According to the latest statistics released by Germany Trade & Invest, in 2011 China became Germany’s largest investor, surpassing even the United States. Investment by Chinese-funded enterprises in Germany, especially through mergers and acquisitions of German companies, has maintained rapid growth in recent years,. Until 2010 there were few transactions with a volume of more than 10 million Euros, but since 2011 there have been more than ten transactions with a volume exceeding 100 million, with the largest transaction reaching 700 million Euros. As reported by Germany Trade & Invest, half of all Chinese investments in Europe are directed towards Germany.
Why do Chinese companies prefer the German market?
Chinese investors are convinced that the following sectors of the German economy will develop further and outperform: machinery manufacturing, machine tools, automobile spare parts, engineering machinery, and alternative energies such as wind and solar. These are the sectors where German companies display the world’s most advanced technologies and innovations, according to Chinese investors’ view. For growing Chinese companies that seek new technologies, German companies are an ideal investment target. Not to mention that “Made in Germany” represents meticulous workmanship, outstanding product quality, serious business philosophy, and the best reputation in the market, all very attractive characteristics for Chinese investors.
Germany is located at the heart of Europe, bordering Scandinavia in the north, Austria and Switzerland in the south – who at their turn neighbour the Balkans – and growing Eastern European markets in the east, as well as the core member states of the European Union to the west, such as the Netherlands, Belgium, Luxembourg and France. Germany’s advantageous geographic location guarantees swift access to all major European markets, both in the East and West. Most major European cities can be reached within two to three hours by plane from Frankfurt am Main, home of continental Europe’s largest airport. German highways connect it to every regional economic centre. After the fall of the Berlin Wall, German companies reached out to Eastern Europe en masse and snapped up most markets. German companies can be found everywhere.in the biggest Eastern European cities like Budapest, Prague or Warsaw.
Germany has many well-known technical universities, such as the Technical University of Darmstadt and Aachen University. Since the opening-up of overseas studies, more and more Chinese faces can be seen on these campuses. For the Chinese companies that intend to invest in Germany, it is not difficult to find Chinese engineers and technicians that speak Chinese as their mother tongue but are familiar with the German culture. The German educational system is famous for its practical-minded, diligent, and hard-working graduates. More and more Chinese companies are willing to set up their R&D centres in Germany to profit from the advantages provided by the German talent market. One example is XCMG, who invested 50 million Euros to establish its R&D centre in Bielefeld.
Having more than 80 million inhabitants, Germany is the largest market in Western Europe, and has become the pillar of the Euro zone thanks to its strong real economy. Chinese enterprises use the German market as an entrance into the European market and as means for their globalization. For a Chinese investor, entering the European market is much easier if they have already accessed the German market with their products.
More than one million small and medium-sized enterprises form Germany’s economic backbone. Many of them – for various reasons –are being sold, resold, or need new investors, providing various investment opportunities for Chinese investors. Conversely, good prospects for the development of the vast Chinese market ensure high expectations for the German sellers. As a result, acquisitions and mergers of small and medium-sized enterprises constitute the main part of China’s investments in Germany.
With respect to mergers and acquisitions of German companies by investors from non-EU countries, Germany enacted a national security review of investment regulation in 2009, The requirements of the security review are quite strict, but it appears that the German government has yet to use this regulation to intervene in any Chinese investment. Initially, German political institutions and media had doubts about the motivation of Chinese investors. They worried that the investors of state-owned enterprises had only political purposes. With the increasing number of transactions by Chinese investors, however, this scenario has changed. Most media reports about Chinese investments are positive, and investments from China are now considered a large opportunity for the development of the German market and as a foothold into China’s huge market, as well as for the improvement of the German labour market.
Compared to Italy, the United Kingdom, France, and other countries, the Chinese people seem to better appreciate German qualities. German people are patient, reliable, hard working and precise. Chinese people greatly admire these features.
In brief, Germany’s technology, economic power, and outstanding geographic location, the quality of German people, and the excellent reputation of German products are what attract Chinese businessmen and investments from China. With the development of China’s economy, there will be more and more enterprises going abroad. After the European debt crisis, German companies will be more willing to meet investors from the far away country – China.