China still top choice for foreign investors

Firms stay positive despite the economy's slowdown

China's economic restructure will usher in a new era of German investment featuring automation, digitalization, environmental technology and renewable energy, according to the German Chamber of Commerce in China.

German businesses operating in China are performing robustly and remain relatively optimistic despite the economic slowdown, according to the Business Confidence Survey 2014 conducted by the chamber between May 12 and June 6.

The survey drew responses from 417 companies, which accounted for 17.4 per cent of the chamber's members.

"Its importance as a global market has, despite slower economic growth in China, continued to increase for both turnover and profit. This indicates that the Chinese market remains a key growth driver for German companies," Lothar Herrmann, chairman of the northern division of the chamber, said during the release of the survey.

The importance of the Chinese market has continued to increase, with more than three fourths of respondents identifying domestic demand in China as the most important market for their local operations.

German companies operate in China to participate in economic growth and development within the country and they invest in China to satisfy domestic demand, according to the survey.

In contrast, the 2014 European Business in China Business Confidence Survey, released on May 29, found that 46 per cent of 552 surveyed businesses believed the "golden era" for multinationals in China has ended, amid tougher business conditions in a slowing economy.

Herrmann said that the structure and knowledge base of German industry "fits very, very well with the reform agenda of China for the next few years."

German companies in China believed that economic conditions remain fairly stable compared with 2013 and they were "cautiously positive", the survey found.

The automotive sector in particular maintained a largely positive outlook.

A key point in the report was that, this year, there was a jump in the portion of companies expecting to exceed business targets compared with 2013. The survey suggested this indicated the Chinese economic slowdown was not as severe as anticipated.

In late March President Xi Jinping visited Germany, which is the nation's largest trade partner in the European Union. It was the first trip by a Chinese president to Germany in eight years.

Michael Clauss, German ambassador to China, said that the success of China's economic reforms "depend, to a large extent, on foreign investment in China and the country needs to continue to create a level playing ground for investment inflows".

Problems related to human resources-rising labour costs, finding and keeping qualified staff-have consistently been the biggest challenge for German companies in China.

"However, a comparably smaller share considers them to be major business challenges," Herrmann said. "German companies are getting more mature.

"For the first time, more than 50 per cent of companies have operated in China for over a decade. They have invested in their people, brought new training methods into China."

Slow Internet speed has become the biggest non-personnel business challenge confronting German companies, according to the survey.