China’s Reopening Fails to Lift Confidence Among German Firms

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(Bloomberg) -- German businesses remain relatively pessimistic about prospects in China despite the ending of pandemic restrictions, with worries over the economy and geopolitical tensions dominating, according to an industry survey.

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More than half of the firms surveyed by the German Chamber of Commerce in China expect conditions to either worsen or remain unchanged for their industries, according to a report published by the chamber on Thursday. Almost a third expect profits to decline by more than 5% in 2023, up 10 percentage points on last year.

“The slower-than-expected market development, as well as ongoing geopolitical tensions, have dashed hopes for a quick improvement in the business environment,” the chamber said in the report. “China’s policymakers need to act now” with “measures to stimulate consumer confidence and targeted support for businesses,” it said.

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Only 55% of companies planned to increase investment in China, which while up four percentage points on 2022 was still “far behind” pre-pandemic levels, according to the report.

“Geopolitics have a profound impact on companies on the ground, prompting them to drive forward localization and diversification strategies as risk management measures,” said Jens Hildebrandt, executive director and board member of the chamber’s North China chapter.

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The report also highlighted the problems caused by the slow processing of business visas for Chinese employees wishing to visit headquarters, with three quarters of the companies negatively impacted, the chamber said.

Some 288 member companies responded to the survey, which was conducted between May 9 and 17.

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