UNDERSTANDING BUSINESS WITH CHINA –
THE TRADING VOLUME BETWEEN
SWITZERLAND AND CHINA ARE GROWING.
With these opportunities, the demands placed on “doing business with & in China” have also risen significantly. The ZHAW School of Engineering makes you fit for this; compact and practical!
Trade with China is growing for both industrial goods and consumer goods – a positive development for the Swiss economy.
The development of the Chinese economy is regarded as one of the greatest success stories. In terms of numbers, China has the world’s largest middle class. It is larger than that of the USA. If total consumer demand in the USA and Europe still occupies the highest positions today, these conditions will soon shift towards China. The attractiveness of China as a sales market will continue to increase. At the same time, China will continue to play a central role as a procurement market. New product groups and industry segments (automation, IT, e-mobility, Fintech, etc.) will come into focus.
As a rule, “supply” follows “demand”. China continues to be attractive as a production location, and opportunities exist. However, the requirements for “How to do business in China” have increased over the years.
Costs have also risen continuously in China. However, the “smart” companies in China have also managed to improve their productivity more than the costs have risen!
Procurement in China is therefore still attractive.
But manufacturing in China for China and Switzerland also offers attractive opportunities for Swiss producers.
The conscious design of the interplay of rational and emotional influences represents a particular challenge in intercultural trade. The technical coordination meeting with the Chinese business partner alone is not enough to clearly coordinate existing mutual expectations. Misunderstandings can occur in many places. Beginning with the purchasing discussion about the quality of “high-quality” materials up to the “punctual” delivery of components. Thus an imaginary picture sometimes appears unintentionally in the wrong direction. Can a Swiss customer correctly assess whether a product “SWISS-MADE IN CHINA” actually corresponds to the quality level according to the Swiss imagination? Both in China and in Switzerland, a technical-cultural transfer of competence and knowledge is indispensable.
For “doing business in & with China” it is critical to know the cultural differences and how to deal with them. This know-how forms the foundation of a CAS education at the ZHAW School of Engineering. Practice-oriented modules such as procurement, logistics, production, and engineering are just a few of the areas covered in the first part in Zurich by experts with many years of experience in China. The second part of the training takes place in China according to the motto “from theory to practice”.
CAS Engineering in China
Start date: 09 November 2019
Location: Zurich and China (Shanghai and surroundings)
Information and registration: www.zhaw.ch/engineering/weiterbildung
Improve opportunities in Chinese business with a very practice-oriented continuing education program at the ZHAW…
Understanding the Chinese production business
After successfully establishing Swiss companies in the Chinese market, the task now is to optimize the technically based Chinese business. It is also advisable for the European manufacturing industry to take a closer look at the Chinese production world – even if its international orientation is not very pronounced.
Author: Prof. Dr. Udo Müller, Head of the “CAS Engineering in China” course at the ZHAW School of Engineering
The framework conditions for Swiss foreign trade are positive. In March 2018, a cross-border trade balance surplus of around CHF 1.8 billion was recorded. If we focus solely on trade with China, this country-specific trade balance shows a deficit of CHF 1.58 billion in 2017. However, this figure should be put into perspective because exports to China have increased continuously in recent years. Exports to China have roughly doubled since 2008.
Against this backdrop, it is clear that trade with China is becoming increasingly important even from a long-term perspective. Looking at the total trade volume with China, this impression is confirmed. The Federal Department of Economics, Education and Research is currently reporting: “In recent years, bilateral trade between Switzerland and China has developed extraordinarily rapidly and more dynamically than the rest of Switzerland’s foreign trade. China (excluding Hong Kong and Macao) is Switzerland’s most important trading partner in Asia and third only to the EU and the USA (in terms of exports and imports)”.
The statistics show that many Swiss companies have already established and positioned themselves in China. The task now is to optimise and expand business in China at a different level.
The integration of technology and management appears to be a matter of course at first glance. But is this really the way it is lived?
If you look at brand management alone: emotional brand schemes are created here. According to Daniel Kahneman, who won the Nobel Prize for Economics in 2002, there is not only the purchase decision of the rational actor, but also the irrational purchase decision, the control of which the management of brands is concerned with. Ratio and emotion cannot be viewed in isolation. Just as “SWISS MADE” evokes many rational as well as irrational images.
In many places there are good opportunities to improve business in China with simple means. Technical purchasing and sales, learning from the mistakes of others or avoiding intercultural and technical misunderstandings form the basis for optimising business in China.
In the following, some typical problem areas will be discussed and explanations or proposed solutions will be presented:
Intercultural communication in technical purchasing
In negotiations with Chinese business partners, a “Chinese yes” means: “I hear what you say”. However, a concrete implementation of an agreement in which, for example, a commitment has been given, can lead to different results. Misunderstandings should be avoided as far as possible and the contents of the discussions should be interpreted correctly.
Technical agreement and still talked past the Chinese interlocutor; this is the case:
A product engineer is sent to China to solve a customer problem. The problem then appears to have been solved. Please provide a detailed description of the technical solution for the reporting. Despite an emphatic request, there is no solution specification. What is the reason for this? There can be many reasons for the behaviour of the Chinese side.
1. and most likely explanation: Instead of a technical solution, it will have been possible to find a political solution to the customer problem. Although the causal problem was not solved, a free supply of spare parts was negotiated. For Chinese companies, a contract is often seen as a guideline and not the ultimate regulation.
2. possible explanations: It was hoped to wait for pressure from headquarters until a solution was found.
3. possible explanation: Perhaps a solution could have been found which one tries to conceal from the engineer.
Recommendation: From the point of view of the Swiss business partner, Chinese conversation processes, negotiation rituals and problem solutions are sometimes implemented in an unusual way. This is due to different behavioural cultures based on different leitmotifs that need to be learned.
Technical purchasing in China
In addition to communication, technical purchasing in China itself also entails risks of incorrect deliveries, quality losses and other inconveniences.
Choice of parts supplier in China; the case: Pressure on the manufacturing costs of a Swiss mechanical engineering company has increased sharply. The decision is made to purchase components manufactured in China and install them at the Swiss production site. Component quality has a major influence on the load capacity of the machines. A parts supplier with qualitative test products was found. But is the company merely an intermediate supplier? Were material alloys produced in accordance with specified standards? How high is the risk of incorrect deliveries, subsequent improvements, delivery continuity and compliance with standards?
Suitable preventive measures must be prepared: In order to minimise risks, efforts should be made to establish and maintain relationships with suppliers on an ongoing basis. This can be ensured by agents who are permanently present on site and who are familiar with the local conditions. In addition, joint parts development, for example, promotes product quality. This considerably strengthens the relationship with the supplier and improves quality.
Conclusion: Through active supplier management on site, qualitative supplies from China are no witchcraft. By anchoring security measures, a network and knowledge of the Chinese market, the exploitation of opportunities becomes attractive. In the interests of continuous improvement, players with Chinese experience should also regularly put their positioning to the test. The dynamics of the Chinese market are so high that it is easy to miss out on the latest changes in market conditions. Products “MADE IN SWISS” or “SWISS MADE IN CHINA” are appreciated by Chinese customers. China is also a lucrative sales market.
Chinese law has pitfalls that should better be cleared up in advance. This also applies to labour law. The correct drafting of employment contracts and what is particularly important should be found out:
Employment contracts with Chinese companies; the case: After a quarrel with the parent company, the Swiss employee who is employed in a Chinese subsidiary is dismissed. Employees have wage claims and claims against the Chinese subsidiary. The employee regards the dismissal as ineffective.
Under Chinese law, no solution appeared to be achievable in the near future. An amicable solution was found outside court proceedings by means of a mediator. The parties agreed that the employment relationship had ended, the employee would be paid his claims and the outstanding salary, including severance pay. The costs of the mediation were shared.
Recommendation: Employment contracts under Chinese law are problematic for Europeans. If this cannot be avoided, it must be ensured that mediation is contractually agreed from the outset so that it does not end up before the state courts in China in the event of disputes.
The company’s own market position should also be properly sounded out internationally: If, for example, you’ve enjoyed looking into American Silicon Valley with regard to innovation impulses, you’ll also find what you’re looking for in Shanghai today in search of news impulses. Although the image of Chinese producers as cheap copiers is still present in the minds of European customers, it is no longer the driving economic force. In the areas of electronic mobility, the Internet of Things and innovation, Chinese producers are often already pioneers. That is why it is important today for an SME to inform itself about Chinese competing products and to position itself realistically with regard to its own products. The realistic assessment of the competitiveness of one’s own products in comparison to Chinese products is also important for SMEs when weighing up the opportunities and risks for the current market position options in Europe and Asia.
This makes it advisable for the European manufacturing industry to take a look at the living Chinese production world.
Finding solutions with technically tailored and focused training: CAS Engineering in China was established at the ZHAW School of Engineering with a view to optimizing technically-based business in China. Following the principle of “from practice for practice”, information about the technically based China business is provided in condensed form. On the basis of a qualitative survey of specialists who have been active in China business for many years, the problem areas and solution options were selected that are of particular relevance for technically responsible employees in China business. The practical implementation is delivered directly with an included one-week stay in China.
This further training for the Chinese business is therefore specially tailored to technically oriented players in the Chinese business. For beginners and experienced practitioners, however, the course also provides a specialist forum with proven and innovative solutions for problem areas that entrepreneurs are typically confronted with.
CAS Engineering in China does not only focus on technical purchasing, sales or production. Knowledge of Chinese production potentials and independent Chinese innovation achievements is also relevant.
CAS Engineering in China imparts practical knowledge on Chinese business over 7 consecutive weeks, each weekday. Following the series of events, the participants will gather their own intercultural experiences, make contacts, get to know European and Chinese production sites and get to know solution options for problem areas of the Chinese business during a one-week stay in China.
CAS Engineering in China
Durchführungsort: Zürich und China (Schanghai und Umgebung)
Infos und Anmeldung: www.zhaw.ch/engineering/weiterbildung
NZZ Invest Sept.2009
Hardly any topic has investors of this
year more than the concern
about the Chinese economy. Long
For years, the country was the engine of growth
of the world. In the last months
the economy has weakened noticeably.
This can be seen not least in the
in the thinning order books
of Swiss companies. Their managers
that the China business
is not going as it used to. But how
dramatic is the slowdown really?
And above all: How long will the weak phase last?
The last few weeks have shown that the
Fears that China is a ticking time bomb,
were probably exaggerated. The economy
slows down, but not so much
dramatic, as suspected. In
growth in the third quarter amounted to
gross domestic product was 6.9% and thus fell by
to a six-year low. The authorities are looking for
an annual growth rate of 7%, which would be
so that was only just missed. Thereupon
share prices rose, and since October the
the MSCI China Index calculated in US dollars
by a fifth.
“China has arrived in reality and
will continue to grow in the foreseeable future with clearly deeper
annual growth rates must be modest –
The economic miracle in China
is not over yet
Bank Julius Baer commented, “We are very pleased with the results. As
Importer of raw materials would come to the country
the continuing low raw material prices and the
Fidelity International expects that the
economic growth over the years
due to dwindling productivity gains
to that of the industrialized countries.
Nevertheless, the fund provider continues to see a
a lot of potential. “China is an emerging country
and has many inefficiencies. This offers
great opportunities for stock picking,” says the
Catherine Yeung, Investment Director for
Equity investments in Asia. The state-owned
would have attractive assets,
but they are inefficiently managed. This leads to
undervaluations and offers a long
the chance of high returns.
China’s President Xi Jinping has proven to be a
first priority set, until the 100-year anniversary of the
Anniversary of the Communist government
Party (KP) in 2049 the country to superpower
to the top of the hill. The applicant submits that
Party tightened the reins. Yeung raises the
a strict anti-corruption program:
“The middle party cadre is protected by the program
practically eliminated, the decision makers
have been removed. Today
the power lies with the president and a
handful of members of the Politburo,” says the
who works in Hong Kong.
KP has ambitious plans for the economy.
The minister responsible, Miao Wei
would like to achieve a degree of industrialisation by 2025
which is comparable to that of Germany.
and Japan in the early days of industrialization
corresponds. The country should
to be one of the ten largest production
Consumption is increasingly becoming an important pillar. The opening of
The economy makes the country interesting for private investors. By Franziska Pfister
locations around the world. Some provinces
have announced workers through robots
because the wage costs are calculated year for year.
year and the shortage of labour is increasing.
intensified. “The party would like to see the Internet-based
production and to this end to develop know-how and
abroad,” says Yeung. Before
technology and research expertise, and
I’m interested. Increased are
Fidelity International says we’ll see,
that Chinese companies acquire Western brands,
to expel them themselves and to
to round off my business.
Miao Wei has announced, among other things
in pharmaceuticals, medical technology and the
to want to be at the forefront of automation. And
the party has also created financial incentives
for the companies to keep their e-commerce
Fidelity International sees private consumption as
as a support and has great confidence.
According to the forecasts, this will be more strongly
than the economy as a whole. What
Swiss Bijoutiers should be pleased: Yeung
assumes that the Chinese will also be able to
abroad will remain willing to donate. “4% of
Chinese already have a passport, and they’re
want to travel,” she says. The country has huge
airports, which will be fully utilised in a few years’ time.
“The conversion from an industry-heavy
Growth model towards services
and private consumption as drivers will be protracted
and bumpy,” comments the Banque
Pictet. After the sharp drop in prices in the
Summer, Chinese equities would be
a 30-percent discount on papers
from industrial nations. The market
I realized that this discount was exaggerated.
which is reflected in the rise in share prices since September
mirror. Pictet has been
Index a price-earnings ratio of 9.3
is calculated. This is 0.7 below the ten-year average.
This means that the valuations
Fidelity International advises private investors,
in investments in China not all eggs in
to lay down a basket. A broadly supported
Portfolio is necessary. In the in-house fund with
Consumer goods equities include the e-commerce
Platform Alibaba like the instant
News service Tencent among the largest
Positions. There are two classes in China
of shares: the so-called H-shares (Chinese
Titles listed on the Hong Kong Stock Exchange
traded) and locally traded
A-shares, the domestic investors and
are reserved for international funds. AAshares
are currently cheaper than H-shares.