International opportunities for growth: China’s market is large and diverse.
An interview with Yi Zhang - the representative of the state of Niedersachsen in China considers himself a mediator between the cultures and helps Niedersachsen-based companies enter the local market: China is a huge market, so there is a wide range of market opportunities.
Mr Zhang, you represent the state of Niedersachsen in China. I’m sure our readers would like to know a bit about you personally.
I came to Germany for the first time in 2003 to learn the language and to study. I immediately felt right at home and one semester turned into four years. Following my Master’s in Electrical Engineering at the Technische Universität Berlin, I worked in Munich as a software developer for a while.
Although I’m an engineer, I received an interesting job offer in business development, promoting investment and exports, in 2010.
The work involved in initiating international investment between Europe and China and helping companies enter the Chinese market is both exciting and diverse.
For five years I worked in Vienna and Zurich as representative of the Sino-Austria Ecological Park and the Sino-Swiss Industrial Park. Then I spent several years heading up the office for promoting investment in the city of Zhenjiang in the province of Jiangsu, where I was responsible for promoting international investment before becoming representative of the state of Niedersachsen in China.
In normal circumstances, what interests you most about your work as representative?
Heading up the representation of the state of Niedersachsen in China is a very interesting job as it allows me to work closely with German and Chinese companies and promote economic cooperation between the countries. I consult closely with the Ministry for Economic Affairs in Niedersachen.
I also see myself as a mediator between the cultures, for example, to ensure that intercultural differences in communication between German and Chinese business partners don’t lead to misunderstandings.
One of my main tasks also involves helping German companies enter the Chinese market and highlighting ways to acquire customers. Communication between the governments, companies and institutions in China and Germany can be challenging and prevent projects from progressing. I can offer the necessary assistance here as representative, and I love being able to mediate.
How challenging was the period of severe restrictions during the corona pandemic?
China was in lockdown for about a month and a half in the first quarter of 2020 and the government imposed systematic measures such as curfews to control the spread of the virus. This, of course, had a major personal impact on our everyday lives, but my family and I adapted relatively quickly and we continued with normal life as much as possible at home.
It did, of course, also affect my work as representative, and enquiries from Niedersachsen-based companies were thin on the ground. By contrast, the interest of Chinese companies looking to invest in Europe didn’t decline quite as much, and so my work at that time focused primarily on developing relationships with Chinese companies interested in expanding. However, this was pretty challenging because, at the time, almost all business activities here in China too had to switch from offline to online. But Chinese people prefer meeting in person rather than online.
Thankfully the restrictions were gradually eased from mid-March. We can now travel freely throughout China and business life has got back to normal. I’ll soon even be able to take part in the first trade shows in China.
The corona pandemic has had a negative impact on economic development in all countries. How do you see the economic situation as we head into 2021?
Unfortunately, COVID-19 will cause an economic recession unlike any other global crisis, and China is also severely affected. For example, in the first quarter of 2020 there was a negative GDP growth of 6.8%. Imports and exports in many sectors, but also hotels, catering companies, tourism, aviation, the events industry and many other areas are greatly affected. A significant decline in consumer spending and direct foreign investment is also feared. Experts are expecting a fall in foreign investment of up to 40% in 2020 and international trade is also likely to decrease at a similar rate.
If we can get a vaccine and deploy it widely, I think China has a good chance of strong growth in 2021. But economic recovery will definitely look very different in the different industries.
I see huge opportunities for growth in innovative sectors such as artificial intelligence, IT and life science. China’s government is going to invest heavily in these areas and promote growth.
China is a very important market for German and Niedersachsen-based companies. Given the special strengths of Niedersachsen as a business location, which sectors do you think might be of particular interest to our companies?
China is a huge market, so there is a wide range of market opportunities. I do, however, think that there are special opportunities for Niedersachsen-based companies in the mobility and life science sectors in particular.
The automotive industry is the main sector for investment by Niedersachsen-based companies in China and will continue to carry weight. China’s e-mobility industry is developing rapidly. In the first six months of 2020, 400,000 new electric vehicles were sold in China in spite of the pandemic, and by 2023 it is expected to be 3,000,000. Many German companies have increased their investment in this sector; Volkswagen in particular has just invested € 2.1 billion in the province of Anhui.
Life science is one of the sectors that can benefit from the pandemic. Many Chinese companies in this area have seen tremendous economic growth recently and are very interested in international cooperation. There is also plenty of Chinese capital available in this sector at the moment. Now is a good time for Niedersachsen-based life science companies to enter the Chinese market or work together with Chinese companies.
Another sector is the food industry. Because of the strong growth of the Chinese domestic market, the major food companies have pumped vast amounts of money into expanding production and processing capacities. The rise in Chinese demand for premium products is a good opportunity for Niedersachsen-based companies to get involved in the Chinese market. And Chinese companies are very open to working together with German companies in this sector.
I could cite more market opportunities because China’s market is large and diverse. I would encourage Niedersachsen-based companies to get in touch with me so that we can assess the specific market opportunities together.
How can Niedersachsen benefit from closer relations between the EU and China?
Given the current tensions between China and the US, the relationship between China and the EU is more important than ever. The EU is China’s most important trade partner. The Chinese government supports European companies expanding to China, and Chinese companies that want to invest in Europe.
Moreover, the Chinese government’s five-year plan aims to open up the market from 2021 and also encourages Chinese companies to expand internationally. Companies from Niedersachsen can avail of support measures when exploring the Chinese market and have better prospects of finding investment and cooperation partners in China.
One advantage is that Chinese companies like to invest in Germany and Niedersachsen is an attractive business location that stands a good chance of winning over Chinese investors.
What special economic and cultural aspects of China does a company from Niedersachsen need to adapt to at the moment?
In China contact with the government is unavoidable. Many products have to be registered, certified or licensed by the responsible Chinese authorities before they can be sold in China. A common and more efficient practice to speed things up is to work together with a Chinese company.
Safeguarding intellectual property is very difficult in China, although there are discernible improvements. That is why, for example, it’s important to ensure that all rights are registered and that the necessary checks are carried out by the business partners.
In terms of communication within China, WeChat is recommended because the app is the main tool for business communication in China.
Using WeChat signals professionalism to your business partner and is an important aspect when developing business relationships.
What are the challenges you see facing companies from Niedersachsen and how can you help them specifically?
Cultural misunderstandings are one of the biggest challenges for German companies in China.
Even though more and more Chinese people can speak English very well, it’s still difficult to understand the ‘hidden’ meanings in the language.
But good business relationships depend not just on direct communication, but also on an understanding of indirect communication as well as cultural conventions. I can help companies here to avoid misunderstandings based on cultural differences and form better business relationships.
Another frequent challenge is closely studying potential business partners to determine whether the Chinese company really is an efficient and cooperative partner. Again, I’m happy to help here.
Chinese companies are increasingly interested in becoming active in Niedersachsen, be it by setting up a sales unit or an actual new business. What support services can the representation offer interested Chinese companies?
On the one hand, the Niedersachsen representation in China is proactive in pointing interested companies towards the opportunities in Niedersachsen in particular. On the other, it also helps companies looking specifically to set up in Europe.
I work closely with the Ministry for Economic Affairs in Niedersachsen to help Chinese companies develop strategies for setting up in Niedersachsen and find a location. This includes both assistance in finding industrial, commercial and office premises as well as potential cooperation partners and contacts with clusters and associations. I’m delighted when concrete projects come about between Chinese and Niedersachsen-based companies and institutions as a result of my assistance.