China outlook ‘strongly negative’ for German engineers, with poor demand and overcapacity named as culprits

In a recent survey, German industrial engineers reported a negative outlook on China business, putting the blame on low demand and overcapacity

Surveyed firms did not attribute excess capacity to government subsidies, however, with most saying an abundance of investment the most likely cause

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German industrial engineering firms reported low confidence in the future of their China business in a recent survey. Photo: Xinhua

Published: 6:15pm, 17 May 2024

An association of German industrial engineering firms said their business remains tough in China this year due to slow orders and overcapacity in a recent survey – a phenomenon most members attributed to excess investment, rather than the government subsidies currently being investigated by the European Union.

German firms that design and build manufacturing equipment for China said an “economic slump” in China is “still having an impact” on their trade, according to the results of a survey by the 3,600-member Machinery and Equipment Manufacturers Association.

The survey of 220 of the association’s members – China subsidiaries of German firms – produced a “still strongly negative overall rating” of minus 28 percentage points. This represented a slight improvement over the minus 33 percentage points recorded in a late 2023 poll. For this iteration, members were canvassed from April 10 to 26.

The German trade group’s findings follow dire statements from European and American chambers of commerce in China this year on the second-largest economy’s investment climate.

Lack of orders remains the main problem for many mechanical engineering companies in China

Daniel Yoo

A 9.8 per cent drop in Chinese property investment and a slowdown in consumption hurt the economy in April.

In particular, China’s automotive and consumer electronics sectors lack new investment, the German association said.

These industries invested “heavily” in robotics and automation technologies during the pandemic and the equipment is just now starting to be used, the association’s Shanghai-based office manager Daniel Yoo said in a statement on Thursday on the survey results.