Leading German state magnet for Chinese investors

The four-decade partnership between China and Germany's most populous federal state, North Rhine-Westphalia, has blossomed as exchanges have intensified in an ever-wider range of fields.

The state, located at the heart of Europe and bordering the Netherlands and Belgium, has, since 2003, grown into the No 1 investment destination in Germany for Chinese companies.

This long relationship has produced dynamic development and success in bilateral cooperation that is evident in a broad range of industries. President Xi Jinping pointed this out during a visit to the German state's capital, Dusseldorf, in March 2014.

"Our investments have helped create a lot of jobs and optimize the distribution of industrial locations. This makes us more competitive internationally and promotes our mutual growth," Xi said, according to German media reports.

To make this success curve rise further and to initiate new collaborations, Minister-President of North Rhine-Westphalia, Hannelore Kraft, is visiting China together with NRW Economics Minister Garrelt Duin and a business delegation.

Magnet at Europe's heart

With 77 Chinese-invested projects in 2014, North Rhine-Westphalia clearly ranks at the top among German states. The Dusseldorf region in particular enjoys great popularity, especially since a Chinese consulate general was established there early in 2015.

Another reason factored into investment decisions is the reputation of "made in Germany" quality.

Chinese businesses have created a total of some 10,000 jobs in NRW. Compared with other major investor areas, there is still great potential for development.

The state's advantageous, central location in Europe also helps attract more foreign investment to NRW than to any other German state.

NRW secured 218 billion euros ($230.62 billion) in 2012, accounting for 27.5 percent of direct investments in Germany, by far the largest share of all 16 federal states in the country.

Importantly, more than 15,000 foreign companies from main investor countries control their German or European operations from NRW.

Among them are 850 Chinese companies, including telecommunication leaders Huawei and ZTE, as well as electronics manufacturer Lenovo and Hisense. The number represented a sharp rise from around 100 in 2013.

The majority of Chinese investors are from tier-one cities, such as Beijing and Shanghai, as well as Jiangsu, Shandong, Zhejiang and Guangdong provinces.

New opportunities

North Rhine-Westphalia in particular has profited from the increasing internationalization of the Chinese economy over the years.

NRW has maintained relations with the Chinese provinces of Jiangsu, Sichuan and Shanxi since the 1980s. Chinese efforts that started with establishing trading branches as well as sales and European headquarters now are focusing on the construction of production facilities and R&D centers.

When the Chinese central government began to encourage local companies to go abroad in 1999, it was the starting signal for the rapid development of Chinese direct investments. Since 2010, Chinese investors have increasingly targeted mergers and acquisitions of local companies. Experts predict that China will further increase its outward investment significantly in the coming years.

Significant sectors currently are trade and services, as well as distribution. In NRW, one special focus has been on mechanical engineering and the automotive industry, in particular the supply industry.

Major industries include textiles and clothing, information and communications technology, mechanical engineering, automotive supply, and metal production and processing.

A study by the Hans Boeckler Foundation found that the intensity of Chinese investment has increased significantly as a result of the M&A strategy. A large proportion of Chinese investors in NRW cluster along the Rhine, an area with 85 percent of the Chinese-invested businesses based in the region.

A total of 116 German companies were taken over by Chinese investors from 2000 to 2014, 24 of them in North Rhine-Westphalia, according to a survey by the State-owned ecnomic development agency NRW.INVEST.

With this acquisition strategy, Chinese investors are aiming primarily to develop foreign sales markets and to increase their market shares, for example by acquiring global brands.

The efforts in securing technology and know-how and changing its image from a low-cost manufacturer to a high-tech country also play a part in such investment decisions.

Asian companies traditionally have pursued long-term goals in NRW. According to a study that queried Chinese managers by the consulting firm Ernst & Young, the main reasons for a long-lasting commitment are in particular the highly trained professionals and the central location of the state.

Strong, supportive community

In North Rhine Westphalia, Chinese investors find remarkably helpful and supportive official agencies, and a familiar, welcoming community that also is home to nearly 25,000 Chinese people.

NRW provides outstanding support to Chinese investors on their way into the European and German markets. With its representative offices in Beijing, Shanghai, Nanjing and project offices in Guangzhou and Chengdu, NRW.INVEST encourages investments from China.

The experienced economic development agency markets NRW worldwide as a business location and helps foreign companies with their investment plans in the state. Its expert team provides comprehensive information and contacts from NRW, analyzes investment projects and finds the right location for every project.

Also the agency moderates and accompanies an investment project from the first step to its conclusion.

The intensive location policy and friendly climate for investors from Asia add to the state's appeal.

NRW also boasts Chinese banks, lawyers, schools, supermarkets, doctors, restaurants and culture centers, making for a highly varied Chinese infrastructure.

Over the years, a strong community has developed, providing a high cultural affinity. The many Chinese offerings also help to shape the multinational image of the state.

The close ties among Chinese investors have contributed to NRW's status as an investment hub. Thanks to a broad Chinese network, investors also have access to firsthand local information when planning new projects.

Easy access, prime destination

Long-term economic ties have opened the door to close, convenient connections between China and North Rhine-Westphalia.

Air China provides non-stop, round-trip flight services five times a week from the NRW capital to Beijing.

For freight transport by rail, a container train connects the central Asian city of Chongqing to Duisburg four times a week. It takes the Chongqing-Xinjiang-Europe train 16 days for the 10,300 km trip, twice as fast as transport by sea, but only half as expensive as air freight. The route is already regarded as a key part of the "new Silk Road".

Its advanced transport infrastructure provides easy access to destinations all over the world. NRW boasts more than 400 international direct flights from two major international airports and four other airports with European connections. A dense network of waterways, rail tracks and roads ensures convenient connections worldwide. With more than 123 million tons of cargo handled every year, Duisburg is the largest inland port in the world.

Nearly 150 million people live within a radius of 500 kilometers around the NRW state capital, Dusseldorf. This is equivalent to one-third of all consumers and 45 percent of the purchasing power in the European Union. The 34,110-square-kilometer German state itself is home to 17.5 million people. Its largest cities include Cologne, Dusseldorf, Dortmund, Essen and Duisburg.

The size of the market is a magnet for businesses. Sixteen of the 50 highest grossing German companies have their headquarters in the state. Big names include chemical and pharmaceutical giant Bayer, media colossus Bertelsmann and the world's largest courier company, Deutsche Post.

Besides large international companies, scores of small and mid-sized businesses that are leaders in their respective fields and known as "hidden champions" flourish in the state.

In addition, more than 80 technology centers and non-university research institutes make up of the densest research network in Europe, offering ideal conditions for technology commercialization. The broad spectrum of 72 universities involved in applied sciences supplies companies in all sectors with high-quality employees.

zhuanti@chinadaily.com.cn

(China Daily 04/25/2015 page12)