities in China” states Tunde Laleye, Partner & General Manager at BearingPoint China.
German Companies Expand R&D in China for Global Markets
China is not only an important market for German companies to conduct local research and development, but also an emerging hub for global markets. Nearly half of the respondents state they do R&D in China for the local market and roughly one-third of respondents do R&D in China for global markets. “Proper R&D can only work with a free flow of information between countries. Cyber Security and Data Protection Regulation should be clearly defined. In order to tap into the Chinese innovation ecosystem’s full potential, and mutually benefit from the possibilities, it is necessary to provide German companies with a reliable regulatory framework and ensure a level playing field” says Martin Klose.
About the Survey
Between February 17 and March 17, 2022, a total of 386 member companies of the German Chamber of Commerce in China participated in the “Innovation Survey 2022”. You can find further information about the latest results as well other surveys and economic data here: https://china.ahk.de/market-info/economic-data-surveys
About the German Chamber of Commerce in China
The German Chamber of Commerce in China currently has more than 2,100 members in China and is the official member organization for German companies in China. By providing up to date market information and practical advice, the German Chamber helps its members to succeed in China. It offers a platform for the Sino-German business community and represents its members' interests towards stakeholders including government bodies and the public.
BearingPoint is an independent management and technology consultancy with European roots and a global reach. The company operates in three business units: The first unit covers the advisory business with a clear focus on selected business areas. The second unit provides IP-driven digital assets and managed services beyond SaaS. The third unit is designed to explore innovative business models with clients and partners by driving the financing and development of start-ups and leveraging ecosystems.
BearingPoint’s clients include many of the world’s leading companies and organizations. The firm has a global consulting network with more than 10,000 people and supports clients in over 70 countries, engaging with them to achieve measurable and sustainable success.
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