German companies taking note of China's sustainable economy

With the Chinese economy entering a new era of green and innovation-led growth, an increasing number of German companies have shifted their investment focus from building conventional plants to establishing more innovation and service facilities in China, as the country will continue to remain a stabilizer and driving force for the global economy.

Given the country's ongoing manufacturing transformation and the growing number of middle-income earners, German companies, such as tire maker Continental AG and technology and industrial group Siemens Group, have all invested heavily in building research and development centers for different business segments over the past three years, according to information released by China's Ministry of Commerce.

Germany's cleaning systems provider Alfred Karcher SE& Co KG, also invested 100 million yuan ($14.06 million) to build a high-tech R&D center in Suzhou, Jiangsu province in June.

"Despite the disruption caused by the COVID-19 pandemic, we are still fully confident in the Chinese market, and our long-term plans in China will not change," said Tang Xiaodong, president of Karcher's China unit.

From 2013 to 2021, China's GDP grew at an average annualized rate of 6.6 percent, higher than the global average of 2.6 percent and 3.7 percent for the developing economies during the same period, according to information released by the National Bureau of Statistics.

China's dual-circulation development pattern will continue to create more space for the growth of multinational corporations in services, innovation-driven areas and businesses related to digital empowerment, according to Gu Xueming, president of Beijing-based Chinese Academy of International Trade and Economic Cooperation.

The dual-circulation growth paradigm recognizes the domestic market as the mainstay, and calls for the domestic and foreign markets to reinforce each other.

He said companies from Germany, France, Japan and the United States have already discovered that it is vital and necessary to invest more in China's R&D, design, science and technology businesses. New growth points will present themselves as the economy becomes more sophisticated.

Under government policies, foreign companies are encouraged to invest in high-end, smart and green manufacturing; set up innovation centers; and strengthen cooperation with domestic peers.

China has been deeply integrated into economic globalization and international division of production forces.

Development of globalization is inseparable from connection with international industry and supply chains, as well as international cooperation and competition, according to Liu Chang, president of Government Affairs Forum at the European Union Chamber of Commerce in China.

Liu is also vice-president for China (rail system) of Knorr-Bremse AG, a Munich-based braking and control systems provider for commercial vehicles and trains.

To facilitate this integration, German and European companies can fully utilize their technological advantages and international vision, to facilitate the development of dual-circulation growth paradigm, she said.

After unveiling innovation centers in Beijing and Suzhou separately for rail system and commercial vehicles divisions early this year, Liu said her company will strive for digital innovation by integrating world-leading technologies and know-how in China. "In terms of digitalization, China has broad application scenarios and abundant industrial resources," she said. The addition of digital and innovative products will not only help Knorr-Bremse AG expand its business in China but also support the group to expand the global markets.

China has the potential to become a hotbed for R&D activities, especially for multinational companies.

There is also enormous untapped potential in both trade in services and decarbonization in the country, according to the Business Confidence Survey 2022, released by the EUCCC in June.

"As China has adhered to high-quality development and set up clear 3060 dual-carbon goals and emission-reduction plans, we see great potential of market demand in China," said Gao Yan, CEO of Thyssenkrupp China.

In addition to establishing two companies focusing on both innovation and production businesses in China over the past three years, the company said it will continue to focus on the green and high-end manufacturing business in areas including wind power, green hydrogen and automobile in the coming years.

As both China and Germany have launched ambitious carbon neutrality targets, they should strengthen international cooperation and realize the development and application of climate-neutral technologies through technological innovation, Gao said.

Chen Wenling, chief economist at the China Center for International Economic Exchanges in Beijing, said China's stable domestic market and firm support to multilateralism, surging trade activities with partners related to the Belt and Road Initiative and fast-growing 5G technology have all raised German companies' appetite to invest in China.