German firms in China report record low business sentiment

German companies operating in China are experiencing unprecedentedly low business sentiment due to increased competition and a slowing Chinese economy, according to the German Chamber of Commerce in China.

A survey conducted by the chamber revealed that over half of the German businesses reported a deterioration in industry conditions this year.

Additionally, a mere 32% anticipate any improvement by 2025, marking the most pessimistic outlook since the survey’s inception in 2007.

Clas Neumann, chair of the German Chamber of Commerce’s east China chapter, highlighted the challenges faced this year, leading to a negative revision of future expectations. Despite this, he noted that a significant 92% of German companies are committed to sustaining their presence in China’s vast economy.

Germany serves as China’s largest European trading partner, with major companies like Volkswagen (ETR:VOWG_p), BMW (ETR:BMWG), and Bosch (NS:BOSH) having substantial investments in the country. This troubling sentiment among German firms echoes similar concerns raised by a British business survey conducted the previous day, which also depicted a gloomy scenario.

Foreign direct investment (FDI) in China, though only a small fraction of the country’s total investment at 3%, has seen a decline for two consecutive years. This trend suggests waning confidence from international investors.

The chamber’s findings show that 87% of the 51% of German businesses planning to increase their investment in China over the next two years are doing so primarily to compete with local firms. This represents an annual growth of eight percentage points in investment motivation.

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