China Turning Into One of Germany Inc.’s Biggest Headaches

(Bloomberg) --

German businesses are more pessimistic on one of their biggest markets than they’ve been in years.

A survey of more than 500 companies with operations in China showed only a quarter expect to meet or exceed their business targets this year, according to the German Chamber of Commerce in China. More than 80% are experiencing either direct or indirect repercussions from ongoing trade tensions between China and the U.S., on top of longer-standing issues such as rising labor costs and barriers to market access.

The results highlight Germany’s exposure to China’s economic woes. Growth in the Asian country has slowed to the weakest in almost three decades amid weak domestic demand and a crackdown on risky debt. Car sales are set to decline for a second year following two decades of expansion, hitting German companies particularly hard.

Just last month, Volkswagen AG lowered its outlook for vehicle deliveries in 2019 amid a faster-than-expected decline in global car markets and an unprecedented slump in China. Daimler AG has stumbled with two profit warnings this year. The traditionally strong machinery and industrial-equipment sector has also seen business expectations decrease significantly, according to the survey.

Uncertain export prospects helped push the German economy to the brink of recession this year. For 2020, companies reported some tentative signs of recovery, the chamber said. It also called for the conclusion of an investment agreement between the European Union and China and improvements in fair market access.

To contact Bloomberg News staff for this story: Carolynn Look in Beijing at clook4@bloomberg.net

To contact the editors responsible for this story: Rachel Chang at wchang98@bloomberg.net, Jana Randow, James Mayger

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With assistance from Bloomberg