The booth of Chinese wind turbine maker Sany is seen at the Hamburg 2024 WindEnergy fair in Hamburg, Germany, September 24, 2024, where Sany is said to start production in Europe by 2026 and is in advanced talks with potential European customers. REUTERS/Riham Alkousaa
BERLIN: “German investments in China reached a new record in the first half of 2024, continuing the upward trend from 2023, when investment levels also set new benchmarks,” Hermann Simon, a prominent German economist known as the father of the “hidden champions” theory, tells Xinhua in a recent interview.
This year marks the 10th anniversary of the comprehensive strategic partnership between China and Germany.
Simon said that the economic and trade relations between the two countries have deepened significantly while cooperation remains the dominant force, and both sides have demonstrated substantial potential for mutual learning and win-win outcomes.
“Business people make their decisions based on assessments of markets and costs,” Simon said, adding that the continued increase in German investments in China has shown that “China is such an important market for the German companies that they keep investing there”.
As an economist, Simon first introduced the concept of “hidden champions” – small and medium enterprises (SMEs) that lead global niche markets but are not widely known – these companies achieve market leadership through focused strategies, ongoing internationalisation, and continuous innovation.
“China’s hidden champions have become one of the main competitors of German hidden champions,” Simon noted.
From his perspective, both German and Chinese economies are engineering-driven, as opposed to the consumer market-oriented economy of the United States.
This makes Chinese and German firms natural competitors as well as significant partners.
Simon emphasised the critical role that business ecosystems play in the development of hidden champions.
These ecosystems, formed through long-term cooperation and shared expertise among multiple companies, enable SMEs to accomplish complex products and systems that would be difficult to achieve independently.
As a result, there is ample room for mutually beneficial cooperation between Chinese and German companies within this framework.
The growth of China’s hidden champions is seen as part of its high-quality economic development path.
Simon praised Chinese companies for their innovation and leadership in fields such as telecommunications and railway transportation.
“For me, patents are indicators of future industrial competitiveness. We see that with international patents, China has become No. 1. They just became one of the top 10 in 2004, and since then, China has moved forward every year and is now number one, ahead of the United States,” Simon said.
“China is considered a competence centre,” Simon noted, adding that in high-tech sectors, many German hidden champions have established research and development centres and artificial intelligence hubs in China, as they believe China has superior conditions for developing AI products and processes, viewing China as a future industrial incubator.
Simon said German companies are no longer just exporting products from their home country, but are establishing production facilities in China to achieve localised production.
Chinese companies are adopting similar strategies, such as the Chinese battery manufacturer CATL and BYD, a Chinese carmaker, establishing production bases in Europe, reflecting the restructuring of global value chains. — Xinhua
