The Innovation Report 2024 from AHK Greater China shows how China is changing the way it creates new products and technology. In order for German companies to stay competitive, they need to understand these changes to stay competitive.
China's New Approach to Innovation
China used to be known mainly as a place where products were made. Now it is becoming a place where new ideas and products are created. This is not happening by accident. The Chinese government has made developing new technology a top priority and has plans to support it.
This is different from how things work in Germany and other Western countries, where companies usually drive innovation without as much government direction. German companies cannot just use the same methods in China that work at home.
More Research Happening in China
The numbers show a big change: more than 60% of German companies now do research and development (R&D) in China. Almost 30% are creating new products in China that they sell around the world.
This is the opposite of how things used to work when products were designed in Germany and only built or sold in China. This change is happening because Chinese companies are continuously improving and creating more competition.
Speed Makes a Big Difference
One of the biggest challenges for German companies is that Chinese companies work much faster. Chinese companies typically bring new products to market in half the time it takes German companies. While German firms are good at engineering and quality, they often get slowed down by lengthy approval processes and too many layers of management.
In China's fast market, this delay can be a serious problem. By the time a German company finishes developing a product, Chinese competitors may have already sold a lot of similar products and moved on to creating newer ones.
Practical Improvements vs. Brand New Ideas
German companies in China focus on making existing products better and adapting them to work well in China. This includes changing products to match Chinese preferences and standards.
They spend less time in creating completely new types of services or business models. Their innovation is very practical—making products cheaper, ensuring they meet local rules, and improving how they work.
Controlling the Whole Production Process
Many German companies outsource different parts of making their products. Chinese competitors are doing the opposite. Companies like BYD make most parts themselves—from batteries and chips to processing raw materials.
This gives Chinese companies important advantages: better control over costs, faster improvement cycles, and a deeper understanding of how all parts work together. This is very different from how German companies typically operate.
Problems Within German Companies
The report points out several problems within German companies that make innovation in China harder:
- Trouble finding workers with the right skills
- Not enough money from headquarters for new projects in China
- Rules that require main development work to stay in Germany
This last point causes particular problems. When teams in China with good knowledge of local customers have to wait for decisions from far-away headquarters, they cannot respond quickly to changes. This becomes a bigger problem as China's market changes rapidly.
Beyond Single Products: Whole System Innovation
China's approach to electric vehicles shows a bigger pattern. Chinese innovation is not just about individual products but entire systems of connected products and services. Companies like CATL do not just make batteries; they also develop large-scale recycling that recovers more than 90% of important materials.
This approach—including battery-swapping stations, self-driving taxis, and smart city connections—creates advantages that are hard to match by focusing on individual products alone. China innovates across entire systems rather than just separate products.
How German Companies Can Succeed
The report does not say German companies should give up their traditional strengths—quality, precision, and good engineering are still valuable. However, they need to add new capabilities to succeed in China's quickly changing market.
Companies that do well in China are willing to change not just their products but how they create new products. This requires:
- Giving local teams more power to make decisions
- Making approval processes faster
- Working with partners across different industries
- Moving at the speed the market demands
Conclusion
For German companies, China presents both challenges and opportunities. Those who adapt how they innovate to match China's speed and approach will continue to succeed. Those who stick too rigidly to traditional methods risk falling behind in one of the world's most dynamic markets.
Success in China is not just about being first—it is about being fast, focused, and willing to change. German companies that understand this will do better not just in China, but in the global market that increasingly follows China's lead in how quickly new products are developed.
IP Lawyer Tools by Martin Schweiger
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