German Companies in China Report Record Low Business Environment

According to the German Chamber of Commerce in China, German companies operating in China are experiencing a record low business environment due to increasing competition and a slowing Chinese economy. A survey conducted by the Chamber revealed that more than half of German businesses reported a deterioration in industry conditions this year. Furthermore, only 32% expect any improvement by 2025, marking the most pessimistic outlook since the survey started in 2007. Clas Neumann, head of the German Chamber of Commerce’s eastern China division, highlighted the challenges faced this year, which have led to a downward revision of future expectations. Nevertheless, he also mentioned that a significant portion of German companies (92%) remain committed to maintaining their presence in China's large economy. Germany is China's largest European trading partner, with major companies such as Volkswagen, BMW, and Bosch making substantial investments in the country. The concerning state among German firms reflects the worries seen in a similarly pessimistic survey of the British business community conducted the previous day. Direct foreign investment (DFI) in China has declined for two consecutive years, despite accounting for only a small fraction (3%) of the country’s total investment, indicating a diminishing confidence among international investors. According to the Chamber's findings, 51% of German businesses planning to increase their investments in China over the next two years, 87% are doing so primarily to compete with local firms. This represents an annual increase of eight percentage points in investment motivation.