ZEW-PwC Indicator of Economic Sentiment China - Favourable Prospects for Trading Activities of German Businesses in China

Favourable prospects for German businesses active in China: Trading activities and German exports to China will develop positively until mid-2014. This development is closely connected to the expected rise in Chinese domestic demand. Furthermore, Germany is a very popular destination for Chinese investors. In the coming six months, Chinese businesses are very likely to invest to a greater extent in German businesses and projects. These are the findings of a quarterly survey among executives from German industrial enterprises in China, conducted by the Centre for European Economic Research (ZEW) in collaboration with PricewaterhouseCoopers (PwC) and the German Chamber of Commerce in China.

The survey in the fourth quarter of 2013 shows that almost 90 per cent of the consulted executives expect their companies’ trade activities to increase in China. None of the respondents assumes that German business operations in China will drop. Furthermore, they are optimistic about trade between Germany and China. Almost 70 per cent estimate that the Chinese demand for German products will rise.

The positive development of Chinese domestic demand completes the given picture. Almost 80 per cent of the experts expect the Chinese domestic demand to increase over the coming six months. This may create new sales opportunities for German enterprises.

With regard to economic framework conditions, the executives rather hope for medium-term than short-term improvements. A majority of 72 per cent assumes that the sector-specific guideline catalogue of industries, which defines encouraged, permitted, restricted and prohibited foreign investments, will not be relaxed or abandoned in the next three to five years.

“It remains to be seen if the decisions of the third plenary session of the Central Committee of the Communist Party of China, which include the improvement of the framework conditions for foreign companies, will be implemented quickly,” says Dr. Gunnar Lang from ZEW.

It is remarkable that almost all questioned German companies in China agree that Chinese companies will continue their global shopping tour the upcoming half year. Germany is a particularly popular location for Chinese investors. Three thirds of the consulted executives assume that Chinese enterprises will invest to a greater extent in German companies and projects over the coming six months. “As early as in October 2013, the number of transactions carried out by Chinese companies in Germany reached the total value recorded in 2012. For about three years, the number of deals realised here in Germany has increased significantly,” comments Jens-Peter Otto, head of PwC’s China Business Group. “A current PwC study suggests that the management boards of the acquired German companies favour Chinese investors, since they barely change the existing structures and concentrate on market-strategic advantages of the acquisition.”

According to the participants in the survey, the Chinese M&A market will also be revitalised. In the coming six months, particularly the branches vehicle construction, electronics, and service providers are expected to record increasing M&A transactions.

Contact

Dr. Gunnar Lang (ZEW), Phone +49 621/1235-372, E-mail lang@zew.de

Jens-Peter Otto (PwC), Phone +49 69/9585-6040,  E-mail jens-peter.otto@de.pwc.com