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China gears up to take on Western manufacturers

China is taking on the big boys Keystone Archive

For many Swiss companies, the opportunities offered by China's surging economy have been impossible to ignore.

This content was published on November 21, 2003 - 19:00

But as more firms shift their focus to the East, fears have surfaced that Swiss jobs could be threatened.

The danger is not that jobs will be exported to China, but that Chinese manufacturers could soon be competing with Swiss ones.

Currently Swiss workers are relatively protected from Chinese competition, because the bulk of manufacturing in China is not exported to Switzerland but sold internally or to the Asian market.

China is also still dependent on the supply of parts, services and machinery from abroad – much of which still comes from the West, for now.

Feeling the pinch

The Zurich-based “Tages-Anzeiger” newspaper recently warned that Swiss firms specialising in supplying parts to Chinese factories could be the first to feel the pain.

The paper noted that last year the Winterthur-based textile machine maker, Rieter, built a new factory at which 94 per cent of the parts come from China.

The factory was relocated from France, where the machines used to be made.

The paper said China’s current development was reminiscent of the 1970s, when many European firms built factories in eastern Europe.

Parts, supplies and know-how for those factories were all exported from the West.

But as suppliers began setting up their own industries near the factories, jobs were lost back home.

No choice

Paul Wyss, vice-president of the Swiss-Chinese Chamber of Commerce, told swissinfo that Swiss firms would have little choice but to follow the trend and set up operations in China.

“Trade between Switzerland and China is likely to keep increasing. A company cannot ignore China,” he said.

Wyss dismisses claims that the move to China could trigger a political backlash in Switzerland.

“The risk is small, because it’s understood – even by the public – that companies have to adapt to changing market conditions. They have to produce where the conditions are most favourable."

He also added that a modernised China would fuel the creation of new jobs in Switzerland, “particularly in the design and service industry”.

Challenges

Swiss firms have invested more than SFr4 billion ($3.1 billion) in China over the past 20 years.

But not all have enjoyed success. For each successful joint venture, there have also been failures.

“Swiss companies should be prepared to carry losses for the first few years,” warned Wyss.

“An engagement in this difficult market requires considerable human and financial resources, which favours big companies,” he said.

And China is also not just one market.

“There are vast differences in climate and mentality between north and south. And what succeeds in Beijing will not necessarily succeed in Shanghai," explained Wyss.

swissinfo, Jacob Greber in Zurich

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