China buys German

German exports have surged in recent months, fuelled in large part by strong Chinese domestic demand. Numerous manufacturers across Germany see China as a key driver in their recovery from the global financial and economic crisis that led to a dramatic drop in exports worldwide.

Underscoring the robust business ties between the two export giants, German Chancellor Angela Merkel brought the heads of major German corporations with her on a four-day visit to China this week.

On Friday, the German companies signed contracts worth billons of euros. Among them: a $3.5 billion (2.7 billion euro) deal between Siemens and Shanghai Electric Power Generation Equipment to develop steam and gas turbines and a 6.35 billion yuan (720 million euro) venture between Daimler and Beiqi Foton Motor to build trucks.

Grabbing a chunk of the business

But not only the giants of German manufacturing are benefitting from growing Chinese demand, mid-size producers are also grabbing a chunk of the business.

"China is our number one growth market," said Hans-Jochen Beilke, chief executive officer of Ebm-Papst, which specializes in ventilation, air-conditioning and refrigeration technologies. "More than 300 million Chinese are now able to afford quality refrigerators and air-conditioners. They want to consume - and they are."

While sales in China account for approximately 15 percent of Ebm-Papst's 1 billion euro total revenue, Beilke told Deutsche Welle he expects that share to increase to 25 percent over the next couple of years.

China's booming economy has created wealth for a growing number of people in the country. For instance, Germany luxury carmaker Daimler reported earlier this month that its car sales in China topped 13,7000 units last month, a 177 percent year-on-year surge.

Prefab kitchens

Even prefab kitchens "made in Germany" are in demand. Nobilia, a mid-size manufacturer of kitchen systems, is selling its kitchens to construction companies building huge housing projects in China, according to company spokeswoman Sonja Diermann.

"These are big projects with 1,000-plus apartment units," Diermann told Deutsche Welle. "There is a growing group of consumers who have money, seek quality products and know that Germany has a good reputation in manufacturing."

While Europe and the United State remain Germany's largest export markets, some experts worry that some German manufacturers may be slowly becoming too dependent on China for growth.

"Dependency on China is an issue with some companies in some sectors, and these companies will need to look at their individual situations," Ralph Weichers, chief economist at the German Engineering Association (VDMA), told Deutsche Welle. "But I wouldn't push the panic button."

As enticing as the Chinese market is for German manufacturers, it is not without its challenges. Chief among them is the protection of intellectual property rights (IPR). During her meetings with Chinese government officials, Merkel again stressed the need to respect patents.

'In the lion's den'

While admitting that China has taken steps to curb IPR violation in the country, Beilke said "copying remains an issue." And he speaks from experience.

"We're affected by it," Beilke said. "But we still have to be in the lion's den. The market is too big."

Trade between the export powerhouses has grown steadily, to 91 billion dollars last year compared with $41 billion in 2001. Of last year's total, Chinese exports to Germany accounted for $55 billion and Germany's exports to China for $36 billion.

Author: John Blau
Editor: Sean Sinico