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Sino-Swiss
Economic Relations
The Swiss economic policy approach toward China
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Themenübersicht
1 Introduction
2
Sino-Swiss economic relations in a historical perspective
3 Switzerland’s economic policy strategies toward
China
3.1
Facilitating Swiss SME’s entrance into the Chinese market
3.2 Strengthening domestic economy
3.3 The image of Switzerland
3.3.1 Switzerland as a location for investment
3.3.2
Switzerland as a tourist destination for Chinese travellers
3.4 The role of diplomacy
3.5 Multilateral and plurilateral approach
4 Conclusion
Bibliography
Autorin und Copyrighthinweis
1 Introduction
China has met with growing public attention in recent years, as the
shift from an agrarian to an industrialized state moved China into
the centre of global economic interests. In Switzerland, China’s
rapid economic growth evokes mixed feelings, since the consolidation
of China’s role as a leading player in the world economy is
perceived both as an opportunity for and a threat to the Swiss
economy (Roth 2005). On the one hand, China’s increasing purchasing
power offers excellent market potential for Swiss products and
services; on the other hand, growing Chinese importations also pose
a potential threat to the local industries. Particularly noteworthy
in the bilateral trade relationship is the fact that Switzerland is
a small trading partner for China due to the relatively limited
trade volume (cfr. annex 1), whereas China represents Switzerland’s
3rd supplier and 4th client worldwide (Kellerer 2006:5; Swiss
Federal Council 2007: 20).
For Switzerland, China is though not only an important trading
partner, but also a place for investment that provides Swiss
companies a chance to secure their international competitiveness.
Obviously, the relocation of business processes cannot merely be
considered in terms of the viability of single companies. The
potential macroeconomic consequences need to be taken into account,
too (Roth 2005).
Considering both the scope and the dimension of this paper, it
cannot be intended to assess the implications of the Sino-Swiss
economic interactions. In view of the unequal dependency on a
well-functioning bilateral economic partnership of the two countries,
it shall instead be observed how Switzerland promotes its economic
interests in the bilateral relationship and how it faces the
opportunities and challenges that China’s economic power presents.
The main goal of this paper is to analyze the Swiss strategic
economic policy-making toward China over the past few years.
In the first part of the paper, the development of Sino-Swiss
economic relations will be briefly outlined in order to integrate
the issue in question in the historical context. The second part
aims at identifying the strategies Switzerland has been pursuing to
deal with China’s new role as a global economic leader. Finally, the
attention will be drawn to the implications that can be interpreted
from the illustrated strategic measures.
2 Sino-Swiss economic relations in a historical perspective
Switzerland began to develop economic interests in China in the late
18th century and established trade relations within the colonial
trading system of major European powers operating in China. Under
the shelter of the colonial powers, Swiss traders not only benefited
from consular protection, but also from unequal contracts and
extraterritoriality rights – rights that Switzerland gave up only
after the Second World War as one of the last European countries.
Switzerland’s trade with China had typically colonial features, as
it was largely confined to the importation of textiles and foodstuff,
and to a very limited exportation of watches and machinery until the
beginning of the 20th century (Specker 2000: 32 – 36).
After that the political unrests caused by the establishment of the
Chinese Republic in 1912 and the Japanese occupation had heavily
compromised the Sino-Swiss trading relations, they had to be
interrupted completely when World War II broke out. But as
Switzerland officially recognized the People’s Republic of China in
1950, only a few months after the victory of the communists in the
Chinese Civil War, a sound basis for the smooth development of the
Sino-Swiss economic relations seemed to be established. However, the
state ideology didn’t favour at all China’s foreign trade, and as
foreign property was nationalized, many Swiss traders had to give up
their business activities in China (Dubois 1978: 91 - 92; Specker
2000).
In the 1970s, the Sino-Swiss economic relations gradually recovered
and were further consolidated by the implementation of Deng
Xiaoping’s reform policy. The Tian’anmen Square Massacre in June
1989 strongly overshadowed this positive development, but hardly
affected the bilateral economic relations in the long term.
In the mid-1990s, the Sino-Chinese economic relations entered a
period of mutual cooperation without precedent. China’s advancing
industrialization accelerated bilateral trade considerably and was
predominantly beneficial to the Swiss chemical and pharmaceutical
sector as well as to the machinery and watch industry (Kellerer
2006; Specker 2000:52). At the same time, also the industrial
cooperation began to increase, as more and more Swiss-based
companies started to establish representative offices in China’s
coastal area and to found joint ventures with Chinese partners. The
Swiss direct investments in China assumed though only greater
proportions at the beginning of the 21th century when China’s
long-term economic growth was further affirmed and the production
conditions improved (Roth 2005). Today, about 300 Swiss firms with
more than 700 branches operate in China, engaging about 55’000
employees, and the Swiss direct investments amounted to 205.9
million in 2005 USD (Embassy of Switzerland 2006: 8; Kellerer 2006:
8).
3 Switzerland’s economic policy strategies toward China
3.1 Facilitating Swiss SME’s entrance into the Chinese market
As mentioned above, the fast development of the Chinese market
provides considerable opportunities for the Swiss economy,
particularly because the growth rates of the classical European
markets have been decreasing substantially in recent years (Roth
2005: 212). The relocation of Swiss companies to China cannot simply
be explained by the chances of short-term profit, but many companies
are forced to take the big step toward the Far East to secure their
long-term viability in an increasingly competitive globalized
business environment.
However, the challenges foreign companies face in China are not to
be underestimated. Besides cultural obstacles and lacking knowledge
about the local conditions most foreign investors are confronted
with at the beginning, numerous non tariff barriers need to be
surmounted, such as violations of the intellectual property rights,
restrictive regulations, and bureaucracy (Embassy of Switzerland
2006). In order to facilitate Swiss small and medium enterprises’
(SME) access to the Chinese market that in many cases dispose of
bounded means, various institutions and associations providing
information and consultancy services have been founded. The three
most important shall be mentioned hereafter:
The “Swiss-Chinese Chamber of Commerce” is a Swiss-based non profit
association that has been operating since 1980 to promote the
Sino-Swiss economic relations. With a network of more than 700
corporate and individual members the association assists Swiss
companies in their activities in China.
In the late 1990s, the Swiss government affirmed the necessity of
fostering the relationship between the two countries by establishing
the “Sino-Swiss Partnership Fund” together with the China
Development Bank. On the one hand, the direct investment-fund aims
at facilitating Swiss-based companies’ investment activities; on the
other hand, it promotes sustainable development in China.
In response to the growing attractiveness of the Chinese market, the
OSEC Business Network Switzerland, commissioned by the State
Secretariat for Foreign Affairs (SECO), has established in 2002 the
“Swiss Business Hub China” at the Embassy in Beijing, with branches
in Shanghai and Guangzhou. Experienced consular and local staff
consults Swiss entrepreneurs operating in China and bring them into
contact with local authorities and business partners (Calmy-Rey
2005: 5; Embassy of Switzerland 2006).
3.2 Strengthening domestic economy
Although the delocalization of labor-intensive production processes
to China seems to consolidate Swiss companies’ competitiveness, the
consequences on the macroeconomic level that result thereof should
not be disregarded. Offshoring carries the risk of a job shakeout in
the affected industry sectors in the domestic economy, a transfer of
strategically relevant know-how, and finally calls for important
structural adaptations in Switzerland (Roth 2005: 212 - 213).
To face these forthcoming challenges, Switzerland has adopted a
policy that focuses on boosting the domestic economy. The Swiss
Federal Council, arguing that a powerful and competitive domestic
economy is a condition for a country’s successful foreign economic
policy, pursues two main goals: first, enhancing Switzerland’s
comparative advantages and second, encouraging Swiss enterprises
that are willing to move parts of their production processes abroad,
to adopt a long-term perspective regarding their viability and to
assume social responsibility (Deiss 2005).
The first goal calls for a further specialization of Switzerland’s
economy, baling its comparative advantages that lie in the domains
of high-tech production and luxury items – sectors that increasingly
matter to Chinese importers. Indeed, China’s growing demand for high
quality investment goods and consumption products has indeed
enhanced Swiss exports to China, predominantly in the areas of
machinery, apparatus, precision instruments, pharmaceuticals,
watches and jewellery (cfr. annex 2). Particular importance is
attached to high-tech development, where the enormous potential for
growth is to be exploited further. For this reason, the necessity to
make further efforts in the fields of higher education and research
appears evident (Calmy-Rey 2005).
The second goal aims at inducing Swiss companies to keep the main
pillar of their business activities in Switzerland. This business
policy doesn’t only contribute to the preservation of jobs in
Switzerland, but also enables companies to take advantage of the
“swissness” of their products – an attribute that is highly
appreciated in China (Deiss 2005). Swiss-based enterprises in China
that still have their headquarters in Switzerland, furthermore
enhance the economic relations between the two countries and have a
positive effect on Switzerland’s attractiveness as a place for
investment. The establishment of emerging Chinese global players in
Switzerland to enter the European market is particularly desirable,
as this would further vitalize the Swiss domestic economy.
3.3 The image of Switzerland
Switzerland’s attractiveness for the Chinese – both as a location
for investment and a tourist destination - highly depends on the
image of Switzerland in China. Due to the geographic and cultural
distance between the two nations, most Chinese people don’t know the
small alpine country from personal experience. Switzerland’s image
is therefore predominantly created through indirect experience,
particularly by the mass media and other people’s reports and
narrations. A recent study realized by the “Institut de hautes
études en administration publique“ in Lausanne demonstrates that
Switzerland has an excellent, but stereotyped overall image. In
China, Switzerland is first and foremost associated with the watch
industry, the beautiful landscape, and banking (Pasquier and Weiss
Richard 2006: 50).
3.3.1 Switzerland as a location for investment
Considering Switzerland’s outstanding image in detail, a more
differentiated presentment emerges: Whereas Switzerland’s quality of
life and political stability are rated very positively, the
country’s international competitiveness, its innovative strength,
and the investment opportunities it provides are considered rather
critically by the Chinese.
Adequate measures of “country advertising” are therefore required to
raise the Chinese awareness of Switzerland’s attractiveness as a
business location. For this purpose, a range of promotion activities
have been undertaken.
Among the most important projects appears “Location Switzerland:
‘China’”, an initiative launched by the SECO and sixteen cantons
aimed at encouraging Chinese investors to set up business activities
in Switzerland. “Switzerland is most actively advertised with
emerging globalizing Chinese companies as a location for
international headquarters and business control centre” (Embassy of
Switzerland 2006: 10). In addition to systematic PR-work, “Location
Switzerland: ‘China’” carries out market analysis, provides
consultancy to Chinese investors, and organizes high-level seminars
for target groups.
Also projects that are not directly linked to the Sino-Swiss
economic relations can contribute significantly to the promotion of
the location of Switzerland. Educational exchanges and scientific
cooperation is attributed particular importance, and several
initiatives are planned to attract more Chinese students in spite of
the high living costs in Switzerland (Calmy Rey 2005: 9; Embassy of
Switzerland 2006: 10).
Even sister-city arrangements have demonstrated to be beneficial to
the Sino-Swiss economic relations: The partnership between Kunming
and Zurich, initiated in 1982 to promote mutual cultural exchange,
has been extended to a close technical cooperation in projects in
the field of urban development, and has created a positive climate
for investments, as indicates the growing interest of major
Chinese-based companies in investment projects in Zurich (Bichsel
2000: 25).
Last but not least, “Presence Suisse” – an organization set in by
the Federal Council, and responsible for raising the Swiss awareness
abroad – intends to take advantage of the forthcoming opportunities
that the Olympic Games 2008 and the World Expo 2010 offer to enhance
Switzerland’s overall presence in China (Embassy of Switzerland
2006: 9).
3.3.2 Switzerland as a tourist destination for Chinese travellers
Whereas Switzerland has still a long way to go to be perceived as an
attractive place for investment, Switzerland’s attractiveness as a
tourist destination is already deeply-rooted in the Chinese
population. The Swiss tourist industry benefits from the widespread
famousness of Switzerland’s “beautiful scenery” and its “high
quality of life”. In China, Switzerland is indeed one of the most
favored European tourist destinations – right after France in the
first place (Pasquier and Weiss Richard 2006: 68).
Recent political and economic developments both in China and in
Switzerland further enhanced the positive prospects for the Swiss
tourist industry, and confirmed China as a key market with high
potential for development: The fast-growing Chinese outbound tourism
and the conferment of “Approved Destination Status” to Switzerland
by the Chinese government in 2004, allowing Chinese tourists to
travel to that country with a simple tourist visa, led to an
increasing number of Chinese visitors (Krauer-Müller 2005).
Beneficial effects on the Swiss tourist industry are also expected
from the establishment of a new branch of the national tourist
office “Swiss Tourism” in Shanghai in 2005, in addition to the
already existing branches Beijing and Hong Kong, as well as from the
opening of a new Consulate General in Guangzhou (Deiss 2005: 3).
Switzerland’s accession to the Schengen-Agreement that enables
Chinese tourists to enter Switzerland with a Schengen visa should
further boost the Swiss tourist industry. What is still hampering to
a certain extent the Chinese tourist flow to Switzerland is the lack
of a direct flight link between China and Switzerland (Calmy Rey
2005: 6). According to the Swiss Embassy in Beijing, respective
negotiations with China have been opened and first results are to be
expected by 2008 (Embassy of Switzerland 2006: 9).
3.4 The role of diplomacy
In a country like China, where the economy is still strongly
controlled by the state despite the gradual transition toward a more
market-oriented economy, political relations play an important role
for safeguarding and promoting another country’s foreign economic
interests. Especially the grant of licenses and export quotas tend
to depend to some extent on the political goodwill (Bichsel 2000:
19).
The Sino-Swiss diplomatic relations, being built on a sound basis
from the beginning due to Switzerland’s early official recognition
of the People’s Republic of China – a fact that is still highly
appreciated by the Chinese –, have witnessed a favourable
development for trading and the investment climate since the
implementation of China’s reform policy in 1978 (FMPRC 2006, Roth
2005: 210 - 213). Regular mutual visits were paid in the subsequent
two decades, but the political relations intensified only in the
mid-1990s. Frequent visits by high-ranking government members from
both countries and the adoption of important politico-economic
agreements should have contributed significantly to bilateral trade
and economic cooperation (Kellerer 2006). Despite a few politically
critical matters that characterize the Sino-Swiss relations, such as
the human rights issue, Switzerland pursues a policy of dialogue and
pays great attention to being on good terms with China. The
maintenance of regular personal contact between the two countries’
government representatives is indeed crucial for Switzerland’s
economic interests, as this allows addressing challenges jointly and
discussing eventual problems at a high level.
However, a recent example illustrates that good political relations
among countries are in fact a condition for favourable economic
relations, but not a guarantee for a trouble-free economic
partnership. In April 2006, as the Chinese government introduced a
consumption tax of 20 percent on luxury watches sold in China – of
which 99 percent are of Swiss origin –, Switzerland’s intervention
on the diplomatic floor was without success (Laubscher 2006).
A stronger integration of Swiss representatives of industry and
commerce in China’s political milieu could presumably attenuate or
even prevent in some cases such problems. In order to reinforce ties
between economic and political realms of the two countries, the
Swiss Federal Council plans to attach more importance on the
involvement of mixed business delegations in bilateral meetings at
governmental level (Swiss Federal Council 2007: 28).
3.5 Multilateral and plurilateral approach
Although the above-mentioned approaches are all of bilateral nature,
Switzerland acts also on a multilateral and plurilateral basis,
working within international organizations and with like-minded
countries to favour China’s integration into the global economic
system. China’s economic opening to the outside world and its
membership in international organizations have in fact beneficial
effects on trade regulations and on business conditions for
foreign-based companies in China.
A milestone in this integration process represents China’s accession
to the World Trade Organization (WTO) in December 2001 that advanced
China’s compliance with international norms. Tariff reductions and
the diminution of non-tariff trade barriers intensified China’s
economic relations to other countries considerably. Improvements in
transparency and legal certainty further facilitated market entry of
foreign-invested companies.
Switzerland, for its part, benefited in particular from Chinese
concessions in the domains of insurance licences and inspection
services. Most recently, new business opportunities arose for the
Swiss financial sector, when China opened the retail banking market
to foreign invested financial institutions in December 2006 to meet
its WTO accession commitment (Embassy of Switzerland 2006: 2).
Although China largely complies with the WTO rules, a number of
problems still exist in the areas of intellectual property rights
enforcement, protectionist practices and anti-dumping regulations.
Switzerland has set priorities, and lobbies within the WTO for
further facilitations in merchandise trade and easing of
restrictions in the services sector. In view of the great extent of
product counterfeiting in China, Switzerland places also emphasis on
intellectual property rights protection. Given the high financial
losses for the affected industries and the potential risks for
customers involved, Switzerland is committed both within the WTO and
the World International Property Organization (WIPO) to enforcing
intellectual property rights protection in China (Federal Council
2007: 26).
On the plurilateral level, Switzerland promotes its economic
interests jointly with the member states of the “European Free Trade
Agreement” (EFTA). As the other EFTA members, Switzerland is
interested in a free trade agreement between EFTA States and China
to raise bilateral trade. However, China reacted with diffidence on
Switzerland’s proposal to contemplate a feasibility study about a
free trade agreement with EFTA, pointing out the increasing number
of bilateral free trade negotiations with other countries (Embassy
of Switzerland 2006: 3).
4 Conclusion
When recapitulating Switzerland’s foreign economic policy-making
toward China, emerge two main strategic objectives.
First, Switzerland is willing to benefit from the potential of
development that China holds in terms of trade and foreign
investment. For this purpose, Switzerland seeks to enhance business
conditions in China that favour the market access of Swiss products
and services, and to encourage Swiss investments. The illustrated
measures demonstrate that Switzerland has not only been operating on
a bilateral level, but that also multilateral and plurilateral
practices have been adopted.
Second, Switzerland is eager to boost domestic economy. The Swiss
foreign economic policy aims indeed at attracting Chinese investors
to consolidate the position of Switzerland as a location for
investment. For this more recent objective, Switzerland has been
using methods of country advertising. Further emphasis is placed on
the promotion of Switzerland as a tourist destination for Chinese
travellers.
The scope of strategic activities shows that Switzerland has been
making considerable efforts to counter-balance the unilateral
dependency on a well-functioning Sino-Swiss economic partnership by
stimulating China’s interest for the small alpine country and
encouraging Chinese business activities in Switzerland.
In summary, it can be concluded that the strategic approach exposed
in this paper manifests Switzerland’s attempt to enhance mutual
Sino-Swiss interdependency by establishing a close, stable and
possibly balanced relationship of economic cooperation that matter
to both sides.
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Autorin und Copyrighthinweis
Dieser Beitrag wurde von Annette Ryser
im Februar 2007 an der Universität Genf im Rahmen einer Seminararbeit
erstellt.
 |
Annette Ryser aus Bern, 23 Jahre
alt, ist Kommunikationswissenschaftlerin (B.Sc.) und
Studentin des Masterstudiengangs „Interdisziplinäre
Asienwissenschaften“ an der Universität Genf. Ihre
Studienschwerpunkte liegen im Bereich der chinesischen
Politik und Chinas wirtschaftlicher Entwicklung. |
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