Nearly a quarter of German companies operating in China are planning to relocate all or part of their business out of the country, according to a study released Tuesday, with many blaming rising costs.
The German Chamber of Commerce’s annual survey of 526 member firms in China found that 23% have either already decided to withdraw production capacity in the country or are considering it.
One-third of those companies have planned to leave China entirely.
The rest will transfer part of their business and production overseas, largely to lower-cost countries like India or in Southeast Asia.
Operating costs in China have been rising as the country seeks to rebalance its economy from an export and investment-led model to one driven by consumer spending.
Of the 104 companies that have decided to leave or are considering to, 71% cite the rise in production costs – particularly for labor.
A third blamed an unfavourable public policy environment and one in four said the China-US trade war is having an impact.
“Business expectations have dropped to their lowest level in years,” the study warned, with only a quarter of companies surveyed expecting to meet or exceed their goals this year.
And more than a third said Beijing’s efforts to “level the playing field” for foreign companies are “insufficient.”
“Competition has to be fair,” said German Ambassador Clemens von Goetze at the launch of the study Tuesday.
“Foreign companies, including German companies, and Chinese companies, should play on a level field.”
The ambassador also said German companies had been “not so well informed” about China’s huge Belt and Road Initiative – a US$1 trillion global investment drive – and said they had not been able to benefit from the economic potential of the project.
This initiative “is mainly Chinese-financed and implemented by Chinese companies,” said the German ambassador.