But the market still has its weaknesses. The underdeveloped financial system and weak IPR protection have topped the list of complaints. German enterprises feel that the supply of high quality skilled workers is inadequate, especially blue-collar workers in the construction or factory sector. A comprehensive education system is very important for economic development-not only for a white-collar labor force, but also for the blue-collar worker. Major concerns of most German enterprises are the protection of their know-how. In terms of IPR protection, China has to strengthen its efforts to make sure all WTO requirements are fully carried out.

How about the investment climate in China? What fields need to be improved?

It has improved dramatically since China became a member of WTO. German companies came to China because they knew this would be an important future market. First of all, you have to fulfill WTO commitments and regulations. We need a transparent and open country. Transparency is the most important demand we always repeat to the Chinese Government. Foreign companies, especially German companies, have contributed a lot to the employment of Chinese. It would be very helpful for the Chinese Government to treat foreign companies like Chinese companies because actually 95 percent of the employees within these companies are Chinese. Transparency and the attitude towards foreign-invested companies should be improved.

This is one. The other is that we do need improvement in the financial sector, the IPR protection and the education sector, for better employees and then the companies. Education for blue collars has to be improved.

Germany has a system that is called a “dual system,” which means that blue collars are also educated within the company and in the school. This system has been very successful for Germany. There has been a lot of cooperation already between Germany and China. This could be a good basis to enhance the skills of blue collars in China.

Will major German investment still focus on the Chinese manufacturing sector in the future? Do you see any other promising industries for German investors?

The manufacturing industry will still be very important for German investors in the future. The construction industry is booming, with whole production increasing by 24 percent and real estate prices by 5.2 percent last year. About 15 percent of all construction projects in China are conducted with foreign architects, and German companies are in a good position. Other promising industries are the financial industry and environmental protection sector. The Chinese financial market has fully opened to foreign investors since December 2006 and enjoys high potential.

There are increasing complaints about IPR violations in China. Has this affected the in-depth technology cooperation between two countries?

The Chinese are aware that they need to improve IPR protection within China in order to protect their own developments and credits. Our companies also complain as American and Italian companies do.

German investment is strongly focused on manufacturing, while other countries are more likely to invest in the service industry. Accordingly, German enterprises have transferred a higher amount of technology to China than any other country. In general German enterprises are more careful protecting their IPRs. If possible, they transfer out-of-date technologies, not the latest. IPR issues, however, only has a little impact on the high demand of business activities here in China.

What have you done in protecting German companies in this respect?

The legal department of the chamber focuses on informing and consulting member companies and companies which want to enter the Chinese market about the Chinese law system on IPR. It includes general consultation about how and where to register intellectual property in China, information and consultation on how to protect companies without trademark rights, and information and consultation if IPRs are violated.

What can German companies do to fight piracy?

In order to be fully protected German companies should register their intellectual property not only in Germany but also in foreign countries such as China. Companies should catalogue all documents in order to be able to evidence the IPR violation and conduct continuous market observation to find potential plagiarism.

What is your advice for the Chinese Government on how they could tighten IPR enforcement?

The Chinese Government really understands that it’s in their own interest to work on IPR protection in order to be competitive, not only in China, but also in the global market. The market has to be observed to a higher extent in order to protect foreign investors and the people should develop a general understanding towards the necessity of IPR protection.

(Data source: German Chamber of Commerce in China)