Direct Investment

Yin and Yang in the back of beyond

Jin and Jan 1800
China is Germany's second-largest investor after the United States. Source: Axel Kowalewsky

The Hunsrück is a scenic range of hills in southwestern Germany dotted with sleepy villages. Not much happens there, and what does is often shrouded in the mist that frequents these parts. Despite its natural beauty, the area has been suffering from depopulation like many rural areas of Germany, and the impact has been worsened by the withdrawal of German and NATO troops stationed there for decades.

But one little town is bucking the trend in spectacular fashion. Neubrücke has become home to what is believed to be the biggest Chinese trade center in the whole of Europe, the International Commercial Center Neubrücke (ICCN). To the delight of local authorities, a total of 600 Chinese entrepreneurs and their families have moved into former US army apartments in a project launched by Chinese businesswoman Jane Hou and her German partner, Andreas Scholz.

Ms. Hou plans to erect 12 further commercial buildings to accommodate 500 more businesspeople in a €40 million ($47 million) investment. With families, that would amount to a further 2,000 Chinese moving to the Hunsrück. “It was difficult at first,” said Ms. Hou, a former employee of a Chinese paper company who embarked on the venture six years ago, believing it would be much better for Chinese employess to be based in Germany. She decided that a former barracks in the Hunsrück would be just the right spot.

“Jane is a born saleswoman and got me hooked on her plan to build a bridgehead between Germany and China.”

Andreas Scholz, co-managing director of ICCN

She managed to find some private investors and got a local cooperative bank on board. The ICCN bought 12 former apartment blocks that had been used by the US army, refurbished them for €12 million and sold them to Chinese businesspeople. “Jane is a born saleswoman and got me hooked on her plan to build a bridgehead between Germany and China,” said Mr. Scholz, 38.

The duo are proud that they got it all up and running without any government subsidies. “There were several points when we were on the brink of insolvency because there were unforeseeable problems with the fire-safety system,” said Mr. Scholz.

Julian Schwabe, a business consultant who specializes in China, said the ICCN’s business model was sound. “Traders only need one base in Germany. It’s not so important whether it’s in the provinces or in a big city,” he said, noting that trade between the two countries is flourishing – China became Germany’s biggest trading partner for the first time last year.

Oak Garden
Andreas Scholz and Jane Hou are partners at work and home. Source: Reiner Voss/view

In 2012, the first entrepreneurs came to take a look ’round. The location is a 90-minute drive from Frankfurt airport and close to France and Belgium. And offices and apartments are much cheaper than in Frankfurt or Düsseldorf. The air is cleaner, and the beautiful Rhine and Moselle valleys with their castles, vineyards and old-world charm are close by. “Many are impressed that we can drink the tap water here,” said Mr. Scholz.

One of the businessmen who have settled here, Mr. Fan, 43, moved to Neubrücke from Shenzhen, a metropolis of 14 million inhabitants, one year ago. He exports luxury watches and has antique clocks restored in China. He loves the nature of the Hunsrück. “Even if you’ve got a lot of money in China, you can’t buy fresh air.” he said. And his 9-year-old son was having an easier time in the local school than he had back in China.

Hui Duan, 29, speaks fluent German. She worked for a German company in Shenzhen and moved to Neubrücke in 2014. “Now I’m a businesswoman,” she said with pride in her voice and pointed at the rucksacks she sells via Amazon. The Chinese traders based at the ICCN, she added, are likely to generate revenues totaling €50 million in 2018.

“We’ve had a stream of people moving away partly because NATO and Bundeswehr soldiers were withdrawn,” said Michael Dietz, a regional official responsible for business development. “So we’re very happy about the Chinese. I tell that to the skeptics we occasionally get who are worried about too many foreigners coming.”

The ICCN already accounts for 5 percent of the district’s business tax revenues and the large-scale refurbishments have invigorated the local building trade, he added. The economics ministry of the state of Rhineland-Palatinate applauded the center as a “great success, especially from an economic and structural point of view.” And China’s ambassador to Germany, Shi Mingde, who visited the site last week for the first time, said: “This is unique.”

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But it isn’t. The ICCN is being emulated in the industrial city of Duisburg, where the Chinese Starhai Group is investing €260 million from 2018 in the “China Trade Center Europe.” And nearby Düsseldorf continues to be a magnet for Chinese companies, having replaced London as their top favorite in 2016. In fact, of the 11 European regions attracting the most of their interest last year, seven were in Germany. In the process, Chinese companies created nearly 2,400 jobs in the country, more than twice as many as the second-largest beneficiary, the United Kingdom. Meanwhile, China has emerged as Germany’s second-largest investor after the United States.

Mr. Scholz and Ms. Hou, whom he first met while she was waiting for a flight at Frankfurt airport, are a couple now and have a three-year-old daughter. “My wife works much more than I do,” he said. “Till one in the morning and usually at weekends too.” They’re often in China where her firm employs 50 people in five cities. They employ 30 in the Hunsrück. Both are involved in youth training and Ms. Hou is setting up an academy for care-workers from China.

“Germans and Chinese are as opposite as yin and yang,” she said. “But they complement each other perfectly.”

Katrin Terpitz covers companies and markets for Handelsblatt and Stephan Scheuer is Handelsblatt’s correspondent in China. To contact the authors: terpitz@handelsblatt.com and scheuer@handelsblatt.com

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