Despite competing for the status of the world’s largest exporting nation, the economies of Germany and China work together excellently
As the world’s first and second largest exporting economies, one might assume that China and Germany would be rivals in the increasingly competitive world of international consumption. But with highly complimentary economies, the two countries get along excellently. There are more than 800 Chinese companies doing business in Germany and over 4,500 German companies are operating in China, as Chinese companies exploit the German comparative advantage in machinery, and Germans exploit China’s advantage at light manufacturing.
This relationship is likely to only expand. This January China’s vicepremier Li Keqiang met with German Chancellor Angela Merkel and Foreign Minister Guido Westerwelle to discuss expanding bilateral trade. Bilateral trade, at US$140 billion in 2010, now accounts for almost 30% of China's commerce with the EU, while investment in Germany surpassed US$1 billion, making Germany the second largest destination for Chinese outbound investment in the world. High on the list of subject matter under discussion was relaxing conditions for Chinese companies to enter the German market.
“Germany’s requirements are highly attractive for businesses, which you can see by the number of foreign companies – including approximately 800-1,000 Chinese enterprises – already present in Germany, ” says Yi Cao, a public relations manager from Germany Trade and Invest.
China’s home in Europe
Since the start of the financial crisis there has been a sharp increase in new investments. In 2009, Sany Heavy Industry, one of China’s flagship machinery groups, invested US$140 million in a research and development center and machinery manufacturing base in Colon, North Rhine-Westphalia, the largest such investment in Europe that year.
North Rhine-Westphalia and Hesse have been the regions most benefitting from Chinese investment. China’s largest steel and mineral company Minmetals has been based here since 1986 and others such as Huawei, Genertec, Evoc, Midea or ZTE have followed. In 2009, almost fifty Chinese companies were established in or around Dusseldorf.
Frankfurt benefits as the main air hub of the region, as well as Germany’s financial center. Air China and China Airlines have both set up hubs i n Frankfurt, as have five separate mainland banks Bank of China, China Construction Bank, Bank of Communications, Industrial & Commercial Bank of China and Agricultural Bank of China, which opened its first branch in November 2009.
Frankfurt is also home to the largest Chinese consulate General in Europe and a representative office of the China International Exhibition Center Group Corporation, China’s largest trade fair and exhibition organizer. done a number of reforms to their laws in an attempt to make Germany one of the more investment friendly locations in Europe. the company must have a German address and must choose one from three major forms of corporations: The GmbH (Gesellschaft mit beschrankter Haftung) which is a limited liability company, The AG (Aktiengesellschaft) which is a stock corporation or The KGaA (Kommanditgesellschaft auf Aktien) which is a partnership limited by shares. The GmbH is the most popular as it is flexible and does not come with as many obligations as the other two forms of corporations. Once the company is set up though it is treated exactly the same as any other German company. The nationality and residence of managing directors and shareholders of a GmbH is of no importance.
To set up a GmbH a minimum capital of EUR 25,000 is required. The company must be entered into the commercial register, must be registered with the local trade office and with the tax authorities . The company must have at least one managing director and the corporation should be a member of an appropriate professional organization. Most companies should also be registered in the commercial register. “The establishment procedure guarantees the security and reliability of the data held in the public commercial register,” says Yi Cao.
The country has more flexible employment regulations than other places in Europe, including short term contracts, which can be a maximum of two years, or the first four years of the company’s existence, and allows for easy termination of contracts; temporary employment which is negotiated contractually with an agency as opposed to the employee; and “mini” jobs for low paid or very short term employees.
Visas are, as usual in Europe, difficult to obtain, though going through regional investment agencies, such as Germany Trade and Invest can cut down the time needed to process your application considerably.
The government also provides cash and labor-related incentives such as tax benefits, and low interest loans, with other incentives provided by Federal states as well. Many companies offer range of management and support services in order to help new investors to enter German market and thus make sure that the investment is straightforward and secure.
“[Germany is] constantly striving to improve the investment conditions for foreign companies. Of course the best way to make improvements is to listen to what businesses say and to take action when possible.” says Yi Cao.