Commitment to the Chinese Market
Despite challenging conditions, China remains the most important market worldwide for German companies. German firms expect higher sales and increased profits and want to make further investments in China – despite indications that Chinese competition is significantly increasing. Challenges in human resources remain the most urgent problem in the Middle Kingdom, but with a slightly positive change. These are the findings of a business confidence survey conducted by the German Chamber of Commerce in China among more than 300 German member companies, from 14th May to 8th June 2012.
China is Becoming an Important Cornerstone for the Asian Market
For almost every other German company, China is one of the three major markets around the world - in the automotive and mechanical engineering industries, the ratio is two thirds. The sales potential in China and the proximity to residential customers remain the main reasons for a market presence. In addition, the Middle Kingdom is gaining importance as a cornerstone for business strategies in Asia. Similarly, the Chinese competition continues to increase (+10% compared to last year) and now three out of four companies face Chinese competition.
Ongoing Staffing Problems and More Protectionism
Finding qualified staff and increasing wage / salary costs are still the biggest challenges for German companies which are active in China. About 5% more companies than last year see bureaucracy as a challenge in China. On the other hand currency risks have been minimized due to the strong focus on China as a market as well as increasing domestic added value. After a difficult year in 2011 the companies are now slightly more optimistic towards the development of energy and raw material prices. The protection of IPR ranks at place 13 in the list of challenges but at the same time companies sense increasing protectionism in the Chinese market (+20% compared to 2007).
Continued Confidence for China’s Market
Around half of the German companies foresee the economic environment in China remaining unchanged in the near future. All in all, the positive expectations in regards to the business development in 2012 predominate. Over 70% anticipate that they will mainly meet their targets in the Chinese market this year. The automotive industry, however, claims to be confronted with many more challenges. The majority of the companies expect their business volume to continue to rise and their profitability to improve beyond 2012. But compared to last year these predictions have returned to normal. Investments will also increase in the upcoming year. Big companies in particular plan to further strongly invest in China.
Special Survey for Sales and Distribution in China in Cooperation with Euro Asia Consulting
Closeness to Customer Increasingly Important
Although the most important key markets for German companies in China are the Yangtze and the Pearl River Deltas, these firms predict that their future selling market will be in Central and Western China. Most of their customers (69%) come from the private sector, where Chinese companies as well as joint ventures and wholly foreign owned enterprises are included. Most German companies distribute their products directly in China (72%). In order to be close to the customer and to protect their own know-how and expertise, big companies especially are focusing on direct distribution. For long-term success, companies view improving their distribution efficiency (79%) as essential. Only 5% are satisfied with the current situation. In the future, indirect distribution channels in particular will gain more importance. This is mainly to face both internal HR problems and increasing pressure from competition in distribution.