China and Germany: Investments will continue to grow

Discussion of experts at Osborne Clarke

Investments in and out of China will continue to grow despite the new obstacles from the Chinese government. This was the conclusion of an event on the subject of Cross-Border M&A between Germany and China. Experts from both countries explained the framework conditions for investments; around 40 representatives from various industries, financial organisations and other associations enthusiastically discussed the topic.

In their welcome address, OC Partners Annabel Lehnen and Andrea Schmoll presented the China Group of the law firm. The China Group and was founded with the aim of developing and expanding commercial activities in relation to China.

Philipp Dobbert, Chief Minister of Quirin Privatbank, provided a brief overview of China’s economic development and the related challenges and opportunities. Despite a decline in economic growth China, still reported a high GDP growth rate of 6.7% in the third quarter of 2016. Challenges arise from increasing production costs due to higher wages and a decline in worker numbers as a result of China’s one-child policy. Opportunities thus lie in the growth of urbanization rate in less developed regions.

Liony Bauer, Project Manager of NRW.Invest, explained that NRW was the most ideal investment location in Germany for Chinese companies: an efficient location that is well-connected and already served as a home for many Chinese companies, such as Lenovo and Huawei. The close relationship will be further strengthened by partner cities, delegations and scholarships.

John Koh and Guohua Zhang, OC Partners from Hong Kong, presented the current regulatory framework about investments in and out of China, especially the latest and planned developments in M&A transactions. Recently, the government has established new obstacles for Outbound-Investments. As a result, the investments abroad will become increasingly difficult. With respect to due diligence, particularities regarding, inter alia, anti-corruption regulations warrant special attention; special rules apply, in particular, to State-owned enterprises.

Benjamin Monheim, Partner of the German China Group, reported on venture capital funding rounds in Germany with the focus on the common approach of a direct investment through the capital increase. Emphasis was placed on guarantees in early and late-stage financing.

Further events on German-Chinese economic relations are to follow.