China has just opened its largest business to date in Europe: a construction machinery assembly plant and design shop near Cologne. After the US, Chinese businesses meanwhile rank second as investors in Germany.
Sany, an exporter of cranes, concrete pumps and other construction machinery from China's Hunan province, has officially opened its assembly plant in Bedburg near Cologne and predicted it would be selling 1 billion euros ($ 1.43 billion) worth of machinery into Europe annually by 2015.
Wengen Liang, Sany's founder and chief, said the plant cost 35 million euros so far, but a total of 100 million euros would be spent on the site by the time it had been completed. The assembly plant is the largest investment by a Chinese company so far in Europe.
"If we succeed in merging Chinese cost advantages and German quality advantages, then we are invincible," Liang, who is regarded as one of China's most successful entrepreneurs, said at Monday's grand opening in Bedburg.
Sany is competetive and financially strong, founder Liang says
The plant is designed to assemble 1,870 concrete-mixers and concrete pumps from Chinese parts for the European and North African market annually.
Founded in 1989 as a small factory for welding tools, Sany has meanwhile become the world's largest construction machinery manufacturer, and FORBES business magazine ranks its founder Liang as the third-wealthiest man in China.
Liang quoted the firm's 2011 pre-tax income as two billion euros. "We are in a position to invest a lot of money in research and development," he said.
Over the past years, Chinese businesses have evolved as the second largest group of foreign investors in Germany. But Sany is the first Chinese company to invest such a large amount in Europe.
Trade experts are closely watching developments, according to Paul Deder of BauPraxis Zeitung, a German construction trade journal.
Local parts suppliers guarantee quality
"This is the right time to get started here," he told Deutsche Welle. Deder said the industry suffered losses in revenue of 40 and even 50 percent during the global financial crisis, but meanwhile, demand exceeds supply.
But whether Sany will be able to prove itself on the German market depends on whether the Chinese company can live up to European construction companies' quality standards.
Where sensitive parts of equipment are concerned, Sany resorts to well-respected local suppliers like Esser Werke, a German manufacturer of conveying pipes and pipe special fittings that provides the pipes for Sany's concrete pump. Sany's investment presents a big opportunity for Esser Werke, managing director Albert Daniels told Deutsche Welle.
"If the Chinese only use our pipes to equip their pumps in order to enhance the pumps' quality, then that puts pressure on competitors to use these pipes, too," Daniels said. "In the long run, it's to our advantage."
No matter the outcome of Sany's investment in Germany, it has already been profitable for pipe manufacturer Esser Werke. The company hopes that Sany might now come to the conclusion that it is worthwhile exporting the costly German pipes to China for the Chinese market.
Author: Mathias Bölinger /db
Editor: Thomas Kohlmann