German firms' China market sentiment falls to record low

BEIJING, Dec 04 (Reuters): Business sentiment among German companies in China is at an all-time low, a German business lobby group said on Wednesday, as they face rising Chinese competition and a slowing economy.

Over half of German companies said conditions in their industry had worsened this year, the German Chamber of Commerce in China said citing a survey, while only 32 per cent forecast an improvement in 2025 - the lowest since records began in 2007.

"This year has been difficult for the majority of German companies, prompting a downward adjustment of their business outlook," said Clas Neumann, chair of the German Chamber of Commerce's east China chapter, while adding that 92 per cent of German companies planned to maintain their operations in the $19 trillion economy.

Germany is China's biggest European partner, and prominent German firms with large investments in China include automakers Volkswagen as well as BMW and auto parts supplier Bosch.

The German survey comes just a day after a British sentiment survey of companies operating in China painted a downbeat picture.

While foreign direct investment, seen as a signal of confidence in China, represents only 3 per cent of its total investment, it has been falling for two straight years.

The chamber said investing to keep up with local competitors was the primary motivation for 87 per cent of the 51 per cent of German companies planning to step up their investment in China over the next two years, an annual eight per centage point increase.

The chamber also said that companies were, for the first time, reporting that they were contending with a "Buy China" trend, with Chinese President Xi Jinping's self-sufficiency drive "Made in China 2025" resulting in local customers opting to buy from local producers.