Study analyses potential and risk of doing business in China

According to the findings of the Mittelstandsbarometer 2006 study carried out by Ernst & Young the momentum gained by the Chinese economy is perceived rather as an opportunity than a danger by German small and medium-sized companies. Almost one out of five German companies expect this development to have a positive effect on their own businesses. However, ten percent do not see any positive aspect in the rise of China and consider this development as a threat to their companies.
German small and medium-sized companies which are already operational in China report positive experiences while at the same time expressing severe criticism:

The main problem for setting up a business in China is, according to the companies questioned, the lack of legal security and insufficiencies in the general political framework. 78 percent of the companies surveyed consider this to present a medium or strong risk. The assertion of rights in Chinese courts is said to consume much time and money with the outcome being incalculable. Furthermore, violation of patent rights by copying of patent technology was the rule. Everyone doing business in China would sooner or later be confronted with theft of intellectual property. In addition, 62 percent of the companies asked consider wide-spread corruption among Chinese government officials to be a problem.

At the moment 17 percent of German small and medium-sized companies are doing business in China with 9 percent selling and 6 percent producing there. Seven percent count on Chinese companies as suppliers and 6 percent have them as customers. According to Ernst & Young the entry costs to the Chinese market and the competition have recently grown substantially there.

All the findings of the Mittelstandsbarometer 2006 study with the main focus on China can be downloaded here. GERMAN