German companies prefer to expand their business operations abroad rather than at home, a survey published by the German Chamber of Industry and Commerce (DIHK) and the German Chambers of Commerce Abroad (AHK) shows.
According to the study involving 3,600 German companies, one-third (33%) of them have reported plans to expand investments abroad in the next 12 months. On the other hand, only 20% have stated they intend to reduce their investments globally due to the economic crisis.
The results come against the backdrop of a looming recession in Germany, with the country’s industrial production having fallen by 1.4% in September compared to a month prior, according to German statistics office Destatis.
Volker Treier, chief executive of foreign trade at DIHK, said: “Unlike in Germany, we see a certain sense of optimism among German companies. Companies are also grappling with challenging economic conditions at their locations, albeit with fewer structural challenges than at home.
“In some locations, they even benefit greatly from favourable investment conditions. However, they also face additional burdens, primarily due to the persistently high interest rates. This is particularly the case in the Eurozone and the USA.”
DIHK noted that lowering demand from China, as well as rising tensions with Beijing and Moscow, are now hurting German businesses operating internationally. Both Beijing and Moscow used to be long-time trading partners for the German economy.
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However, the survey notes that, despite rising geopolitical challenges, German companies are now looking into different markets for potential FDI projects. One of them is India, which in recent years has pulled in Western investors looking to diversify their supply chains away from China.
“The Indian economy is developing remarkably well. Our member companies are optimistic and have significant investment plans for the coming years,” says Stefan Halusa, Director General of the Indo-German Chamber of Commerce. “Even though the Indian market is not easy, companies see many opportunities here due to robust economic growth and high government investments in physical and digital infrastructure, and they are significantly expanding their engagement here.”
Germany is one of the leading players in outward foreign direct investment (FDI), with the country’s businesses now mainly investing in Europe and the US.