Sino-German bonds continue to advance

The author is the delegate and chief representative of the Delegation of German Industry and Commerce Beijing.

Trade relations between China and Germany have steadily progressed in tandem over the past 35 years.

By 2014, the bilateral trade made up 7.5 percent of Germany's foreign trade, making China its third most important trading partner and important market outside the European Union. At the same time, Germany is China's most important market within the EU, which overall is China's largest trading partner.

Over the past few decades, the importance of the Chinese economy for German companies has translated into a steady flow of investment, with the capital stock invested by Germany growing to around 48 billion euros ($52.98 billion) by 2014.

Germany has consistently been among China's top 10 foreign investors, with direct investment flows nearly doubling from their value in 2010 to $2.1 billion by 2013, a level that was maintained in 2014.

The vast majority of German investment continues to be concentrated in China's three main economic centers - around Shanghai in the Yangzte River Delta, Beijing in the Bohai Economic Rim, and Guangzhou and Shenzhen in the Pearl River Delta.

Smaller clusters of investments are located in the northeastern provinces of Liaoning and Jilin, around the cities of Shenyang and Changchun, as well as Chengdu in Sichuan province and Chongqing in Southwest China.

The diversity and strong growth of China's economy has continued to attract German companies with international operations. Their manufacturing experience and know-how in such traditional German strongholds as automotives, machinery and chemicals have been major drivers for investment in China.

The German Chamber of Commerce in China estimates that around 5,200 German companies are currently operating in China.

German investment accounts for 1.1 million jobs in China with a focus on high-tech industries requiring greater skill sets of its employees.

The majority of German companies are engaged in technology-intensive industries with a strong focus on the Chinese market, rather than using China as a cheap production base for exports.

The Chinese economy is transitioning from an extensive period of rapid growth to an era of more moderate growth. Economic and business conditions in China are changing, which also affects German companies' businesses in China.

German companies increasingly realize that the transition will bring new challenges but also opportunities, according to two recent flash surveys, which the Chambers of Commerce and Industry in Germany, in cooperation with the Association of German Chambers of Commerce and Industry and the German Chamber of Commerce in China carried out in both countries among their member companies.

German companies have mostly maintained their optimism, and the Chinese market continues to be a major contributor to their growth and has established itself next to the United States and the EU.

Shortage of qualified staff is consistently named as one of the biggest business challenges in the yearly membership survey of the German Chamber of Commerce in China, which, in turn, pushes up labor costs, another major challenge in the market.

In addition, Internet speed and access is a concern, which limits the utilization of modern information technology.

Over the years, China has enhanced its business environment by improving the protection of intellectual property rights as well as curbing corruption.

However, despite the progress that has been made, German companies expect further reform measures that will strengthen market forces and lower domestic protection barriers.

As China is undergoing significant structural changes, services and consumption are beginning to comprise a larger share of the GDP. The importance of manufacturing for China, however, will continue to remain of great significance.

A key to the success of German industrial strength is the focus on high-tech manufacturing driven by innovation. A lot of German companies operating in China are already pioneers in industrial upgrading.

In many aspects they are well positioned to partner China during its transformation. This partnership also can go beyond manufacturing.

Improving the environment is a key issue in China, and Germany is a global leader in the field of green technology and reducing its reliance on fossil fuels. In dealing with the consequences of an aging society, German companies are also leaders in healthcare services and equipment. These are strategic areas with high growth potential.

There is ample room for a continuous strengthening and deepening of Sino-German business cooperation.

(China Daily 10/29/2015 page13)