Chinese firms struggling to enter German market, study says

Chinese firms struggling to enter German market, study says
Bavarian premier Horst Seehofer with a Chinese diplomat. Photo: DPA
Small and medium-sized companies are among the most likely Chinese investors in Germany, but many struggle with bureaucratic constraints, limited market knowledge and intercultural differences, according to a study released on Friday.

The German Center for Market Entry (GCME) at Berlin’s Free University said they had looked for the first time at how Chinese companies view business conditions in order to find out what they considered the biggest challenge to investing in Germany.

Among 14 economic development experts and 96 Chinese companies, results showed that they could make substantial improvements in their approach to the market, but that there were ample opportunities for German businesses to aid in the process.

While the public generally perceives investment from China as coming from large firms, in reality about 70 percent of the country’s business activity comes from small and medium-sized firms with fewer than 10 employees, the GCME said in a statement.

“Predominately, only sales offices and small subsidiaries are established,” said GCME head and study co-author Alexander Tirpitz.

Some 42 percent of the Chinese companies in Germany invest less than $250,000 – a situation that creates problems because only non-EU companies that spend more and create at least five jobs are given residency permits.

The strongest motivation for Chinese companies to expand into Germany are sales and marketing opportunities, with access to research and development trailing shortly behind.

Companies in the study, however, made the mistake of thinking that their first priorities should be identifying potential customers and business partners instead of learning the language and business culture, Tirpitz said.

“Overall the market entry for Chinese companies in Germany is difficult,” he said in the statement.

Compared to other international business destinations, some 44 percent said learning the language was a particular challenge, while 48 percent said obtaining a work permit was difficult. Other bureaucratic hurdles also figured large in stalling Chinese investment, including fulfilling German labour law and other regulations.

Many German companies take little notice of this – but it is an opportunity for the two sides to build strategic co-operations to strengthen their standing in the world market and ease their own potential entry into the Chinese market, the study said.

The Local/ka

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