According to a survey by the German Chamber of Commerce in China (AHK), corporate optimism among German firms in the Chinese market has reached an all-time low this year. 

The number of German companies seeking to expand their China investment has decreased by 20% over the past year to 51%. 49% said they no longer consider the country appealing.

The survey was based on 593 companies who gave their opinion between August and September, before China’s drastic pandemic shift. 

66% of the respondents cited the country’s zero-COVID policy as undermining their taste for the Chinese market. 10% were planning to reduce or forgo investment in the country for the entirety, a 4% plus from last year.

Clas Neumann, chairman of the business group, said geopolitical tensions have further added pressure for the firms to change their strategy. After the Ukraine crisis exposed Germany’s reliance on Russian energy, Berlin has been drafting policies to ensure it won’t make the same mistake with China.

58% of respondents agreed China’s investment appeal is dwindling compared to other economies. This year, only 30% of German businesses saw rising domestic consumption as a significant commercial opportunity, and this is a drop of more than half from 68% in 2019.

The Asian country’s regulatory environment is another concern. One-third of the companies (or 33%) were worried about legal uncertainty. 31% were taken aback by China’s cyber and data security regulations. 29% said they experience unfair treatment compared to local rivals.

According to the chamber, two-thirds of the companies are looking to build resilience by diversifying South-East Asia, localizing operations and supply chains within China, or doing both at once.

Meanwhile, Neumann expected German companies to be more optimistic in 2023 after adapting to China’s changing pandemic situations.

He said, “The sudden end of China’s zero-COVID-19 policy is a game changer.”

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