A subsidiary of the BayernLB Sparkassen-Finanzgruppe, the German Centre first arrived in Shanghai in 1994, located then on the campus of Tongji University, west of the city’s Huangpu River. It moved across the river to Pudong, to its current location in Shanghai’s Zhangjiang High-Tech Park in November 2005, opening a building with approximately 30,000 sqm of office space. Its occupancy rate stands at around 98%.
The German Centre’s CEO Christian Sommer came to Shanghai to head the new location, after spending six-and-a-half years at the helm of Beijing’s German Centre. CHINA ECONOMIC REVIEW talked to him about the 2010 World Expo’s effect on Shanghai’s property market and the changing face of German investment in China.
Q: What differences did you see among your clients in Beijing as opposed to Shanghai?
A: Shanghai and Beijing are as different as Hamburg and Munich. Both are big cities, but there’s a different mentality. Shanghai is a more demanding, 24-hour business environment, and many of the companies renting office space come ready for work. In Beijing, there is less production, so that also affects the clients you are dealing with. For German investment, the vast majority is in Shanghai, Jiangsu and Zhejiang.
Q: What changes have you seen in Shanghai’s German business community over the years?
A: Ten years ago, you only saw classic export-oriented industry coming to China to sell, but now there is a much broader range. The service industry is growing -– you see architecture firms and purely technical engineering companies. Also, the aim for many German companies has developed beyond exporting to include production. Within the last 10 years, many companies realized that by only exporting goods, they couldn’t cover the [domestic] market.
Q: What new demand trends are you seeing from small- and medium-sized enterprises (SMEs) renting office space?
A: Demand, in general, is still strong despite the strong euro. From the 130 tenants that we have, I would regard about one-half as SMEs from Germany. They are expanding quickly, and some of them have doubled their size in the first two years.
Q: How has your tenant mix evolved over the years?
A: We’ve seen a lot of growth in classic German industries like machinery, high-tech and construction industries. The machinery industry is still number one, and this includes a broad range: machinery tools, car manufacturing, high-tech related machinery. Our big-name clients like eBay and Rosch are expanding as well.
Q: What effect will the Shanghai Expo have on Shanghai’s office property market?
A: The office property market is not much influenced by the Shanghai Expo. Of course it’s a big event, but companies are doing business here with or without the expo. All of the infrastructure being built for the expo is already necessary now, it’s not something extra being built just for this event and to be unused later. I don’t expect a downturn after the event, instead I think that the world will realize how fast cities in China are developing and then say, “Oh my God, I have to do something there.” Moreover, in a few years’ time, I see China’s economy being increasingly driven by local purchasing power, which is really not affected by events like the World Expo. I don’t see a Chinese person buying one car more or one car less because of the Olympics and World Expo.
Q: What necessary paperwork is involved for leasing office space?
A: It depends very much on what kind of set-up you have, but basically the paperwork is administrative. If you cover trading or you have a representative office, you have different procedures to follow, and therefore the time setting up a limited or trading office will vary. Overall, companies should have a timeframe of about two to three months in mind, but the timing also depends on how quickly you can prepare your own paperwork. For special sectors like banking, for example, you would have to go to different authorities and that’s a totally different story than setting up a representative office or branch.
Q: What is the German Centre’s relationship with the Delegation of German Industry and Commerce?
A: We have a close cooperation, naturally. I always compare our relationship with them to a computer: We are the hardware and operational platform, and the German Delegation is the standard program – they do the work of consultancies to help with company registration and set-up, match-making and more. Besides our own events, we also host chamber events, not only workshops, but also social events.
Q: What services are the most well-used by your tenants?
A: This is surely facilities that we have for meetings and conferences. Our serviced apartments are also well-received. Everybody knows that traffic is not easy, so living directly beside the office is good for people staying in Shanghai for one or two months. Some even stay in the apartments for a year or more. Finally, for banking, we will open a branch of China Merchant’s Bank in the center very soon, and it will join the BayernLB bank branch that we already have.
Zhangjiang High-Tech Park
Located in Shanghai’s Pudong district, the 25-square-kilometer Zhangjiang High-Tech Park was founded in 1992. The park’s leading industries are integrated circuit (IC) production, software and biomedicine. It is increasingly being dubbed “China’s Silicon Valley.” The park stands at the terminus of the city’s Metro Line 2 and is 21km away from Shanghai Pudong International Airport.
In 2006, the park attracted 126 new projects and a total of US$123 million in foreign investment. For IC production, more than 200 domestic and overseas enterprises, such as SMIC, Huahong Group and Hongli have a presence here. IC investment in the park now exceeds US$10 billion, accounting for 60% of mainland China’s total IC investment.