German machinery producing success

German companies remain optimistic about their operations in China this year, especially those in the machinery sector, according to a business confidence survey by the German Chamber of Commerce.

In addition, 42 percent of the companies perceive the economic environment is improving.

China is the second-largest investment destination for German machinery manufacturers, as specialized machines bring necessary high-tech solutions to China's many challenges in urbanization.

Investment by German mechanical engineering firms in China increased six-fold between 2004 and 2012.

"When looking at the German-Chinese machine building industry, we can say that it was a continued success story," Reinhold Festge, president of VDMA, said at a press conference on June 26 in Beijing.

VDMA - whose English name is the German Engineering Federation - represents 3,100 member companies.

Accounting for sales of 205.8 billion euros ($285.5 billion) and representing 986,000 employees in 2013, mechanical engineering is one of the largest industrial sectors and employers in Germany. Roughly two-thirds of German production is exported. 

The VDMA covers the entire industry chain - everything from components and factories to service providers, system suppliers and integrators.

VDMA established a representative office in Beijing in 2004.

Bilateral trade between Germany and China in the machinery sector then totaled about 70 billion yuan ($11.2 billion), which by last year increased to 166 billion yuan - an almost nine-fold surge.

It makes China the most important market for German machinery and factories worldwide.

Germany's machinery and equipment sector is the largest and strongest in Europe, yet it is dominated by the small and medium-sized companies that form the backbone of Germany's innovative economy.

As well, deliveries from China to Germany are growing consistently. Germany has been by far the most important partner of Chinese machine builders in Europe for years.

Between 2004 and 2012, direct investment by German engineering companies in China grew from 5.7 billion yuan to almost 40 billion yuan.

Today at least 600 German machinery manufacturers operate in China under their own names.

About half have production or assembly in China and many others are represented with sales agents.

In the future, German medium-sized enterprises and local Chinese companies are expected to find individual solutions to increase market access and enhanced global market share based on a win-win situation.

Machinery to make garments and leather as well as heavy machinery provide examples.

China faces many technological challenges during its urbanization process.

German engineering provides special technological solutions in key fields such as energy and environmental technology, traffic management or infrastructure development.

German engineering also provides China with sustainable solutions in energy-efficient production and for low-carbon emissions.

The German engineering industry is an innovative partner with mature solutions, while the country's equipment is of top standard and often has a lifecycle that lasts longer than others.

In addition, local professional customer services and after-sales support is provided by a growing number of subsidiaries of German mechanical engineering companies in China.

German machine builders have leveraged industrial progress worldwide for years. An important step will be the realization of the vision "Industry 4.0", a high-tech strategy by the German government, to develop innovative products and product concepts.

The author is chief representative of the VDMA-German Engineering Federation-China Office.

For China Daily