German 'hidden champions' pursue new cooperation opportunities in Chinese market

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This photo taken on April 12, 2024 shows an exterior view of Knorr-Bremse Commercial Vehicle Systems China Research & Development Center in Suzhou, east China's Jiangsu Province. [Photo/Xinhua]

An increasing number of German enterprises, particularly "hidden champions," are actively pursuing new opportunities for industrial collaboration in China due to its large market size, continuously optimized business environment and the innovation-driven development of companies.

"Hidden champions" refer to highly successful yet lesser-known small and medium-sized enterprises (SMEs) that are global leaders in terms of market share in their respective niches, with Germany currently boasting nearly 500 such enterprises.

A forum on Sino-German industrial cooperation and development, which concluded Tuesday in Beijing's Shunyi District, highlighted a trend of collaborative development between German "hidden champions" and their Chinese counterparts.

According to the China-Germany Hidden Champions Industrial Cooperation Research Report issued at the forum, German high-tech start-ups and SMEs are expected to be the main players in the future cooperation between China and Germany.

While some German "hidden champions" have entered China by providing supporting products for large German enterprises, many other such companies strongly desire to tap the Chinese market, said Yang Ming, vice president of the Senate of Economy Europe and chief representative in China for the Summit of World Market Leaders.

Yang has dedicated the past decades to fostering exchanges and cooperation between China and Germany in areas such as trade, science and technology, culture, and environmental protection.

"No 'hidden champion' can afford not to be in the Chinese market. They have to invest in China and cooperate with Chinese companies, otherwise they have no chance to stay 'hidden champions' or world market leaders," said Walter Döring, chairman of the Senate of Economy Europe and initiator of the Summit of World Market Leaders, in an interview with Xinhua during the forum.

Record-high investment

In recent years, the bilateral economic and trade exchanges between China and Germany have been continuously deepened, providing a strong impetus for the sustainable economic development of the two countries. China has been Germany's largest trading partner for eight years in a row.

According to a report issued by the German Economic Institute, direct investment from Germany in China reached a record high of 11.9 billion euros (about 12.95 billion U.S. dollars) in 2023. During the same period, German investment in China accounted for 10.3 percent of Germany's total overseas investment, the highest level since 2014. Data from China's Ministry of Commerce also shows that German investment in China increased by 48 percent in the first three months of this year.

"Against the backdrop of slowing global economic growth, German investment in China is increasing," Yang said. "I think this is due to the objective needs of enterprises on both sides, the existence of the domestic market, and the continuous improvement of the innovation capacity of domestic enterprises. There is great potential for China-Germany cooperation," Yang added.

According to Döring, most German and European companies are highly interested in the Chinese market due to its vast size and potential. "When we evaluate the Chinese market, we see that in the last 20 or 25 years, many Chinese companies have become very important for the worldwide market."

"The Chinese companies have become very, very innovative. They are very good partners for European and German companies, and we think that there will be a chance to get a win-win situation," Döring added.

Gunther Wobser, CEO of LAUDA, a German "hidden champion" in the manufacture of constant-temperature equipment and systems, conducted a thorough study in 2006 on how to promote business in China. Two years later, LAUDA set up its branch in Shanghai following the establishment of branches in France, Russia, Singapore and Latin America. "From the very beginning, I thought if we want to be really successful, we have to develop products in China and we have to produce in China," Wobser said.

Openness, innovation

Germany's Wilo Group, one of the world's leading providers of pumps and pumping systems, established its branch in Shunyi in 2000. Over the decades, the company's sales revenue has risen by more than 25 percent.

"Especially with the planning of the Beijing China-Germany economic and technological cooperation demonstration zone, I have really felt the local government's intentions and care in supporting our development so that we can focus on market research and development," said Lyman Tu, vice president of the Wilo Group.

As a national-level cooperation project between the two countries, the Beijing China-Germany economic and technological cooperation demonstration zone, located in Shunyi, has attracted more than 100 German enterprises, such as Mercedes-Benz, BMW and Bosch, reaching an industrial scale of 40 billion yuan (about 5.63 billion U.S. dollars) last year. The demonstration zone, with a 5-billion-euro investment from enterprises, is seen as a crucial gateway for Sino-German cooperation in Beijing.

Tu said that based on the openness and future prospects of the Chinese market, the group has increased its investment in China by opening another factory in the past few years. It also plans to double its investment in research and development in China by 2025.

Speaking at the forum, Peng Jian, chief expert of the China-Germany Hidden Champions Industrial Cooperation Research Report research group, said that local authorities and enterprises need to reassure excellent German SMEs of the level playing field, policy stability and cooperation security in order to further attract them to invest in China.

LAUDA's new plan resonated with the forum participants' views, who believed there is ample room for cooperation between Chinese and German enterprises in various fields. According to Wobser, the company will bolster its presence in China and expand its product range into industries such as automobiles and semiconductors.

"No matter in what branch, if you want to become a world market leader, you must be the best," Döring said, emphasizing that innovation is the primary focus for both China and Germany.

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