(Yicai) April 7 -- Representatives from 10 of Germany’s 16 federal states appeared in force at a recent forum in Shanghai to pitch their regions to Chinese investors.

The forum -- titled “Investing in Germany, Connecting Europe: In-Depth Analysis of Regions and Industries” -- was jointly organized by the Germany Trade and Invest, the country’s international economic promotion agency, and the Shanghai Institute for European Studies.

Each state had its own booth with investment brochures and project lists designed to show off local strengths. Bremen highlighted Bremerhaven, Germany’s second-largest port; Hessen pointed to Frankfurt’s ambition to become the world’s largest data-exchange hub; Bavaria emphasized its concentration of high-tech industries; and Saxony showcased its automotive cluster and growing semiconductor presence, which has earned it the nickname “Europe’s Silicon Valley.”

Despite their different industrial profiles, the state representatives all made the same point: China is a major focus of their development strategies. Bremerhaven already handles shipments of many Chinese new energy vehicles, while Hamburg has the closest ties with Shanghai. Berlin’s startup and venture scene includes a visible number of Chinese companies.

Chinese investment in Germany is undergoing a clear shift, said Xu Xinyun, investment director of the GTAI in China. They are becoming more cautious with regards to overseas expansion, and most tend to begin by setting up small teams responsible for sales and marketing as the first step into Germany, he said.

When asked about the pain points Chinese businesses face when expanding into Germany, Zhang Yizhi, chief representative in China for Lower Saxony’s economic development agency, said that approvals are a real challenge for many companies. He gave the example of the particularly lengthy certification process for energy sector projects. How to enter the supply chains of major German firms, how to work with local engineering teams, and how to obtain bank loans without local market credit are also all issues that require serious attention, Zhang said.

‘Made in EU’ Act

Several German state representatives also specifically mentioned the European Union’s proposed Industrial Accelerator Act. Announced early last month, it calls for introducing “Made in the EU” requirements in public procurement and public support programs, with the goal of raising manufacturing’s share of the EU’s gross domestic product to 20 percent by 2035.

The act will next be submitted to the European Parliament and the Council of the European Union for review and negotiation.

The act would undoubtedly raise the investment threshold and costs, but it would also generate strong market demand for energy-saving equipment and energy management systems, said Wang Zhen, chief representative of the Economic and Technological Promotion Center of Schleswig-Holstein in China.

Feng Xingliang, chief representative of the International Business Office of North Rhine-Westphalia in China, also said the act should raise concerns among Chinese companies.

Against the backdrop of a growing emphasis on economic security, Germany and Europe are increasingly focusing on reshoring industrial chains through local manufacturing, Wu Huiping, deputy director of Tongji University’s Center for German Studies, told Yicai.

“Chinese enterprises may need to shift from investment as well as mergers and acquisitions to expanding greenfield investments in Germany, and even conducting local operations,” Wu said. “This may encounter fewer restrictions.”

Green, Digital Investment

In Wu’s view, although regulation in Germany and even in the wider European market is tightening, the German government still attaches great importance to foreign investment in the green and digital economies, especially how Chinese smart manufacturing can support Germany’s industrial transformation and help it emerge from an economic slowdown. This was also an important reason why German Chancellor Friedrich Merz visited smart manufacturing companies during a visit to China earlier this year.

German companies operating in China are no longer limited to introducing German technology into the Chinese market, Wu noted. They are increasingly using research, development, and innovation in China to support their own development. “Technology transfer now has two-way flow,” she said.

As for future trends in China-Germany investment cooperation, Wu said that in the digital field, Germany still needs to improve its supporting infrastructure, while China has clear advantages in autonomous driving, industrial robots, and smart manufacturing. These are also investment directions welcomed by the German government.

Furthermore, regarding Germany’s energy transition, she believes Chinese businesses still have opportunities to work with German companies in hydrogen energy in third-party markets and to integrate into Germany’s energy-partnership network.

Editor: Tom Litting