Business Sentiment Among German Companies in China at Record Low

BEIJING (Reuters) – Business sentiment among German companies in China is at an all-time low, according to a German business lobby group on Wednesday, as they face increasing Chinese competition and a slowing economy.

Over half of German firms indicated that industry conditions had worsened this year, as reported in a survey by the German Chamber of Commerce in China. Only 32% anticipate improvements in 2025—marking the lowest expectation since records began in 2007.

Clas Neumann, chair of the German Chamber of Commerce's East China chapter, stated, "This year has been difficult for the majority of German companies, prompting a downward adjustment of their business outlook," while noting that 92% plan to maintain operations in the $19 trillion economy.

Germany stands as China's biggest European partner, with significant investments from German firms such as Volkswagen, BMW, and Bosch.

This survey follows a similar pessimistic sentiment survey among British companies operating in China. With foreign direct investment making up only 3% of total investment, it has been declining for the past two years.

The chamber found that 87% of the 51% of German firms looking to increase their investments in China over the next two years cited the need to compete with local firms as the primary motivation, reflecting an annual rise of eight percentage points.

Moreover, companies are facing a rising "Buy China" trend, influenced by Xi Jinping's self-sufficiency drive and the "Made in China 2025" initiative, resulting in local customers choosing local producers.

A recent factory activity survey revealed that new import orders for parts and components fell for the eighth consecutive month in October, while new orders increased for the first time in seven months.

The chamber urged Berlin to enhance its partnership with Beijing and to revise its China strategy to align more closely with German industry’s interests in localization rather than merely boosting exports.

Germany opposed European Commission tariffs of up to 45.3% on Chinese-built electric vehicles in an October vote. German automakers criticized these measures, fearing that increased Chinese import duties on large-engine gasoline vehicles would adversely affect them.

Last week, Volkswagen reaffirmed its commitment to China by extending its partnership with SAIC for another decade, despite selling its operations in Xinjiang due to accumulating pressure.