German firms will continue to welcome Chinese cash

16  January 2013

Chinese investment in Germany will keep on growing as domestic companies seek to acquire advanced technologies and enhance their brand awareness in the European Union, a new study has suggested.

The findings, by Berners Consulting GmbH, a German consulting company, show Chinese investment in the country began to gain momentum in 2003, and had reached 629 million euros ($820 million) by 2009.

According to Germany Trade and Invest, a government organization affiliated to the Ministry of Economy, by 2011, there were 159 Chinese investment projects in the country, exceeding the number of US-backed projects for the first time.

Yi Cao, a spokeswoman for Germany Trade and Invest, said Chinese investment volume in the country is still relatively low compared to other countries, but “it is growing significantly”.

Miriam Fritz, a consultant with Berners Consulting, said the fast growth in Chinese investment in Germany will be maintained in the coming years, and measures including streamlined procedures for overseas investment and governmental funding continue.

The Berners study shows Chinese investment in Germany is currently centered on two main sectors, machinery and auto parts, and is “mainly aimed at acquiring advanced technology and expanding in the country and across EU”.

From just seven direct Chinese investments in 2007, there were 80 Chinese businesses established in Germany by 2011, according to the latest findings on foreign direct investment made on green and brown field sites.

But Yi said Chinese investors certainly aren’t just interested in extracting German technical know-how.

“They find Germany attractive as a high-tech business location, and also as a market which enjoys a highly qualified workforce, especially in R&D.”

Li Ying, a project manager with Berners, added: “Germany’s stable economic performance, is another important factor for Chinese companies currently investing.

“Chinese private investment in Germany will play a more important role, especially because of China’s financial strength at the moment.”

China’s growing investment links with Germany were highlighted earlier this year, after construction equipment giant Sany Group surprised the market by taking over Putzmeister Holding GmbH, a German company that had been one of the biggest operators in the sector for about 30 years, in a 360-million-euro deal.

In the past, Chinese companies had entered the market by setting up branches or subsidiaries, with mergers and acquisitions accounting for just 45 percent of total investment. “But that number is expanding, and the targets are diversifying,” said Li.

“In fact, Chinese companies used to favor bankrupt projects in Germany – but now they are more strategic, and their mergers and acquisitions are more long-term.”

However, Chinese companies also face significant obstacles in Germany.

As well as the cultural bias against anything ‘made-in-China’, market access, and expansion can prove limited without strong links with local trade and investment promotion agencies, according to Li.

Mario Ohoven, president of the European Confederation of SME Associations, which represents around 55,000 small and medium-sized companies, told China Daily: “Generally, we have a positive approach toward foreign investments and joint ventures.

“First, they can contribute to the internationalization of our own medium-sized companies. Second, they bring much-needed liquidity.”

But Ohoven also said that companies are becoming increasingly careful about accepting any foreign investment, especially in the current economic climate, and that companies in Germany are well aware of the potential intentions of some inward investors.

“It is important that German know-how doesn’t disappear to foreign countries,” Ohoven added.

One key supporter of Chinese growth in Germany is the Federation of German Industries, the leading organization of German industry and industry-related services.

Markus Kerber, the federation general manager, told China Daily that it considers Chinese investment as providing a valuable contribution to economic growth and employment in the country.

“As an export nation Germany is dependent on open markets. But in the other direction, Germany must be open to foreign investment, and we have no general concerns about Chinese investors.”

Kerber said that many German companies are family owned and can be protected against hostile takeovers.

And other conditions are in place which protect target companies, such as strict employment and corporate laws, and those protecting patents. “Fears about political investment from China are exaggerated,” he added.

Albrecht von Hagen, general manager of the German Federation of Family Owned Businesses, said he saw no reason to be concerned about Chinese investment.

“We are glad to see it. In a global world, free trade and capital flows are completely normal,” he said.

“German companies use the advantage of a world market to invest, for instance in China and Brazil and develop new markets.”