China Outlook for 2024 A Perspective from German Companies
Despite a slower-than-expected economic recovery with 52% of German companies that have been surveyed stated a decline in their industry, China's importance to the German economy remains undiminished. As Germany's most important trading partner for the seventh consecutive year, the bilateral economic relationship continues to support millions of jobs in both countries. China's vast consumer market, sophisticated supply chain infrastructure and burgeoning innovation capabilities underscore its central role for German companies and 9 out of 10 German companies expect the Chinese economy to recover within the coming 5 years.
However, the survey reveals that there are significant hurdles ahead in 2024, including increased competition from local companies, market access disparities, geopolitical tensions, and broader economic headwinds. These challenges have prompted German companies to recalibrate their business strategies toward greater supply chain diversification and localization. However, commitment to the Chinese market remains strong, with 91% of respondents indicating no plans to exit. This resilience is further evidenced by optimistic growth expectations and planned increases in investment, which are seen as essential to maintaining competitiveness in the Chinese market.
Moreover, amid the rise of formidable Chinese competitors—every second surveyed German company said that within 5 years a Chinese company will be an innovation leader within their respective industry—, there's a call for policies that ensure fair competition and bolster investor confidence. Such measures are not only critical for foreign companies, but also promise to spur innovation and productivity across the board, benefiting both China and the global economy as a whole.
As we look towards the future, the German Chamber of Commerce in China emphasizes the importance of dialogue and cooperation with Chinese government agencies to improve the business ecosystem. Achieving a truly level playing field remains a priority, with the potential to unlock further economic growth and innovation for both nations creating a win-win environment.
The Business Confidence Survey 2023/24 paints a picture of cautious optimism, strategic recalibration, and an enduring commitment to the Chinese market among German companies, calling for strategic adaptations towards a state-of-the-art New China Playbook to secure and grow in China while safeguarding business resilience.
But moving from a traditional foreign business towards being a true local player involves a variety of steps that must be considered, from strengthening a local-for-local approach across different business functions over establishing a well-developed connection within the Chinese local ecosystem to enabling a mature and self-sufficient China organizational set up, along with the changing macro environment and new growth drivers.
With 30 years of experience in China, EAC can support your China endeavor and support with comprehensive and implementable strategies and chart your company’s path towards a New China Playbook.
Our EAC Partners John Deng and Daniel Berger can be connected for further discussion on this topic.
