The German Chamber of Commerce stated on Wednesday (December 4th) that the commercial confidence of German businesses in China is at an all-time low due to the increasing price wars and economic slowdown in the country.
According to a survey cited by the German Chamber of Commerce in China, over half of German enterprises have reported a deterioration in industry conditions this year, with only 32% of them predicting any improvement by 2025, the lowest level recorded since 2007.
Clas Neumann, the president of the East China chapter of the German Chamber in China, mentioned that “this year has been challenging for most German enterprises, leading to a downgrade in their commercial prospects”. He also added that 92% of German businesses plan to maintain their operational outlook.
Germany is China’s largest European partner, with renowned German companies such as Volkswagen, BMW, and Bosch heavily investing in the Chinese market.
The day before the release of the German Chamber’s survey results, a separate business survey conducted by the British Chamber of Commerce in China displayed similar pessimistic sentiments regarding businesses operating in China.
The 2024-2025 annual survey report on British businesses’ commercial confidence in China by the British Chamber of Commerce in China, released on Tuesday (December 3rd), pointed out a permanent change in China’s business environment compared to pre-pandemic times. Despite Beijing’s efforts to stimulate the economy in recent months, the economic situation remains bleak.
Since 2019, a majority of British businesses operating in China have faced operational challenges for five consecutive years, with 58% expressing increasing difficulties in the past year, attributing it to economic factors.
Foreign direct investment, considered an indicator of confidence in China, has been declining for two consecutive years.
The German Chamber noted for the first time that businesses are grappling with the challenge of “buying Chinese goods”. With Chinese enterprises benefiting from government subsidies and engaging in price wars amidst Xi Jinping’s “Made in China 2025” initiative, coupled with the sluggish Chinese economy, many consumers are opting for cheaper domestic products.
Official factory activity surveys released last Saturday (November 30th) indicated that import orders for finished parts have been declining for the eighth consecutive month.
In response to economic reasons, Volkswagen announced last week that it will divest its business operations in Xinjiang, an area that has been a focal point of human rights controversies for years, while extending its partnership with SAIC Group until 2040.
As China’s low-cost cars impact the European market, on October 28th, the Chairman of Volkswagen’s Works Council revealed plans to close at least three plants in Germany, reduce tens of thousands of staff, and downsize the remaining factories in the country.