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Investment seeds sown in Germany begin to sprout

By Yan Yiqi | China Daily European Edition | Updated: 2012-01-06 10:54

Investment seeds sown in Germany begin to sprout
Sany Group's factory Bedburg which was opened in June 2011. Chinese companies are keen to invest in the machinery industry in Germany. [Provided to China Daily]

Chinese investors are showing growing enthusiasm for central and eastern Europe

Markus Hempel counts himself fortunate to have become the China representative of investment promotion for Germany Trade & Invest, a German governmental branch under its Ministry of Economics, at the time he did.

Since arriving in China in August 2010 Hempel has been a keen observer of Chinese investors' growing enthusiasm for Germany.

In that year Chinese companies invested in 78 projects in the country, almost 20 times more than in 2006, according to fDi Markets, a Financial Times investment monitor.

"These are only greenfield projects, so mergers and acquisition projects are not included," Hempel says. "According to our own statistics, there were 130 projects (in 2010). Some are not counted in the fDi figures because they are small, with only representative offices."

Figures for the year just gone are unavailable, but Hempel is sure there will be huge growth because by July the number of Chinese projects in Germany had already exceeded the total of 2010.

With the fast growing numbers, the quality of investment has also improved, Hempel says.

"In the beginning we (had) mostly representative offices and sales offices, which are commonly a starting point to enter a foreign market. But now as Chinese investment in Germany has become mature, we see bigger projects like production projects, manufacturing facilities and research and development centers."

Some companies have set up European headquarters in Germany as a platform for an expansion in the continent.

But still, Hempel says, Chinese investment in Germany has just started to make a difference.

"The quantity of Chinese investment in Germany has been rising very quickly, but it still comes from a low."

According to fDi Markets, China ranks seventh in project numbers in German investment with 190 from 2003 to 2010; the United States tops the list with 1,065 projects.

"I always say that in the past it has not been so significant," Hempel says. "It is still on a quite low level, but if we look at the growth rates, then it is really impressive."

He predicts that investment links between China and Germany will further strengthen this year.

The annual Frankfurt car show and the Hanover Messe, the major international trade show in Germany, will include China as partner country, and there will be a forum on e-mobility, which will all promote strong links between the two countries, Hempel says.

Speaking of Chinese companies' growing enthusiasm in investing in Germany, Hempel says one of the main reasons is the moniker "Made in Germany".

"The label 'Made in Germany' is an advantage to sell in a foreign market. That is also a good way to distinguish itself as a Chinese company from other competitors even in China."

Sany Group, China's largest engineering equipment manufacturer, established its German operations in 2008, planning to invest 100 million euros in the country.

At a factory opening ceremony in Bedburg, near Cologne, the logo "Made in Germany" was printed in huge letters on the billboard.

Sany has invested 40 million euros in its phase one project in Germany with manufacturing and research and development facilities and more than 200 employees.

"'Made in Germany' was and will continue to be our slogan," He Dongdong, general manager of Sany Germany, was quoted as saying by 21st Century Business Herald, a Guangdong newspaper.

He says products made in Germany will be marketed in Europe, North Africa and the Middle East.

"How to eliminate our clients' discrimination toward Chinese products remains the biggest challenge for us." Hempel regards Sany as an example of how Chinese companies can try to create a new image through investing in Germany.

"They use Germany as a location to further develop foreign markets, not only Europe. In the Middle East, Germany has a good reputation (a quality producer). For them it's a way to say we have built machinery based on German engineering."

There are other reasons why Chinese frequently choose Germany as an investment destination, Hempel says. One is that Germany is the biggest market in Europe and is where many goods are produced.

"For example, we have seen lots of investment in the automotive sector because in Europe we have the most manufacturers in Germany, many suppliers, and also the market is huge This also applies to other markets like machine equipment, electronics and medical care."

Consequently these sectors have attracted the heftiest Chinese investment.

Figures from fDi Markets show that of the Chinese investment projects in Germany, 31 percent are in automotive, industry machinery and equipment, and 18 percent are in electronics and semiconductors.

"These are industries that Germany has the biggest market (in), and it will be meaningless to go to other European countries and then export those products to Germany when they can go directly to Germany," Hempel says.

Chinese companies' ambitions to expand into Eastern Europe is another reason for them to choose to invest in Germany, Hempel says.

Not only do many companies want to export to Western Europe, he says, but Germany is within two hours' reach by plane of most Eastern European capitals.

As attractive as Germany is to Chinese investors, Germans also attach great importance to Chinese investment.

"We value China as an investment partner, and we put a lot of efforts (into) China," Hempel says. "This is why since 2010 China for our organization has been the main investor. Most of our accomplished projects in 2010 and probably in 2011 (were) from China, even before the US, which has been the biggest investor in Germany so far."

And the investment frenzy has not been affected by the debt crisis, which has hit European countries strongly.

"For the Chinese, Germany has proved to be very stable even during the crisis because the companies can be quite certain that Germany (is) a reliable partner for their investment."

The export driven German economy has done well despite the crisis, he says, and the country's domestic consumption has been relatively unscathed.

He attributes that resilience partly to Germany's trade relations with China, "because during the crisis Germany maintained very good exports to China".

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