More German firms leave China or consider exit – survey

By Sarah Marsh

BERLIN (Reuters) – The proportion of German firms exiting the Chinese market or considering doing so has more than doubled to 9% in the past four years, according to a survey by the German Chamber of Commerce in China.

The survey highlights the challenges faced by German companies operating in China, including increased competition from local companies, unequal market access, economic headwinds and geopolitical risks, the chamber said.

“Last year was a reality check for German companies operating in China,” said Ulf Reinhardt, chairperson of the chamber for southern China.

Some 2% of the 566 firms surveyed between Sept. 5 and Oct. 6 said they were selling off business operations in China while 7% said they were considering doing so. That compared to a total of 4% exiting China or considering doing so in 2020.

Moreover 44% have taken steps to address risks linked to their business operations in China – including building up China-independent supply chains.

The survey comes half a year after the government unveiled a strategy toward de-risking Germany’s economic relationship with China, its biggest trade partner and confirms anecdotal evidence reported by Reuters of German firms reducing their dependence on China.

Other countries in the West are also promoting risk mitigation amid concern about China’s increasingly assertive attitude towards Taiwan and in the South China Sea, as well as its tightening grip over its domestic economy.

China’s economy is facing a downward trajectory, some 86% of German firms said in Tuesday’s survey, although most deemed it to be temporary and predicted a bounceback within the next 1-3 years.

China’s recovery from the pandemic has proven shakier than many expected, with a deepening property crisis, mounting deflationary risks and tepid demand casting a pall over this year’s outlook.

Some 54% of surveyed German firms said they nonetheless planned to increase investment to stay competitive.

(Reporting by Sarah Marsh; Editing by Christina Fincher)