China's strategy to pursue technologies and clean energy creates investment opportunities

China's focus on advancing its high-end manufacturing sector and fostering new quality productive forces will generate growth points for German businesses, making the global economy and supply chains even greener and more diversified, said senior executives of German industrial and technology conglomerates.

They noted that in the context of a rapidly changing global economy, green and strategic emerging industries are poised to strengthen new quality productive forces and drive innovation. These industries are seen as key indicators of the direction of the latest technological revolution and industrial transformation.

New quality productive forces signify a paradigm shift in productivity, primarily propelled by revolutionary technological breakthroughs, innovative allocation of production factors, and profound industrial transformation and upgrading.

Highlighting the alignment of new quality productive forces with his group's growth strategy, Roland Busch, president and CEO of Siemens, said the German company will complete an expansion project of its digital factory in Chengdu, Sichuan province, by the end of this year.

"Investors are always on the lookout for markets like China, which are at the forefront of innovation and rapid progress," said Busch, adding that businesses in China are rapidly adopting new technologies to maintain their competitive edge in various markets, often surpassing the pace of their counterparts elsewhere. This makes the country a highly dynamic market.

The German company currently employs more than 31,000 people and operates 21 research and development hubs across China.

Foreign direct investment in China's high-tech manufacturing sector jumped 10.1 percent year-on-year to 28.27 billion yuan ($3.92 billion) in the first two months of this year, and German investment in China increased by 19.8 percent year-on-year during this period, statistics from the Ministry of Commerce showed.

During his meeting with a number of heads of multinational corporations — including Ola Kaellenius, chairman of Mercedes-Benz Group, and Christian Hartel, president and CEO of Wacker Chemie — in Beijing in late March, Chinese Commerce Minister Wang Wentao said that China is committed to fostering high-quality development through high-standard openness and ensuring quality service support for foreign businesses.

China will consistently establish a top-tier business environment characterized by market orientation, legal governance and international standards, said Wang.

With China creating more favorable conditions to attract foreign investment, Cui Fan, a professor at the University of International Business and Economics in Beijing, said that accelerating the establishment of a new development pattern and enhancing the level of foreign investment utilization are crucial.

The key is to enhance the attractiveness of China's vast market to global investors and optimize the environment for foreign investment, said Cui, adding that as China continues to progress in implementing policies for high-level economic openness and fostering new quality productive forces, global companies have found new growth opportunities, especially in areas like high-end manufacturing, digital transformation and efforts toward decarbonization.

Stephen Lewis, president and CEO for the Asia-Pacific region at Voith Hydro, a German hydroelectric equipment manufacturer, said that China's economy is shifting toward high-quality development, and there is surging demand for sustainable green technologies, including renewable energy technologies.

"This shift brings a new impetus for global companies and we look forward to leveraging this opportunity to continue contributing to China's ecological environment quality," said Lewis.

Emphasizing that China's green transformation has created business opportunities for foreign companies in the country, Miguel Lopez, board chairman and CEO of Thyssenkrupp, said the German company will expand its expertise in eco-friendly, high-end manufacturing sectors, including wind power, vehicles, green hydrogen, chemicals, cement and steel in the country over the coming years.

About 78 percent of German companies expect growth to be consistent in China over the next five years, while 54 percent plan to increase investments in the country, according to a survey released in January by the German Chamber of Commerce in China.

According to the Business Confidence Survey for 2023-24, nearly 80 percent of German companies said it is necessary to remain competitive in China.

About 42 percent of German companies expect positive industry development in 2024, compared to only 21 percent in 2023, as per the survey.

Ulf Reinhardt, chairperson of the board of the German Chamber of Commerce in China (South and Southwest China), said about 5 percent of the survey respondents currently regard Chinese companies as innovation leaders in their industries, but 46 percent predict that they will become leaders within the next five years.

As Germany's most important trading partner for seven consecutive years, China has witnessed its economic relationship with Germany sustain millions of jobs in both countries, said Jens Hildebrandt, executive director of the German Chamber of Commerce in China (North China).

The enormous size of the Chinese consumer market, advanced supply chain infrastructure and status as an increasingly strong innovator make China one of the most important markets for many German companies, Hildebrandt said.

The German Chamber of Commerce in China has more than 2,100 members, including Volkswagen, Covestro and Bayer Group.

China's advantages, including a complete industrial system, a lucrative market, social stability and positive long-term economic fundamentals, as well as the smooth operation of China-Europe freight train services, have created a solid foundation for the growth of German companies, said Lin Meng, director of the Modern Supply Chain Research Institute at the Beijing-based Chinese Academy of International Trade and Economic Cooperation.

"In the context of market demand, supply chain stability, global companies' existing footprint, current growth in China or future development strategy, it is vital for China and Germany to enhance business ties to mitigate the risks caused by economic uncertainties in the world," said Lin.

Akiko Terada-Hagiwara, head of the economics and strategy unit of the Asian Development Bank's resident mission in China, said that China is on the way to become a high-income country, and it will be unlikely to fall into the so-called middle-income trap if it continues to pursue reforms that focus on achieving high-quality development as it does now.

With China ascending the value chain, it has evolved into more of an exporter than an importer of intermediate goods utilized by manufacturers in other regions. This development enhances connectivity and, consequently, boosts the competitiveness of global supply chains, according to a report released by banking and financial services group HSBC in 2023.