GermanFirmsinChinaGrowMoreOptimisticDespiteGeopoliticalTensions

German companies operating in China are growing more optimistic about the country’s economic outlook despite mounting geopolitical and trade tensions.

A flash survey released Tuesday by the German Chamber of Commerce in China showed 37% of more than 200 respondents expect China’s economy to improve over the next six months, up 22 percentage points from a similar poll a year earlier.

The survey also found that 42% of respondents expect higher turnover by the end of this year compared with last year, while 29% expect profit growth. Separately, 61% said they plan to increase investments in China over the next two years.

The results suggest many German firms remain committed to the Chinese market even as Western governments push to reduce reliance on China and global trade tensions continue to reshape supply chains.

Oliver Oehms, an executive director of the chamber’s North China operations, told Caixin that the improved outlook was surprising given rising tensions between China and Europe, though U.S.-China relations had eased compared with last year.

About 25% of surveyed firms said U.S.-China trade tensions had a significant negative impact on their business. Oehms said many companies were weighing whether dealings with certain Chinese entities could affect their U.S. operations and vice versa, posing particular challenges for smaller family-owned firms.

The survey also showed the war involving Iran had increased logistics and supply chain costs for many companies, particularly in the plastics and electronics industries.

Contact editor Lin Jinbing (jinbinglin@caixin.com)