Switzerland can expect to see a lot more companies coming over from China in the coming years, according to Liu Jiren, co-founder and chairman of leading Chinese software firm, Neusoft.
Chinese companies made the headlines in Switzerland last year with several notable merger and acquisition (M&A) deals, including the record $43.3 billion takeover of Basel agrochemical giant Syngenta by the China National Chemical Corporation (ChemChina).
Yet more are taking advantage of Switzerland’s political stability, technical know-how, strong financial system and low corporate tax rates to set up regional headquarters in the alpine nation. It also helps when diplomatic relations between the two countries are at a high point, as witnessed by the free trade agreement and visit earlier this week of Chinese President Xi JinPing.
Speaking to swissinfo.ch at the World Economic Forum in Davos, Liu said Chinese companies are expanding their horizons abroad as they transform their business models. The domestic Chinese market is evolving from a manufacturing-heavy model to a services-based economy, he argued.
To meet this demand, Liu believes Chinese firms will seek established expertise abroad. “There will be more and more Chinese companies coming to Europe and to Switzerland,” he said. “They need to find a different direction to create new value.”
In a recent report on the Chinese M&A phenomenon, consultancy firm KPMG Switzerland said Chinese firms are interested in portfolio diversification, pursuit of advanced technology, and a desire to own traditional companies with "Swissness".
Neusoft set up its European HQ in Appenzell in 2009, from where it now runs operations in Germany, Finland, Romania and Israel. Attracted initially by Europe’s strong automotive industry, for which it provides software, Neusoft now wants to expand into healthcare.
“We utilize a lot of intensive R&D (research and development) in our products. We need the know-how and talent in Europe. We used to concentrate on trading [as overseas strategy] but now we are looking more intensively at co-operations,” said Liu. “If we locate R&D in Europe and manufacturing in China, we can leverage both sides.”
The expansion strategy is two-fold. Setting up in Europe gave Neusoft access to established technology and expertise and opened up a new market for sales of its products.
And there appears to be no shortage of partners in Switzerland and Europe, either to collaborate or be bought up by Chinese firms. Last year, China’s HNA Aviation Group snapped up Swiss air transport support companies Gategroup and SR Technics.
Precise statistics of Chinese investment in Switzerland are hard to come by, but there are an estimated 100 Chinese firms already active in the alpine state.
Another recent takeover saw Haers Vacuum Containers buy up the makers of the iconic aluminium drinking bottles Sigg. Speaking to swissinfo.ch earlier this week, Sigg chief executive Stefan Ludewig said there was no reason to be concerned by Chinese takeovers.
“There was a lot of trust from both sides throughout the process,” he said. “Why should you fear the Chinese? Why would you buy a company with the Swiss label if you don’t then look after it?”
Ludewig added that the Chinese deal had opened up sales growth that could not be found in Europe. Liu agrees that the prospect of access to the growing Chinese market is a huge carrot for European firms, making it a win-win situation for both sides.
“Every start-up wants the opportunity of access to China, so it makes it very easy to talk to them” he said. “A lot of European companies come to China at a very early stage. Globalisation is in their DNA.”
As for Switzerland, Liu says he is “very comfortable” with Neusoft’s European base remaining in Appenzell despite a current overhaul of the Swiss corporate tax code.
“The image of Switzerland in China is of a very stable country that is very transparent, friendly and tops all the rankings in ease of doing business. I expect more Chinese companies, which want to expand abroad, will choose Switzerland as their destination,” he said.