Business
Industrial Connections
Made in China 2025 teams up with Germany's Industry 4.0 for added benefits
By Wang Jun  ·  2015-12-14  ·   Source: | NO. 51 DECEMBER 17, 2015

The 1 millionth BMW car made by Brilliance China Automotive Holdings Ltd. rolls off the production line in Shenyang, capital of northeast China’s Liaoning Province, on January 8 (CFP)

"German investment in China used to be 30 times the number of Chinese investment in Germany, but now the situation has changed due to the huge innovation demand of Chinese industries," German Ambassador to China Michael Clauss said at an investors' conference held by the German embassy in Beijing on December 2.

Zhai Qian, commercial counselor of the Department of European Affairs of China's Ministry of Commerce, said at the investors' conference that Chinese investment in Germany totaled $1.44 billion in 2014, surging 58 percent year on year, which accounted for 14.7 percent of the country's investment in Europe. Since 2009, Chinese investment in Germany has been growing at an annual average rate of 51.7 percent, higher than the average growth of 16.8 percent for China's total outbound investment.

Against the backdrop where the Chinese strategy of Made in China 2025 and the German strategy of Industry 4.0 are concerned, Cai Hongping, Chairman and founder of the private equity firm AGIC Group, estimated that in the first quarter of 2016, China's investment in Germany is likely to reach $2 billion. "Many Chinese and German companies have started cooperation based on the Industry 4.0 strategy," he said.

Ongoing process 

Collaboration between Chinese and German industries is mutually encouraged by their governments. China and Germany jointly issued a comprehensive action plan on bilateral cooperation during Chinese Premier Li Keqiang's visit to Germany in October 2014, inaugurating the two countries' collaboration under Industry 4.0. When German Chancellor Angela Merkel visited China a year later, she and Premier Li resolved to deepen ties between the two countries' national manufacturing strategies: Industry 4.0 and Made in China 2025.

"This is a long-term process, which may be achieved in several decades, but companies starting late will lose [to their] competition," said Clauss. According to him, Germany aims to achieve a production model that is more efficient, economical and environmentally friendly, in addition to creating higher and more sustainable economic growth. German technologies that are applied to Industry 4.0 will also contribute to China's drive toward modernization.

For example, Lothar Herrmann, CEO of Siemens China, said at the investors' conference that the company's research and development base in Chengdu in southwest China's Sichuan Province, has automated the whole production process, with its products' acceptance rate reaching 99.5 percent.

In an interview with the 21st Century Business Herald , Clauss said that he visited an industrial park in Shenyang in northeast China's Liaoning Province, which was built mainly for BMW's Shenyang plant. "BMW has a huge plant there. Although it has not met the standards of Industry 4.0, the plant has been highly automated. Now more and more German companies come to this industrial park, most of which are BMW suppliers," Clauss said. The industrial park is amenable to German companies, so Clauss believes it will attract more foreign companies and form an industrial cluster of high-end equipment manufacturing.

Quality Chinese investment 

Clauss also said that in recent years, the amount of Chinese investment in Germany keeps growing. By now more than 900 Chinese companies are operating businesses in Germany. According to a report by the Germany Trade and Invest, a federal economic development agency, in 2014 China invested in a record high of 190 projects in Germany, the most among all world countries. The United States and Switzerland have invested in 168 projects and 130 projects, respectively, in Germany. The value of Chinese investment grew by 37 percent compared to 2013. Most of the financing went into electronics and semiconductors, mechanical manufacturing, financial services and information communications and software.

"Although the amount is not very high, Chinese investment in Germany has a higher quality than those in any other countries," said Zhai, adding that Chinese investment in Germany is all-dimensional and sustainable. "As the number of high-quality projects increases, the total volume of Chinese investment in Germany will also grow," he said.

But he also noted that Chinese companies are still not capable of managing the German companies they acquire, and they need to better understand the local market and business models in Germany. Zhai suggested that Chinese and German local governments strengthen their exchange of information and cooperation, enhance joint research and development and make innovations in financial cooperation. In the big data era, the two countries must develop better digital manufacturing and adhere to international standards, so as to jointly lead the development of electric vehicles and smart manufacturing in the world.

Yu Sicheng, vice president of Alibaba's cloud computing business, said at the investors' conference that in the first half of 2016, the Alibaba Group will start cloud computing services in Germany, eventually covering the entirety of Europe.

Trade union satisfaction 

Clauss noted that Germany's demand for high-speed railways and nuclear power was not as large as Great Britain's, so the country will open other industries to Chinese investors. "Hi-tech companies such as Huawei and ZTE have encountered policy obstacles in some countries, but in Germany they have already gained a 50-percent market share in mobile telecommunication. By now none of the Chinese-invested projects have been stopped by the German Government," he added.

The ambassador highly praises the performance of Chinese companies in Germany. "They didn't close factories, fire workers or take away their technology after acquiring German companies, as some U.S. companies have done before. Therefore the trade unions of German companies are satisfied with Chinese companies," he said. Sewing machine manufacturer Dürkopp Adler, fire truck maker Ziegler and the manufacturer of concrete and material placing equipment Putzmeister are examples Clauss cited of sound growth after being acquired by Chinese companies.

In December 2013, the China International Marine Containers (Group) Co. Ltd. (CIMC) acquired Ziegler, the largest firefighting and rescue vehicle manufacturer in Germany. Li Yonghui, Vice President of CIMC Group, said at the investors' conference that after he was sent to Ziegler, he used five measures to win the support of the employees.

First, the CIMC Group established a sales company in China for Ziegler, who currently has orders running up to the end of 2016. Then, Ziegler was incorporated into CIMC Group's capital pool to ensure it will have adequate financial support. Third, the CIMC Group spent 30,000 euros ($32,725) building a museum as a sign of respect for Ziegler's reputation. Moreover, Li also spent a whole month visiting all of Ziegler's major clients in order to dispel their worries. Finally, making use of the advantages of the parent company, the CIMC Group renovated a production line for Ziegler, reducing the company's labor hours by 40 percent.

These steps highlight the depths that both countries' companies are taking in collaboration toward achieving their goals for innovation. More of these actions are necessary to foster increased interaction and mutual benefits for companies in both countries.

Copyedited by Bryan Michael Galvan

Comments to wangjun@bjreview.com

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