German firms are keen to invest more in China as they shy away from the US, but they still face issues in the Chinese market, business group says
German companies are turning towards investments in China as they lose confidence in the United States over President Donald Trump’s policies, but they still see obstacles in the world’s second-largest economy, according to an executive at a German chamber of commerce.
That landscape would form the backdrop of German Chancellor Friedrich Merz’s planned visit to China later this month, said Oliver Oehms, executive director and board member of the German Chamber of Commerce in North China.
Merz should offer a message of optimism tinged with frustration that Chinese officials had not solved old issues such as intellectual property rights protection, he added.
“Everyone sees the technological advances of China, the great potential, but especially the smaller companies shy away from the complexity of and the tough competition in the Chinese market,” Oehms said.
Trump has deterred German businesses from expanding in the US because of his tariffs, immigration policy and threats to acquire – or potentially seize – Greenland, disrupting the North Atlantic Treaty Organisation (Nato), according to Oehms.
A survey by the German Chamber of Commerce in China – a nationwide group that represents German firms based across the Asian country, including northern China – in the fourth quarter of last year found that 56 per cent of respondents were considering greater engagement with Chinese partners. Some 630 of the countrywide chamber’s 2,000 member companies took part in the survey.
“It’s difficult to compare the relatively stable and predictable trade relations with China with these erratic ups and downs that are currently characterising relations with the US,” he said.
German direct investment in China surpassed €7 billion (US$8.25 billion) between January and November last year, up 55.5 per cent over the same period in 2024, according to data compiled by the IW German Economic Institute. Major German investors in China include carmakers such as BMW and Volkswagen, as well as machinery and mechanical engineering firms.
A string of Western leaders have travelled to China in recent months, including British Prime Minister Keir Starmer, Canadian Prime Minister Mark Carney and French President Emmanuel Macron. Spanish Prime Minister Pedro Sanchez is also in talks to make another visit later this year – which would be his fourth trip to China since 2023.
Merz, on his first official visit to China, would likely travel with an entourage of senior business leaders who would raise “structural and sectoral issues” with Beijing, Oehms said.
Top issues would include advancing an “open market environment”, creating a “level playing field” for German companies and improving intellectual property rights regulation, he said.
China had made progress on these fronts at the central government level but lacked enforcement at the local level, Oehms said.
“With respect to regulatory bottlenecks, this is not new,” he added. “Our organisation has been talking about these topics for many, many years.”
Oehms said investors were also concerned about competition from Chinese peers and “overcapacity” in the Chinese economy, which he described as less dynamic now than 20 years ago.
“The ones that are here know how to navigate the complexities of the China market,” he said. But smaller firms, especially if family-run, were more hesitant, he added. “The question is how to convince these companies to have a second look into China.”
Of the chamber members surveyed, 17 per cent said economic conditions in China had improved in 2025, while 43 per cent said they had worsened. But firms were more optimistic about the future: 65 per cent expected China’s economy to improve over the next five years, while just 20 per cent predicted a deterioration.
China’s economic issues have led many German firms to seek offshore cooperation with Chinese companies, according to Oehms. He pointed to 2025 infrastructure projects in Hong Kong and Singapore as examples. German businesses, he added, were also keen on working with Chinese partners in Africa and the Middle East.
Chinese companies, he said, “are on the same level or spearheading innovation” compared with their German peers, but are open to working together in artificial intelligence, robotics and “smart” manufacturing.
“Some projects from Germany would invest in Chinese firms or work alongside them,” the executive director forecast. “There will be different forms of partnerships, not just joint ventures but other types.”
