ZEW-PwC China Economic Barometer: German Companies See Themselves as Ahead of Chinese Competitors

German companies are well positioned with respect to their Chinese competitors. This is the outcome of the latest ZEW-PwC China Economic Barometer for the 3rd quarter of 2015, which surveyed executives from German companies working in China. Three quarters of those surveyed believe they are ahead of their Chinese competitors. Just eight per cent reported on Chinese companies that were ahead of them. The ZEW-PwC China Economic Barometer is a quarterly survey by the Centre for European Economic Research (ZEW) in cooperation with PwC.

Company executives believe their advantages lie particularly in the manufacture of complex products, innovation or robust brands: “The Chinese companies are a long way off displacing German companies on the world market. There are only a few isolated examples of serious competition in the IT or telecommunication industries”, says Jens-Peter Otto, Partner and Head of the China Business Group at PwC, but warns: “This advantage is not a given. German companies need to remain alert, progress investments and also make sure their lead in know-how is legally secured.”

Executives expect a slowdown in the growth of the Chinese economy over the next twelve months. Half of them think consumer prices will rise over the next six months. This is driven partly by an increase in unit labour costs which 90 per cent of those surveyed expect to happen. Sixty percent are also convinced that interest rates will continue to fall. “Because of the slowdown in Chinese economic growth, foreign companies will hold back on investing in the country. There is mounting pressure to reduce costs and rationalise, particularly in periods where economic growth is declining whilst prices for labour, land or capital are rising”, says Otto.

Companies critical of the regulatory environment

“German companies overall are more critical of the regulatory environment in China than they were just two years ago. This applies in particular to copyright and intellectual property”, says Professor Dr Michael Schröder of the Centre for European Economic Research (ZEW). The only areas where a majority of those surveyed expect to see an improvement in operating conditions were financing conditions and new business approvals. “Most executives are now more convinced than before that the renminbi exchange rate will be flexibilised and the Chinese currency will be floated within a foreseeable period of around three years”, Schröder says. 

For further information please contact

Dr. Oliver Lerbs (ZEW), phone +49 / 621 / 1235-147, e-mail lerbs@zew.de

Prof. Dr. Michael Schröder (ZEW), phone +49 / 621 / 1235-140, e-mail schroeder@zew.de