beyondbrics

By Daniel Schäfer in Frankfurt

Siemens and BASF, the two German industrial groups whose chief executives recently criticised China’s business conditions, on Thursday issued half-year financial reports full of good news from the Middle Kingdom.

German chemical giant BASF, the world’s largest, reported a breath-taking sales increase of 60 per cent in the Asia-Pacific region in the past quarter, mostly driven by China. And Siemens, Europe’s largest engineering group, reported a 35 per cent rise in orders from China in the same period. But in each case China also generated a few notes of caution.

Peter Löscher, Siemens chief executive, said on Thursday that he was “pleased” with the group’s China business. “We are in a position to profit from the country’s growth dynamic,” he said.

But even in yesterday’s results not everything looked as good as a first glance might suggest.

In local currencies, Siemens’ revenues rose by 9 per cent, trailing the country’s gross domestic product growth of 10.3 per cent and thus suggesting a loss of market share of the group that employs 43,000 in 90 Chinese joint ventures. Siemens’ order growth rates in China also lag behind the leaps achieved in the US and in Germany.

Meanwhile, BASF has been angered by regulatory delays for a planned multi-billion euro expansion of a plastics plant in Chongqing. Jürgen Hambrecht, chief executive, said today the group was in the “final phase of consultation” with the authorities. “I am very confident that we will make further progress.”

And even success in China breeds concern. German industry’s dependency on Chinese growth was last month was described as “frightening” by an executive of VDMA, the German engineering association.

Löscher and Hambrecht both recently criticised China’s approach on foreign investment, technology transfer and intellectual property.

German industrial companies fear they are being crowded out by the fledgling domestic competition in the vast Chinese market. “German machinery and engineering companies are rapidly losing market share [in emerging markets such as China]. This is a huge problem,” says Roman Zeller, managing director of Alix Partners a consultancy group.