By the end of 2021, there were about 5,000 German companies in China, and Germany is already an important source of foreign direct investment on the mainland. What are the characteristics of German companies investing in China? What areas do they prefer to invest in?
The latest data show that Germany's actual investment in China in the first three quarters of this year increased by 114.3% year-on-year, and German companies voted for confidence in China with practical actions.
What sectors do German companies prefer to invest in China? According to the data, automobiles, electronic parts, chemicals, industrial equipment, pharmaceuticals and biotechnology are the favorites of German companies. In 2021, these sectors accounted for almost 70% of Germany's FDI in China.
The localization of the supply chain is also something that German companies have paid more attention to in their investments in recent years.
In Qingdao, Shandong, the German company that has been deeply cultivating in China for 15 years, from the beginning of only one production line, one product, an annual output value of 10 million yuan, to now, the product has expanded to more than 40 categories, the annual output value has increased to nearly 3 billion yuan. In the past 15 years, the compound annual growth rate has reached 46.1%, which has a strong Chinese imprint.
Song Qiongli, Chief Financial Officer of Andre STIHL Power Tools (Qingdao) Co., Ltd.: The localization rate of this product at that time was only 20%, but by 2020, the localization rate of this pressure washer product we produced has reached 92%, behind the figures of 20% to 92%, it is actually our increasingly strong supply chain system in China, and our suppliers can see the rapid improvement of their technology and quality level.
Nowadays, more and more German companies are developing locally in China. This year, BASF Group of Germany invested in the integrated production base of Zhanjiang Chemical Project in Guangdong, and Merck Technology invested in the construction of an advanced semiconductor integrated production base in Zhangjiagang, and a number of major investment projects have landed.
The data shows that of all EU countries, Germany is the country with the most direct investment in China. In 2021 alone, German direct investment in China amounted to US$1.68 billion, accounting for one-third of EU investment in China.
Frontline research: Jiangnan Town witnesses Sino-German cooperation
Germany is an important trading partner of the mainland. On the one hand, many enterprises choose to invest and build factories in China, on the other hand, some places also regard cooperation with Germany as the direction of industrial development. In Taicang, Suzhou, 453 German companies have gathered here since the first German company settled in 1993 until September this year. This county-level city in the Yangtze River Delta has become a well-known highland of Sino-German cooperation.
Early that morning, Sun Jingyu invited a merchant to the Sino-German Life Science Park under construction in Taicang to introduce the factory. Although the park will not be completed until next August, the investment promotion work has been started this summer.
According to statistics from the Taicang Investment Promotion Department, as of September, Taicang has added 40 new German-funded projects this year, with a total registered foreign investment of more than 300 million US dollars, and the number of German enterprises has reached 453.
On the one hand, new projects are constantly being landed, and the number of German companies continues to grow. On the other hand, many existing German-funded projects have also increased capital and expanded production this year.
Qian Yun, Operation Director of Zhuoneng Electronics (Taicang) Co., Ltd.: This is the second phase of our plant under construction, which will have a production area of 15,000 square meters after completion. Then in the future, we plan to have 7 production lines in it.
The mechanical and electrical equipment manufacturer in Taicang invested an additional $20 million this year for the expansion of production lines. More than one German-owned company has chosen to increase production. As of September this year, a total of 14 German-funded projects in Taicang have chosen to increase their capital, with a total amount of 247 million US dollars, a year-on-year increase of more than 400%.
Victor Ugenmacher, General Manager of Zhuoneng Electronics (Taicang) Co., Ltd.: We are now paying more and more attention to our business in China. We have achieved in-depth cooperation with domestic customers in the fields of high-speed rail and aviation.
Up to now, more than 90% of the early-stage German-funded enterprises have completed capital increase and production expansion in Taicang, with a total investment of more than 6 billion US dollars. As German companies continue to integrate into the local area, the industrial chain is also more perfect. For German companies that focus more on the development of subdivided fields, the perfect industrial chain makes them more steady. In an automobile equipment manufacturer, the person in charge told reporters that some products can even go through the entire production, supply and marketing process on a street around the factory.
Ye Sen, General Manager of Hai Rui En Precision Technology (Taicang) Co., Ltd.: This is a motor spindle of our new energy vehicle and a product we are trial-making. It is very coincidental that our core supplier turns 500 meters left when we go out, and our customers turn 600 meters left when we go out. In addition to this product, we have calculated that 85% of our other products are also within the scope of our Yangtze River Delta regional integration.
From the first German enterprise settled in Taicang in 1993, to now, German enterprises in Taicang have formed leading industries such as high-end equipment manufacturing and automobile core parts production, gathering more than 50 "hidden champion" enterprises, and the annual industrial output value has exceeded 60 billion yuan.
Taicang's Liuhe River, connected to the Yangtze River at one end, can be said to be Taicang's mother river. In recent years, Taicang City has built a German-style street on the edge of the Liuhe River. Whether it is the 453 German companies with busy production lines, or the sweet and quiet German style street here. In the past 30 years, Taicang has witnessed the cultural integration of China and Germany, and also witnessed a more open China sharing the dividends of development with the world and working together for win-win results.
Taicang "new citizen" Ma Like: Take root in the local area to serve the two countries
Because there are many German enterprises in Taicang, at most more than 3,000 Germans live here, they have promoted Sino-German cooperation with practical actions and witnessed the effectiveness of cooperation between the two countries. Next, let's meet Ma Like, a "new citizen" of Taicang from Germany.
At half-past eight in the morning, at a café in Taicang, more than a dozen executives of German companies gathered to chat over breakfast. This is a breakfast meeting organized by the Taicang European Investment Enterprise Association. Government departments will introduce some of the latest industrial support policies here. As one of the organizers of the association, the German girl Marike also came to the scene early in the morning. After the staff introduces the policy, she will explain some of the key points in detail.
Ma Like, General Manager of the German Centre Taicang: Last Friday, I attended a policy promotion meeting organized by the Management Committee of the High-tech Zone, which introduced the contents of the manual you just saw.
The Taicang Association of European Investment Enterprises has 106 member units, most of which are German companies operating in Taicang. As one of the organizers of the association, Ma Likee is more like a volunteer to help companies understand local policies.
Marike is not only one of the organizers of the association, but also a German executive. As General Manager of the German Centre Taicang, she is responsible for leasing office space and providing services to many multinational companies that need to set up a presence in Taicang.
Taking advantage of the opportunity of her work, Ma Like will come into contact with a large number of Chinese and German enterprises, which also makes her a bridge of communication between the two sides. Since this year, in addition to renting houses, Ma Like has also set up a training platform to provide vocational skills training for enterprises in Taicang. In the past two days, next year's training plan is being stepped up, and cultural exchange courses are also set up.
Ma Like, General Manager of the German Centre Taicang: Many [Chinese] companies actually send a few employees to Germany, and then they also take advantage of the previous cross-cultural lessons. Then we also consider helping Germans in German companies to do cross-cultural courses, so that they can better understand the work culture here, how to communicate with colleagues, and so on.
Source: CCTV news client