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German Chemical Industry: Losing Competence Advantage over China

31st CHEMonitor trend survey sees China as innovative competitor and attractive production site

Basel, Mannheim, 11/14/2018 Although China’s competitive advantage is decreasing due to rising costs for labor and environmental protection, the country is rapidly becoming a strong competitor for the German chemical industry. On the one hand, the German chemical industry is losing its competitive edge over China in the area of expertise, especially in innovative fields such as robotics and e-commerce. On the other, protectionist trends and continued economic growth in China are making it increasingly attractive for German chemical companies to have their own production plants in China. These are the findings of the 31st CHEMonitor trend study by CAMELOT Management Consultants in cooperation with trade newspaper CHEManager, a study dedicated to the key topic of ‘China: Today and Tomorrow.’ 

According to the CHEMonitor survey, 86% of German chemical managers rate China’s chemical industry as being of ‘high’ or even ‘critical’ importance as a competitor of the German chemical sector. “Even though China’s cost advantages have decreased, the country must be taken very seriously as a competitor. This scenario has not yet been adequately addressed in European company strategies,” says Dr. Josef Packowski, Managing Partner at CAMELOT, when asked about the survey findings.  

 Edge in e-commerce, innovation, and robotics 

The rapidly growing expertise and competitive edge of Chinese firms is primarily demonstrated in terms of innovative, technology-oriented topics, which are implemented as bold experiments. Accordingly, 62% of study participants say China’s chemical industry has a higher level of expertise in e-commerce than its German competitors. 23% of those polled rate Chinese companies as more innovative, while 16% consider China to be more competent in the field of robotics. “China is catching up quickly in many important areas. German chemical companies are therefore encouraged to act quickly. The trend can only be reversed through a consistent focus on implementation, by implementing specific pilot projects,” explains Dr. Jörg Schmid, head of the CHEMonitor study at CAMELOT. 

 Protectionism endangers industrial activity 

Asked about the role of China in the next five years, 65% of participants in the CHEMonitor panel answered that China will continue to be important as a raw materials supplier. Almost the same percentage (60%) see the region as an important export market for their own company. However, the protectionist trends in global trade with China are a source of concern for German chemical managers: Over one third of them (36%) anticipate a decline in industrial demand and worry that their own company will be affected. 

 Building proprietary plants in China 

In light of the above, German companies are increasingly interested in having their own production capacities in China. While China is now, along with North America, the second most important investment objective for large chemical companies (both rated at 46%), the latest CHEMonitor survey shows that the percentage of chemical companies having fewer than 500 employees and planning investments in China in the next 12 months has doubled to 23%.  

 Satisfaction with Germany as a site for chemical producers grows 

As always, the CHEMonitor panel was surveyed about Germany as a site for chemical producers. For the first time in two years, the percentage of those who rate Germany as ‘good’ or ‘very good’ has risen again, from 65% in March of this year to 78% in October 2018. Even if the outlook is in general somewhat less optimistic than in the last survey, three quarters of the managers continue to expect sales growth for their own company in the next twelve months. For the latest CHEMonitor survey, the organizers polled a panel from August to the beginning of October. The panel has existed since 2007 and consists of more than 200 top decision-makers in the German chemical industry. 

 The results of the newly released 31st CHEMonitor Trend Barometer can be downloaded free of charge at www.camelot-mc.com. 

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