Beijing/Shanghai/Guangzhou, June 8, 2023: The German Chamber of Commerce in China has published the results of a Flash Survey which indicates that German companies' business sentiment towards China post-COVID is not as optimistic as initially hoped. The slower-than-expected market development, as well as ongoing geopolitical tensions, have dashed hopes for a quick improvement in the business environment. Jens Hildebrandt, Executive Director & Board Member of the German Chamber of Commerce in China - North China summarizes: “Geopolitics have a profound impact on companies on the ground, prompting them to drive forward localization and diversification strategies as risk management measures”. He adds: “German companies will sustain investments in the Chinese market as a means of remaining competitive and leveraging its potential”.
Findings:
- Business outlook restrained: More than half of German companies expect unchanged or worsening industry development for 2023, despite China's pivot away from zero-COVID.
- Profit development weaker than expected: Last year, 22% of companies expected profits to decrease by more than 5% for 2023. This year, that number has increased to 32%, a jump of 10 percentage points.
- Investment confidence unimpressed by end of Zero-COVID: 55% of German companies are planning to increase investment in China in the coming two years, which is 4 percentage points more than last year, but far behind pre-COVID levels.
- Sluggish market development and politics deters investors: The main reasons for not investing are low expectations for market expansion, ongoing geopolitical tensions, and China's self-reliance policies.
- Competition drives investment: If companies continue investing, 62% are doing so to remain competitive in the Chinese market, while 48% expect to benefit from the market’s growth potential.
- Localization & diversification trend continues: Headquarters’ response to rising geopolitical tensions combines increased diversification outside of China and intensified localization inside China.
- China’s policy makers need to act now: Measures to stimulate consumer confidence and targeted support for businesses are required. Currently existing business obstacles need to be removed.
- Wish list for government consultations: 45% of German companies desire a clearer regulatory framework, while 60% ask for increased collaboration in decarbonization, smart manufacturing, and mobility.
- Visa backlog pressing concern: Over 75% of German companies are negatively impacted by slow processing of business visas to Germany for Chinese employees.
About the Post-COVID Flash Survey:
Between May 9 and 17, 2023, a total of 288 member companies of the German Chamber of Commerce in China responded to the survey. The Post-COVID Flash Survey captures the business sentiment among German Companies in China after the Chinese government’s pivot away from the Zero-COVID-policy. The results of the Post-COVID Flash Survey are compared with those of the Business Confidence Survey 2022/23, which was conducted between August 23 and September 21, 2022.
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