MNI INTERVIEW: China Emerging As German Firms' Export Base

Evolving business conditions in China are prompting German member firms – large industrial players and specialised Mittelstand SMEs – to deepen their integration, expand operations, and use the country as a base for global exports, a senior representative of the German business community in Beijing told MNI, noting that sustained high levels of FDI in China are seen as essential.

Oliver Oehms, executive director at the German Chamber of Commerce in China - North China, said German firms are increasingly treating China as a global export hub for high-end manufacturing, expanding their presence to leverage lower costs, an innovative industrial ecosystem, and faster turnaround times.

Companies increasingly cite high production costs and skilled-labour shortages at home as constraints, he said. Germany’s traditional export model has shifted from “local-for-local” production in China toward “China-for-global,” Oehms noted.

FDI GROWTH  

A recent chamber survey showed 53% of firms plan further investment in China, up from 51% last year, with the internationalisation of Chinese companies and the production of goods and services for export now ranking as the top opportunities.

While earlier investment waves were dominated by major industrial integrators, Oehms said interest is growing among small and medium-sized firms in high-end niche manufacturing – segments where member capabilities still lead local competitors. The days of a small enterprise in Germany exhibiting at a trade fair in Shanghai once a year and then enjoying steady export business from back home is increasingly disappearing, he said. China’s move up the value chain now necessitates deeper integration to remain competitive.

This shift is expected to support continued German FDI into China, which remained near record highs in 2024 at USD80 billion – around 60% of total EU investment, Oehms said. Although smaller firms still account for a modest share compared with large industrial groups, they represent a new wave of supply-chain-driven engagement, he added. Beijing’s push for self-reliance and indigenous innovation is prompting more firms to shift part of their production and sourcing to China – a development not conducive to the rebalancing sought in Berlin and Brussels. However, Oehms argued that home-country operations are increasingly benefiting from China-to-Germany innovation transfer. 

China’s FDI into Germany reached USD35 billion last year, making it the country’s 10th-largest investor. The chamber’s latest survey shows a modest improvement in sentiment after the all-time low in 2024, with 17% of firms expecting conditions in their industries to improve in 2025, up from 14% last year.

Oehms said most members’ limited exposure to the business-to-consumer sector has to a certain extent shielded them from weak Chinese household demand. The hesitancy of consumers is not hitting all our members that hard, he said.

RARE EARTHS

Rare-earth supply remains a persistent concern for German companies, whether operating in China or importing from China, Oehms said, noting talks between the German and Chinese government produced a general understanding to improve conditions, but challenges remain.

“Obviously, we hope that with the upcoming visit of the German chancellor a solution can be found,” he said.