The number of foreign companies in China increasing thanks to opening-up and economic growth

People visit the booth of China Books at the 73rd Frankfurt Book Fair in Frankfurt, Germany. (LU YANG / XINHUA)

Despite external uncertainties, German companies remain committed to China as they plan to expand their local footprint and investment. They are also impressed by the country's latest commitment to high-standard opening-up and high-quality economic growth, said business executives and market watchers.

Although there have been some investment outflows to Southeast Asia due to lower labor costs, they said that it does not conflict with the investment plans of German business in China, which are more about collaboration in high-tech and service industries and in line with China's high-quality growth strategy.

Seeing big opportunities in areas such as carbon neutrality, high-end manufacturing and innovation-driven development, foreign direct investment in China expanded 15.6 percent year-on-year to more than 1 trillion yuan ($136.9 billion) in the first nine months of this year. Investment from Germany climbed 114.3 percent, statistics from China's Ministry of Commerce show.

China's advantages, including a complete industrial system, lucrative market, social stability and positive long-term economic fundamentals, as well as fast-growing 5G technology and China-Europe freight train services, will continue to assist the growth of German companies in the country, said Zhang Yongjun, a researcher at the Beijing-based China Center for International Economic Exchanges.

By launching a series of new infrastructure investment programs that provide basic support for industrial upgrading and scientific and technological development, China has not only created market demand but maintained a stable production and innovation environment, he noted.

After seeing its sales revenue increase by more than 20 percent year-on-year in China in 2021 and the country become its second-largest single market that year, Wilo Group, a German provider of pumps and pump systems, will put an Industry 4.0 standard plant into operation in Changzhou, Jiangsu province, in early 2023. Its products will not only supply the Chinese market but be exported to other emerging markets.

With the growing importance of the Chinese market, Wilo has announced further investment in R&D and is to enlarge its product portfolio in China in its 2025 strategy, said Lyman Tu, Wilo's vice-president for China and Southeast Asia.

China's broad market prospects, integrated supply chain and improving market environment are the main reasons for Wilo to expand its presence, he said, adding China will likely become the group's largest market by 2023.

Echoing such sentiment, Zheng Dazhi, president of Bosch Thermotechnology in Asia-Pacific, a business unit of German industrial and technology giant Bosch Group, said China's commitment to promoting green and low-carbon development allows the company to meet and exceed the expectations of local consumers who pursue comfortable and low-carbon lifestyles with its products and solutions.

"Looking forward, we are optimistic about the long-term and stable growth of China's consumer market, and will expand our presence in the segment of green and affordable residential heating systems," he said.

Zheng said that Bosch Thermotechnology will debut its 100 percent hydrogen-ready heating system — a wall-hung condensing boiler with a heating power of 35 kilowatts — at the fifth edition of the China International Import Expo, which will be held in Shanghai from Nov 5 to 10.

Their current boiler uses a mixture of 20 percent hydrogen and 80 percent natural gas. When the fuel is changed to 100 percent hydrogen, it takes just 1 hour to modify the boiler and achieve zero carbon emission.

The first China-Europe freight train from Qingdao departs from the Chinese coastal city to Mannheim in Germany on Feb 18 this year. (WANG ZHAOMAI / XINHUA)

Eager to reinforce its position in global industrial and supply chains and to inject more stability into the global economy, China released the 2022 catalogue of industries for encouraging foreign investment in late October. The move is widely seen as part of intensified efforts to attract more foreign investment and expand high-standard opening-up.

Set to take effect on Jan 1, the catalogue has 1,474 items, among which 239 are new and 167 are modified from that in last catalogue released in 2020, according to a statement by the National Development and Reform Commission.

For instance, new or revised national items in the catalogue cover sectors including aviation equipment manufacturing, key industrial components used in autonomous driving, and high-performance raw materials.

The Chinese market is of paramount importance to many German companies.

They expect growth in many industries, especially in the field of decarbonization, e-mobility and connected driving in the years ahead, said Jens Hildebrandt, executive director of the German Chamber of Commerce in North China.

As businesses in Germany and China begin to explore each other's markets as the automotive industry steps up the process of electrification, Contemporary Amperex Technology Co Ltd, or CATL, received approval to produce battery cells in its factory in Thuringia, a German state in April. It marked a step forward in global expansion for the battery manufacturer based in Ningde, Fujian province.

The Thuringia plant is allowed to manufacture batteries with an annual production capacity of 8 gigawatt-hours.

The plant, as CATL's first factory outside China, has a total investment of 1.8 billion euros ($1.73 billion), which is much higher than the average 300-400 million yuan investment in the company's domestic factories.

Attracted by China's vast auto market and well-developed upstream and downstream industries in Changchun, Audi, the German premium carmaker and China FAW Group established a joint venture in the first quarter of this year. The new company — Audi FAW New Energy Vehicle — broke ground on its first electric vehicle factory in Changchun in June.

The joint venture will invest 35 billion yuan into the project. Its manufacturing facilities are expected to be operational in the end of 2024, with a designed production capacity of more than 150,000 vehicles per year.

China's EV sales have remained a bright spot. More than 4.56 million EVs were sold in the country over the first three quarters, soaring 110 percent year-on-year and taking up 23.5 percent of the total share of the nation's automotive market, according to the Beijing-based China Association of Automobile Manufacturers.

"These facts show that the majority of global companies' investment decisions are based on market conditions and growth potential. They are acutely aware that no economy can independently provide all the resources and ideas of innovation for producers, or offer all the needed goods and services to consumers," said Xu Mingqi, a researcher with the Shanghai Academy of Social Sciences.