Hanover Trade Fair

The world's biggest industrial fair, in Hanover, offered China, this year's partner country, the perfect stage. With around 500 Chinese participants, the event represented the biggest showcase of Chinese industry abroad to date. Many of the participants from Asia's rising power are state-owned and concentrate on the domestic and Asian markets. Nevertheless, China's business leaders did not want to miss out on the chance to show off some of their highly developed products and capabilities.

One example: the CET XJ Group, which belongs to the state electrical operator China State Grid, presented a battery exchange system for electric buses at the fair. The gigantic machine that looks a bit like a car wash acts as a charging station and is already in operation in the Chinese coastal city of Qingdao. Further applications are planned for Beijing and Nanjing.

The CET XJ Group's head of marketing, Liu Shili, told DW that no other country has a comparable battery exchange system, although German companies had developed a similar technology, which was never implemented for various reasons.

Know-how, not profits

German companies often face an arduous path when it comes from going to development of new technologies to putting them on the market. The picture is different with many of China's state-owned companies. Government officials often dictate and then provide the support for their projects.

Siemens, for example, had been developing a modern, high-voltage power network for years but could not find any buyers until it received a contract from China. Now the country has the world's longest and most powerful high-voltage transmission lines in the world.

Liu added that, in the initial phases, Chinese companies are mostly interested in cultivating know-how through their cooperation with German and other foreign partners. As such, the Asian companies are willing forgo the majority of the profits. From the German perspective, exporting technology to China is a welcome way to recover profit losses at home. But a problem that frequently emerges is Chinese disregard for copyright protections.

Aside from exporting, building a company from the ground up in China offers a second possibility for gaining a foothold in the Asian market. That was the approach of family-owned company Phoenix Contact from southern Germany, one of the world's leading electrical engineering companies.

Phoenix Contact founded a factory 18 years ago in Nanjing with just 20 employees; today, they employ more than 1,500 people. Over half of the company's production now stems from China as well as about 10 percent of sales.

Starting from scratch

But German companies will face an uphill battle when it comes to establishing themselves in China, said Gu Jiandang, who oversees Phoenix Contact's business in China. The German company dealt extensively with intellectual theft and other problems at first. But, Gu added, remaining an outsider looking in is no solution either. He favors the alternative of starting from scratch in China for European companies so that their platform for development and innovation is rooted in China and can thereby enjoy better protection when it comes to intellectual property.

Phoenix Contact is an example of a German-Chinese cooperation that has benefited both sides of the partnership. Many Chinese cities now offer attractive packages to German companies in a bid to win them over for joint venture investments.

The Chinese-German Eco-park in the city of Qingdao, also represented at the Hanover fair, is one example. Deputy project head Shen Lei says that over 20 German companies have expressed interest in investing in the project, which brings together electric cars, robots and city planning ideas into a futuristic whole. The park's infrastructure, despite its presentation as a Sino-German partnership, has been financed so far nearly 100 percent by the Chinese, who also footed the bill to appear in Hanover.

German industry can also expect to acquire property to build their ventures at very attractive prices in China. It is impossible to overlook the will for cooperation that exists - one of the strongest messages to emerge from China's participation in last week's trade fair.

Author: Li Shitao / gsw
Editor: Simon Bone