How German Firms Are Recalibrating Strategy in Greater China
Executive Snapshot
German companies are no longer asking whether to localize in Greater China, but how fast—and how deeply—they can embed market-driven, AI-enabled and locally supported operations.
- Mainland China: The vast majority retain their footprint even as many foresee industry deterioration in 2025.
- Hong Kong SAR: Confidence rebounded to an all-time high since 2019—yet cost and talent headwinds persist.
Mainland China: From Protecting Margins to Building Local Ecosystems
Survey signal – German Chamber Business Confidence Survey 2024/25
A clear majority of respondents plan to keep their operations in China, citing “stay competitive” as the primary driver. A growing share of the German companies in China now operates “significantly more independently” from headquarters. Meanwhile, “Buy China” preference has emerged as the top regulatory concern.
What changed? Price pressure and weak demand have compressed traditional import-plus-mark-up models. German executives describe that unless product, supply-chain and R&D muscle are built inside China, the local competitiveness will slip.
Examples in practice
- BSH Home Appliances has established an advanced R&D Center at its Nanjing headquarters. “Our investment in China is not just about market share; it’s about building for the future – in China, for China, and for the world”, said Matthias Metz, CEO of BSH Home Appliances Group. Some of their worldwide products, including large-capacity refrigerators and washer-dryer combos, are now being developed in China.
- BMW’s Shenyang facility—the company’s biggest plant outside Germany—has rolled out a version of the iX3 tailored for Chinese buyers. In addition, a trial production of next-generation cylindrical battery cells has already started in Shenyang.
- Heraeus, when first entering the Chinese market, strategically positioned its investments in China not as a low-end manufacturing hub relying on demographic dividends, but with the clear aim of “delivering localized, high-value-added products and technical services to Chinese customers”. This focus on serving the Chinese market through innovation and localized solutions has allowed Heraeus to carve out a unique competitive edge in the market. Today, Heraeus has set up five innovation centers across China, where it collaborates with local customers on their new product development, thereby solidifying its role as a strategic partner to its clients.
Hong Kong: Reinventing Its Gateway Role
Survey signal – German Business in Hong Kong 2025
A strong majority value proximity to Mainland China and low tax; yet high wages and even higher rents drag down its scorecard. The vast majority have no plans to move out and roughly one-third will enlarge their investment within two years. For businesses affected by the geopolitical issues, US-led tariffs are denting margins for more than half the respondents, yet the same tension is stoking appetite for German goods and handing market space to non-US suppliers.
Hong Kong is therefore morphing into a “resilience buffer”: not the cheapest, but the fastest test-bed for AI governance, IP arbitration and offshore RMB liquidity before scaling into Asia.
Cross-hub Implications for German HQ Boards
Our German Desk recommends three immediate actions to convert “localization in depth” into group-level competitive advantage:
- Manage locally, review regularly
Keep German headquarters as the ultimate gate-keeper for key operating metrics and compliance thresholds, but let your China entity be responsible for its P&L and cash-flow. A quarterly internal control review by an external auditor (or boutique advisory) who knows Chinese GAAP and HK IFRS, gives HQ comfort without smothering local speed. - Seat the designer next to the customer
Merge small, cross-functional “concept-to-prototype” cells (German lead engineer + local designers + supplier engineer) into the local plant. They report to the German CTO for specs, but sit in Asia for fast-loop feedback.
Improve the supply chain in China
Let local procurement lead the shift to domestic vendors—shorter lead times, lessening cross-border transport and customs clearance, and on-site engineering visits within 24 hours cut both freight bills and emergency-order premiums, while German HQ keeps final audit and approval rights to protect quality and compliance standards.
How CW Helps You Win in Localization Strategy
Our Greater China German Desk could help German companies ensure they have robust control mechanisms in place to mitigate risks and enhance operational efficiency.
Offerings in the market
- Internal control review: Our team of experienced auditors can help organizations identify and mitigate risks, such as errors or misstatements in financial statements or non-compliance with internal Standard Operating Procedure (SOP); evaluate the control environment; perform process and control testing; review documentation and policy; and provide recommendations to address control gaps and enhance control frameworks.
- Cross-hub Structuring: tax-efficient holding, IP and cash-pooling blueprints tested with SMEs.
Closing Perspective
Confidence among German investors is no longer measured by “if we stay,” but by “how deeply we localise”. The next growth cycle in Greater China belongs to companies that can act local and think networked: enabling R&D, sourcing and selling locally at China speed while leveraging Hong Kong’s gateway finance and legal infrastructure- one that turns cost pressure into margin resilience and keeps the board’s risk indicator in the safe zone.