German Companies in China Complain About Price Pressure

German Companies in China Complain About Price Pressure

Ahead of the visit by Germany’s Federal Minister for Economic Affairs, Robert Habeck, to China, German companies in the country have called for more support from Berlin and highlighted existing challenges. According to a survey by the German Chamber of Commerce Abroad (AHK), 61% of over 180 member companies currently see price pressure as the biggest challenge. The cause is intense competition, exacerbated by weak demand in China and globally, said Clas Neumann, Chairman of the German Chamber of Commerce in East China, in Beijing.

The survey indicated that companies are urging the Green politician, who is visiting China this week, to advocate for equal treatment of Chinese and foreign companies in China. There is hope that the recently threatened EU tariffs on Chinese electric cars will not be the only topic of discussion, said Maximilian Butek, Managing Board Member of the AHK East China. German companies have long complained about unfair competition conditions and restricted market access.

Additionally, 75% of the companies surveyed reported observing overcapacity in their industries. Nearly all indicated that this overcapacity affected their business. China has long been accused of producing state-supported overcapacity in industries like battery manufacturing and solar energy, meaning they produce more than the demand warrants. Beijing denies these accusations, consistently stating that these sectors are driven by innovation.

Butek believes that the market will self-correct the overcapacity issue. “We believe this is a more mid-term effect, but it will not be resolved in the next two or three years until consolidation occurs and overcapacity is reduced,” he said. The AHK also hopes for increased global demand.

Despite many problems inside and outside of China, more than a third (38%) of German companies remain optimistic and expect an improvement in economic conditions, according to the survey. Nearly half anticipate no change, and 16% foresee a worsening situation. Only about a quarter expect rising profits this year. Over the next two years, just over half plan to invest more in China.

Domestically, China is struggling with low demand, while a real estate crisis, high youth unemployment, and local government debts are weighing on economic performance. Internationally, trade tensions with key partners, the USA and EU, are adding to the strain. The AHK survey included 186 of the 2,100 member companies, conducted between May 21 and May 29. The strongest representation came from the mechanical engineering and automotive industries.