doing business in china

Swiss entrepreneur Martin Winter sells veal sausages in Shanghai. Katharina Hesse

The Swiss economy, which has a keen eye for opportunities around the world, earns more than one out of every two francs abroad. But success is not always guaranteed.

One such example is China, where many Swiss businesses are present but only one in four firms is turning a profit.

In recent years the rapid growth of the Chinese economy has amazed and fascinated the world.

While the majority of western countries see growth of two to three per cent a year, China’s is nearing ten per cent.

“The fever surrounding China is still there,” says Beat Bürgi, director of the Swiss Business Hub (SBH) in Beijing.

“As long as there are no major disasters, it will stay that way until at least 2010. Every year we get hundreds of requests for information.”

But the hard reality shows that in certain cases China’s attraction can prove fatal. Certain experts even

talk of a collective hysteria surrounding the country.

“Too many Swiss businesses think they have to be in the Chinese market,” adds Bürgi. “But China does not work for everybody. Today only a quarter of the 300 Swiss firms that took the plunge are making a profit.”

Starting out

Those who intend to set up shop first need to decide on what they want to do. Are they looking for a new market for their own products or do they want to shift part of their production to benefit from cheaper labour costs?

“In the first instance, which relates to almost 80 per cent of firms that

contact us, there are few problems. You just need to find a competent local representative,” explains Bürgi.

But much depends on whether the product, even though it might be popular in Switzerland, also seduces the Chinese. If this is the case, then the prospects are good.

But for a company looking to manufacture in China, things become more complicated.

“First of all, the investment is a lot bigger, and then a great number of other factors enter the equation,” warns Bürgi.

In short, an entrepreneur must prepare to encounter corruption and to juggle with a complex and

ever-changing legal system where it is, for example, very difficult to respect intellectual property rights.

The majority of Swiss businesses active in China are concentrated in the technology sector, such as the machine industry or electronics.

Lack of skills

But despite the millions of science and technology graduates that come out of Chinese universities each year, the skills of the local workforce remain a problem.

“First of all, […] firms have to train them for several months, even sometimes by sending them to Switzerland,” reveals Bürgi.

“Then, because of the enormous

competition within the Chinese market, when they return home with a higher productivity level, there is a greater chance that they will seek out a better job.”

In short, rising to the challenge of China is no picnic.

But during the early stages firms can count on logistical support and information from the SBH.

“We can carry out preliminary market studies or provide a series of local contacts.

“But we do not deal with operational or business problems: that is not the role of the state,” underlines Bürgi.

The SBH in Beijing also has offices

in Shanghai and Canton but when it comes to personnel, resources are spread thinly, with just five staff in total. This compares with the 15 staff Sweden has in Beijing dealing with export promotion. Austria has 40 staff working nationwide.

swissinfo, Marzio Pescia in Beijing

In brief

There are 15 Swiss Business Hubs around the world. In Asia, they are in Singapore, Tokyo, Mumbai and Beijing.

The centres are part of Osec Business Network Switzerland and are at the disposition of Swiss firms interested in foreign markets.

The SBHs will carry out preliminary market studies and help set up contacts or offices.

Key facts

Around 300 Swiss businesses are present in China where they have some 700 subsidiary firms.
China is Switzerland’s second most important economic partner in Asia, after Japan.