AHK Policy Barometer

Continuation of Existing Macroeconomic Policies

Status Quo：The focus on industrial upgrading, high-quality development and innovation to drive economic growth has been re-emphasized at the Third Plenum in July while increasing consumer demand was rather approached by indirect measures yet again. However, during various recent government meeting formats and press conferences more efforts to boost domestic demand have been on the agenda, such as consumer goods trade-in (see below for more information).

Pulse Check：German companies have set up operations in China to serve the local market. The prolonged period of low consumer demand negatively impacts their China business. To address this challenge, foreign businesses have hoped for more effective initiatives as a result from the Third Plenum.

Latest Developments on Market Access

Status Quo：The central government is taking more detailed steps to implement the “24 measures” to boost foreign investments, including market access for foreign companies. A new version of the "negative list" for foreign investment was issued in September, completely removing restrictions on foreign investment in the manufacturing sector. Authorities also announced relaxations in the healthcare sector, for example allowing wholly foreign owned hospitals to be established in nine core cities.

Pulse Check：On the one side, the two remaining manufacturing items that were removed have not been relevant for German businesses before anyway. Therefore, with the shortening of the list, there will be no change for German businesses. On the other side, tangible progress has been made in the service sector offering potential new opportunities.

Enhancing Consumer Demand Through Trade-in Programs

Status Quo：More provincial and local governments have released their implementation plans on consumer goods trade-in, including concrete subsidies. These measures aim to boost economic growth and have been initiated in March this year. Most subsidies for these programs are sourced from CNY 150 billion of ultra-long-term special treasury bonds (STBs). Products supported are for example vehicles, electric scooters, mobile phones and household appliances.

Pulse Check：The recent low retail sales data for August with 2.1% year-on-year increase, the second lowest level of this year, suggests that these policies have not yet achieved the intended effect, particularly with regards to big ticket items. Hence, German companies that offer products in this area haven’t yet seen the business opportunities they were hoping for.

Green Development as Driver for Economic Growth

Status Quo：The Third Plenum in July highlighted green development as a priority again, for example carbon reduction, pollution reduction, improvement of environmental governance systems and low-carbon development. Since then, the State Council released major documents such as shifting from controlling energy consumption to controlling carbon emission and accelerating the comprehensive green transformation of economic and social development. 

Pulse Check：The long-standing commitment to sustainable practices has become a competitive advantage for many German companies. To maintain this asset, it might be necessary for companies to apply new standards, for example related to ESG factors, adapt to green manufacturing or to digitalize processes. Meanwhile, companies might face challenges in their green ambitions, such as obtaining access to green energy.