Since it became public on 23 February that Mr. Li Shufu, founder of the Chinese car company ´Geely´, acquired 9.7 % of Daimler – the holding company of Mercedes-Benz – and by doing this became the biggest single shareholder, a new debate about investments from China emerged again.
But while many people are warning of adversarial acquisitions, Chinese investors and company founders in Germany are already a reality. In 2018 alone, the establishment of more than 200 Chinese companies in Germany is expected. In addition, our consulting company observes an increasing demand for Chinese companies that are intending to establish a limited liability corporation in Germany.
Further, it should not be forgotten that Chinese owners and shareholders also bring advantages for German companies. The turnover of ´Putzmeister` – a producer of cementation pumps from Aichtal – kept increasing after the acquisition by the Chinese competitor `Sany´. Also, the producer of heat measuring devices “Ista” which was bought by a construction company from Hong Kong is expecting steady growth and continues hiring. And even “Kuka” will double its production volume in China over the next years.
Germany, on the other hand, invested in China for a long period and became one of the major winners of Chinas growth. Until 2014, Germany invested 48 billion EUR in China and gained a multiple of this in profits.
We at ECOVIS Beijing facilitated successful market entries in China for hundreds of German companies. Not only did they gain large profits in China but also created new jobs in Germany.
Is the acquisition of SAP by Chinese investors possible?
The software company from Walldorf is a global leader in business process software. It is right at the center of the “Industry 4.0” and “Internet of things” development, which describes the interconnectedness of machines.
The Chinese alternative concept to the German “Industry 4.0” is called “Made in China 2025”, in which ERP-systems are playing a key role for the development of networked production and hence came into focus. Though there are producers of ERP-systems in China such as “Yong You” and “King Dee”, no one of their products is as fully developed as the products of SAP. Also, the time frame until 2025 is too narrow to catch up with SAP just by focusing on own development. In recent years China increasingly used mergers and acquisitions to catch up with western companies quicker.
The Chinese market offers outstanding opportunities for the automatization and networking of machines and therefore also for SAP. At the same time, the Chinese government is trying to ensure that China is participating in the creation of value and that the security of the state is considered.
Microsoft is an example of this strategy of government participation as well as safeguarding: In China, a Chinese company is operating Microsoft Cloud. Due to data securityconcerns, there is a dedicated Windows version just for Chinese state-owned enterprises. China offers great opportunities for software companies due to the rapid development in the fields of data storage and artificial intelligence. Not only is an enormous amount of data generated in China on a daily basis, which is essential for the development of artificial intelligence, but it also possesses thousands of well-trained IT-experts. Siemens realized that and relocated their artificial intelligence researchcenter to China.
If you compare this to the German key industry – the German automotive industry – the example of VW shows that the close cooperation with Chinese companies is the key to conquering the Chinese market. The same principle applies to the software industry, suggesting that SAP and other German software companies will only benefit from the Chinese investments.
Richard Hoffmann is a partner at ECOVIS Beijing China. Richard obtained an honors degree in law and worked in Germany, the United States, and China for various prestigious law firms prior to joining ECOVIS. In addition to being a member of the board of ECOVIS International, he is Supervisor for the China business of a respected German company and shares his extensive knowledge to students by teaching commercial law in China at SRH Hochschule Heidelberg. He has published more than fifty articles in international magazines, frequently speaks at high profile events in China and abroad and is often invited as a legal expert by international TV stations. Contact: email@example.com
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