Why German firms doing business in China are infuriated

Admin I Monday, July 22, 2024

 

CHINA – German firms doing business in China are disappointed by the outcome of last week’s closely watched Communist Party meeting on long-term reforms to the world’s second-largest economy, a top industry representative said on Monday.

The companies had “hoped for more guidance and specifics” when it comes to economic stimulus measures, said Maximilian Butek, the chief representative of the delegation of the German Industry and Commerce in Shanghai​.

Butek said the plans laid out in public at the Third Plenum of the Communist Party’s 20th Central Committee were ones of “continuity.”

German companies in China must continue to prove their staying power, he said, predicting a market environment “that is unlikely to improve in the foreseeable future.”

In addition to the intense competitive pressures, low level of trust in an often opaque market and subdued private sector investments are also causing problems for German companies in China.

Hopes for greater market liberalization and equal treatment of foreign and domestic companies had also been dashed in the final communiqué issued at the conclusion of the meeting, which is usually held every five years. This year’s meeting came as China’s economy struggles through a downturn.

China’s leadership needs more economic growth and knows that there is no way around opening up its market, but this clashes with Beijing’s desire for firm control over vast swathes of the economy, Butek said

“The Third Plenum did not help to resolve this contradiction, but rather intensified it,” said Butek.

German companies in China have long complained about unfair competitive conditions and more difficult market access.

Against this backdrop are growing trade tensions. Berlin accuses China of state-supported overcapacity in areas like battery manufacturing and the solar industry, producing more than demand allows and then flooding the world market. Beijing denies this.

China was Germany’s most important trading partner in 2023 for the eighth consecutive year, according to German statistics agency Destatis.