According to National People's Congress chairman Wu Bangguo, Sino-German relations are at 'their best point in history'. His optimism is reflected by the two nations' goal - articulated last year - to double bilateral trade (US$54.1 billion last year) by 2010.

On the inside, however, the German Centre was only 30 per cent occupied when it opened two weeks ago. Viewed from this perspective, it is a reminder that many German companies are finding China a hard slog.

In the first six months of this year, Germany's exports to China fell 12.7 per cent even as the mainland's imports grew 14 per cent overall. The Sturm und Drang is keenly felt by some of the industrial giant's leading corporate champions.

Volkswagen, the biggest and longest-standing investor in China's car industry, has seen its market share fall as low as 13 per cent this year, although it has since bounced back to about 18 per cent. Before China's accession to the World Trade Organisation in December 2001, VW commanded more than half the country's passenger car market.

'We underestimated the impact of China's WTO accession on our business,' Winfried Vahland, VW's new global vice-president and president of its China operations, admitted to a group of reporters last month in Beijing.

'Volkswagen did not launch enough new passenger car models after China's entry into the WTO to keep up with the aggressive expansion by Japanese and Korean investors,' adds Bernd Reitmeier, who works at the German Trade Office in Shanghai.

'I recently guided a group of 20 suppliers to [China] assembly plants. At VW, we had to go to the maintenance unit to see somebody working.'

VW's sales in China, its biggest market outside Germany, fell 13 per cent in the first half of this year to 265,000 vehicles. Adding insult to injury, China's passenger car market expanded 13 per cent over the same period. It was a rude shock for a company that in 2003 announced plans to double its mainland production capacity to 1.6 million cars by 2008. Two months ago, that expansion plan was shelved.

China's vehicle industry has evolved into something of a fashion business with 18 new car models debuting in the first 10 months of this year. Only one was a VW.

'General Motors does a much better job than VW in meeting the tastes of Chinese customers who always want something new,' Shanghai Automotive Industry Corp chairman Chen Xianglin said last week. SAIC is the principal China partner for VW and GM.

To stem the decline, Mr Vahland's so-called Olympic Plan calls for VW introduce up to 12 new models in China by 2009 and cut costs.

'They want to squeeze 40 per cent out of us,' said Lothar Schneider, a general manager at components supplier Kolbenschmidt Pierburg Shanghai.

The company's dilemma is a reminder that Germany's flagship investors in China brought hundreds of smaller suppliers along with them and their problems quickly ripple back through the supply chain.

Mr Schneider said his company now got better prices exporting its China-made products to VW's operations in Germany.

Chemical giant BASF, which earlier this year inaugurated the biggest investment in its 140-year history in an ethylene plant in Nanjing, is experiencing a different sort of China nightmare. Its decision last month to serve more than a dozen Chinese agrochemical companies at a Glasgow trade fair with injunctions for alleged patent infringement provoked a furious response in China.

'It is real discrimination against China and it cost us money,' said Anhui Huaxing general manager Xie Ping, whose company received one of BASF's injunctions.

'Those companies have nailed us to the wall with a nasty internet campaign,' a Shanghai-based BASF manager admitted during an interview last week.

The company, which invested US$2.9 billion for a 50 per cent stake in the Nanjing plant, has more mundane problems as well. Like Volkswagen, it finds itself operating in an increasingly competitive environment where rival investments are growing much faster than anticipated. BP, Royal Dutch/Shell and Exxon Mobil will all soon launch massive mainland ethylene complexes.

Back in Pudong, things look even more difficult at Shanghai Krupp Stainless' steel plant. When then German chancellor Gerhard Schroeder inaugurated the joint venture in November 2001, the US$1.43 billion undertaking was China's largest foreign-invested iron and steel venture. Launched at a time when China was importing 70 per cent of its stainless steel requirement, four years later the country is a net exporter.

'We had to cancel the official opening of our phase two expansion this summer ... due to local competition,' says a ThyssenKrupp executive.

In addition to the 200,000-tonne per annum expansion, the executive estimates that 50 per cent of the plant's original 72,000-tonne capacity lies idle.