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German companies in China say economy is on 'downward trajectory'

The survey results underscore concern about China's economic recovery, which is being hampered by a property crisis and stubborn deflation

China

Nearly two-thirds said they expected a recovery to take one to three years | Photo: Bloomberg

Bloomberg

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By Bloomberg News

Most German companies in China think the Asian nation’s economy is declining and will take at least a year to rebound.

That’s according to a survey by the German Chamber of Commerce in China released on Wednesday. Some 83% of the 566 respondents in the survey conducted from early September to early October said China “is facing a downward trajectory” economically. Nearly two-thirds said they expected a recovery to take one to three years. 

“Last year was a reality check for German companies in China,” Ulf Reinhardt, board chairman of German Chamber of Commerce in China – South & Southwest China, said at a press briefing. “Businesspeople believed the economy would kick in again, driven by growth. It hasn’t materialized that much.”
 

The survey results underscore concern about China’s economic recovery, which is being hampered by a property crisis and stubborn deflation. Slumping stocks are the latest concern for policymakers, who are considering a package of measures to stabilize the market, according to people familiar with the matter, after earlier attempts to restore investor confidence fell short.

On Wednesday, People’s Bank of China Governor Pan Gongsheng said China will cut the reserve requirement ratio for banks in early February to unleash more money and help the economy.

The German chamber’s survey also found that some 54% of firms thought China’s investment appeal was falling compared to other markets, though just as many plan to boost their spending in the Asian nation over the next two years. 

New foreign direct investment into China fell last year to the lowest level in three years, according to official data released last week. The Ministry of Commerce earlier came out with 24 specific reforms to encourage more foreign investment but only small actions have been taken so far.

Survey respondents also said their main reason for investment now was countering competition, with the poll finding that German firms were becoming more concerned about their Chinese rivals. While just 5% of respondents viewed China’s companies as top innovators in their industry, 46% predicted they’d be leaders in the next five years.

It also found that 44% of firms were taking steps to deal with possible risks to their operations in the world’s second-largest economy, largely due to geopolitical tensions.

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First Published: Jan 25 2024 | 12:12 AM IST

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