2024-04-11 14:09:44
Government subsidies are omnipresent in China. However, it is primarily the domestic industry that benefits from this. German companies now see their competitiveness at risk.
According to a survey, almost two thirds (65 percent) of German companies operating in China feel that they are being treated unfairly. As the German Foreign Chamber of Commerce in China (AHK) announced on Wednesday in Beijing, the competitive disadvantages are seen particularly in market access and access to government representatives, authorities and public tenders. The Chamber of Commerce hopes that Chancellor Olaf Scholz’s (SPD) visit to Beijing from Saturday will provide solutions to these problems.
“The legal framework in China weakens the competitiveness of German companies that are determined to benefit from China’s innovative strength,” explained Ulf Reinhardt from the AHK. The combination of the sluggish development of the Chinese economy and the strengthening of local companies made the “unfair competitive conditions in China particularly noticeable,” explained the chamber.
Scholz must bring the government closer to the challenges faced by companies
95 percent of companies expect the increasing Chinese competition to have an impact on their own business. According to the information, the main consequences of increased competition are expected to be increased cost pressure, loss of profits and a lower market share. Nevertheless, over half (54 percent) of the 150 companies surveyed are planning further investments in the People’s Republic. The majority of them want to remain competitive at all. In the past, companies would have invested more in order to grow or tap new potential.
Chancellor Scholz must make the Chinese government understand what challenges German companies face. “We expect that more trust will be created between the governments,” said Maximilian Butek from the East China Chamber of Commerce.
Domestic industry is particularly heavily subsidized in China
In view of the increasing competition, the chamber called on the Chinese government to create fair competition conditions. “Most Chinese companies have little reason to fear competition. A level playing field will increase productivity and innovation in all industries,” explained Reinhardt. The Chinese leadership must also have an interest in this.
State subsidies, especially for domestic industry, are omnipresent in China, as an evaluation by the Kiel Institute for the World Economy (IfW) shows on Wednesday. Accordingly, more than 99 percent of listed companies received direct government support in 2022. Green technologies such as electromobility or wind power in particular would be taken into account.
China often uses subsidies in a very targeted manner to bring key technologies to market maturity, explained the IfW. Companies from the People’s Republic could expand very quickly and penetrate EU markets with the help of further support measures such as preferential access to critical raw materials in many green technology areas.
EU Commission examines Chinese subsidies
The EU Commission has long suspected illegal subsidies to give Chinese manufacturers advantages. The authority is examining subsidies for Chinese solar manufacturers, electric cars and wind turbines – ultimately there is a risk of punitive tariffs. Butek from the Chamber of Commerce sees this critically. Germany is like no other country, dependent on open markets and strongly export-oriented. Punitive tariffs therefore not only affected China, but also Germany and the EU.
German companies currently see themselves as superior to their Chinese competitors in terms of product quality, technological leadership and innovative strength. The survey also shows that China is clearly catching up in these areas. Only five percent of companies stated that China is already the innovation leader in their industry. However, 46 percent expect this to happen within the next five years.
In the automotive industry, eleven percent already see Chinese companies at the forefront, while 58 percent expect this to be the case in the next five years.