6. Chinese Investment to Germany
6.2 What do they do, where do they do it and how?
6.2.2 Regional Focus
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pressures highlighted above. (Voss et al 2009, 153) Given the fact that some of the largest investors from China are subsidiaries of State-Owned Conglomerates, this tells us a lot about how investment decisions by Chinese companies come about and will develop in the future. Chinese governmental priorities are indeed highly relevant to future local investment behavior in Germany.
6.2.2 Regional Focus
It appears that Chinese investors have clear priorities with regard to location for their ventures in Germany. When it comes to decision-making on locations, they favor urban centers and metropolitan regions. Based on survey data retrieved from the federal Investment Agency of Germany (GTAI), as well as the state-level Investment Promotion Agencies of the federal states, we get a rather clear picture of this
phenomenon.
When it comes to investment decisions in the field of M&A however, the focus is not as clearly focused on urban clusters. All investment decisions by any enterprise anywhere are mainly driven by financial considerations: The deciding factor for a buyout is primarily the cost of the acquisition, clearly overriding any location factor.
From the listing of key Chinese investments in chapter 6.1 of this paper, we can see that many of the companies acquired by M&A were located outside of urban clusters, but rather in the rural industrial- and manufacturing hubs of Bavaria and Baden-Wuerttemberg. These two federal states are the strongest economic regions in Germany, and range among the top high-technology production locations in Europe.
Innovation there is mainly based on family-owned SMEs, which account for more than 90 per cent of all companies. The technology and manufacturing focus of companies in Bavaria and Baden-Wuerttemberg corresponds to the catch-up needs and interests of Chinese investors. Furthermore, small to medium sized enterprises are easier targets than large companies, as less funds are needed and no unnecessary critical media attention is raised.
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Figure 12: Chinese companies in Germany by Federal State
Federal State Number of Chinese companies
Source of Information
North-Rhine Westphalia + 750 NRW Invest 2012
Hesse + 400 Hessen Agentur 2012
Lower Saxony + 20 Germany Trade and Invest
Hamburg + 420 Hamburgische Gesellschaft
für Wirtschaftsförderung mbH 2012
Schleswig-Holstein + 40 Wirtschaftsförderung und
Technologie- transfer Schleswig-Holstein (WTSH) 2012 Mecklenburg
West-Pomerania
No data available
Berlin + 230 Bertelsmann 2010
Brandenburg + 5 Bertelsmann 2010
Saxony No data available
Saxony Anhalt + 4 Investieren in Sachsen
Anhalt 2012
Thuringia + 3 Bertelsmann 2010
Bavaria + 130 Invest in Bavaria 2012
Baden-Wuerttemberg + 30 Bertelsmann 2010
Saarland + 10 Bertelsmann 2010
Rhineland Palatinate + 5 Germany Trade and Invest
Bremen + 100 IHK Bremen 2012
Total + 2147
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However, the data clearly states, that Chinese investors are most prominent in urban clusters like North-Rhine Westphalia (comprised of three cities: Cologne, Bonn and Dusseldorf), Hesse (with the metropolitan cluster of Rhine-Main region) and
Hamburg (a city state with a harbor cluster). Overall, their number also appears to be twice as large as estimated in other studies. While this would likely lead to a wider spread into new locations, an urban focus still prevails. Chinese investors build clusters in metropolitan regions where they are well connected and find a favorable support-, transport- and communication network. The previous existence of a Chinese community in these locations surely places an additional emphasis on choosing to move there.
Figure 13: Population Clusters with highest number of Chinese companies
Source: adapted from Population Labs 2011.
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The urban cluster consisting of the triangle of Dusseldorf, Cologne and Bonn is the primary location for Chinese companies to settle. The city of Dusseldorf is clearly taking the lead among all three. It is the service capital in Germany, with a strong focus on telecommunications, advertising and consultancy. It also offers a
comprehensive banking system and is location of the second largest stock exchange in the country. Many international trading companies, especially Japanese, established their main offices here. The Chinese investors followed suit and now some 275 Chinese companies as well as some 90 Taiwanese companies are based in Dusseldorf.
Dusseldorf is of particular interest to trade due to its geographic location: 35 per cent of the entire European population live within a radius of less than 500 km.9 Taken together, the three cities constitute an urban agglomeration comparable in its size to metropolitan regions like London or New York- making it the largest agglomeration of its kind in Germany.
Rhine-Main is the most important transportation hub, as it offers the largest airport in Germany and the third largest in Europe, interlinked with Trans-European rail
services and a network of express highways, connecting to the entire Europe. Due to its geographic location in the heart of Germany (and Western Europe), it is not only a major hub, but also a center of the service sector. Services constitute 74 per cent of the total gross value added.10 Services include banking, insurances and other corporate services, with Frankfurt as the financial center of continental Europe. Frankfurt is host to the Federal German Central Bank and European Central Bank, the largest German Stock Exchange (DAX) and additional 300 banking institutions. Accordingly, Bank of China, Bank of Communications and China Construction Bank chose to locate here.
They are joined by several major airline branch offices and telecommunication giants from China, which established their European headquarters here. Through proximity to international transportation links and the world of global finance, Frankfurt attracted over 6,100 Chinese citizens as permanent residents. Two important trading organizations from China followed suit: China Chamber of International Commerce as well as the China Council for the Promotion of International Trade are located here.
(see Invest in Hessen 2012) One of the largest Chinese Consulates (if not the largest)
9 Refer to: China Kompetenzzentrum (2012). Standort Düsseldorf. China Kompetenzzentrum 2012
10 Refer to: Invest in Hessen (2012). Company Structure, a productive mixture. Invest in Hessen 2012
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in Europe is located in Frankfurt. Still, the majority of Chinese companies set up shop no more than 10 years. (Wang 2008, 3)
Hamburg is a prime example for how an urban cluster attracts foreign investment from China. The city is a hub for commodity flows, especially in the logistics sector.
Its industrial harbor is currently the largest harbor in Germany and second largest in Europe. Boasting such assets, the city is home to a large number of Asian companies, with around 650 companies setting up branch offices here: more than 400 Chinese companies, 60 Taiwanese companies, 40 Korean companies, 40 companies from Hong Kong and the European headquarters of Japanese conglomerates (more than 100 Japanese firms in total). (Matz 2009, 3) Hamburg is home to the European
headquarters of some of the largest Chinese conglomerates, including Sinochem Trading Corp., Baosteel, Chinatex Trading Corp., COSCO, China Shipping and Sinotrans. The city further offers a good infrastructure to the large Chinese
community of more than 10,000 people of Chinese origin with resident status: The Commercial section of the Chinese Consulate General is located here, a Chinese school was opened, Chinese shops, restaurants and Chinese newspapers are available.
The city more or less exemplifies the advantages an urban cluster location offers:
infrastructure, services, transportation and community.
Still, urban locations are primarily used to establish branch offices or headquarters.
With access to services and important institutions, they provide a strategic location for Chinese business to manage their operations in Germany and beyond. They are
however not primary locations for M&A transactions, as most industrial companies are situated in the rural regions of Baden-Wuerttemberg and Bavaria. There, industrial clusters have developed over time, with many of the well-known brand names from cars to appliances located here.