# 13 / 2016
25.11.2016

Free Trade Agreement with China – A Milestone for Swiss Business

China is Switzerland's most important Asian trade partner

China has become a heavyweight trading partner for Swiss businesses in recent years. As the second largest economy in the world the country is Switzerland's third-biggest foreign trade partner (following the EU and US) and largest trade partner in Asia. With a trade volume currently exceeding 21 billion Swiss francs, China is Switzerland’s most important trade partner in Asia. Domestic enterprises invested 3.3 billion Swiss francs in China in 2014 (capital flow). This takes total Swiss direct investment in the country up to 20.3 billion francs in 2014 (capital stock), comprising 1.9 percent of all Swiss direct foreign investment. China has thus become the chief investment location for Swiss firms in Asia. According to the Swiss Embassy in Beijing, there are currently more than 600 Swiss companies operating in China with more than 1,000 business locations, employing a total of 178,826 staff.

There is also substantial trade in services. Numerous Swiss service providers are active in China (including banks, insurance companies, logistics providers, goods and quality control providers and consultancies). Chinese service firms are also becoming increasingly interested in Switzerland as a business location.

Die Handelsbeziehungen zwischen der Schweiz und China verzeichneten in den letzten beiden Jahrzehnten eine eindrückliche Entwicklung. Seit 1990 haben sich die Exporte mehr als verzwanzigfacht und die Importe sind zehn Mal höher als vor rund 20 Jahren. Das Freihandelsabkommen hat dieser Entwicklung einen zusätzlichen Schub gegeben. Im ersten Jahr nach dessen Inkrafttreten stiegen die Schweizer Exporte nach China um 2,3 Prozent, die Importe von China in die Schweiz nahmen um 4,1 Prozent zu. Vor dem Hintergrund der langsamer wachsenden chinesischen Wirtschaft und im Vergleich mit allen anderen Handelspartnern (Exporte +0,9 Prozent, Importe -4,2 Prozent) entwickelte sich der Handel überdurchschnittlich gut.

Es darf nicht vergessen werden, dass trotz des geringeren BIP-Wachstums Chinas dieses noch immer zwischen sechs und sieben Prozent liegt. Schweizer Unternehmen bietet sich deswegen noch viel Potenzial, ihre Geschäftsbeziehungen mit China zu vertiefen und auszubauen. Die positive Entwicklung dürfte sich nicht nur angesichts der noch immer wachsenden Wirtschaft, sondern auch aufgrund des strukturellen Wandels weiter fortsetzen. Produktionsanpassungen hin zur Herstellung hochwertiger Produkte und eine zahlenmässig immer grösser werdende Mittelschicht mit einer rasant wachsenden Kaufkraft dürften auch für Schweizer Unternehmen positive Auswirkungen haben.

China hat sich in den letzten Jahren zu einem Marktführer in der Hightechbranche gewandelt. Sein Anteil am weltweiten Hightechexport ist in den letzten Jahren stark angestiegen. Das Reich der Mitte produziert beispielsweise mehr als die Hälfte aller weltweit nachgefragten Solarpanels und Windturbinen. Aber auch in der Elektro-, in der Medizinaltechnik oder in der Elektronik hat China stark aufgeholt.

Over the last two decades, trade relations between Switzerland and China have flourished impressively. Exports having risen over twenty-fold since 1990 while imports are at ten times the level of twenty years ago. The free trade agreement has accelerated these developments. In the first year after the Agreement entered into force Swiss exports to China increasing 2.3 percent and Swiss imports from China rising 4.1 percent. In view of the slower pace of growth of the Chinese economy and compared with all other trade partners, trade performed above average (exports +0.9 percent, imports -4.2 percent).

It should not be forgotten that despite a lower GDP growth China is still growing between six and seven percent. Swiss enterprises thus see major potential for strengthening and expanding their business relations with China. In addition to continuing economic growth, structural changes are underway which will be conducive to furthering these relations. Production is being shifted over to premium quality products, and a growing middle class is making rapid gains in purchasing power – developments which will have positive effects for Swiss firms.

In recent years, China has transformed itself into a leader in the high-tech sector. Its global market for high-tech exports has grown substantially. For example, the country now produces more than half of the world's demand of solar panels and wind turbines. China has also gained major ground in the electrical industry, in medical technology and in electronics.

Bilateral trade between Switzerland and China has surged dynamically and at an extraordinary pace in recent years. The growing consumption of China's rising middle class is opening up opportunities for Swiss firms in numerous industries. The free trade agreement between Switzerland and China will promote further substantial increases in bilateral trade and direct investment. The Agreement creates valuable business opportunities for Swiss businesses. Especially for innovative SMEs offering high-quality niche products new export possibilities arise, for example, for the SME Precimec SA based in Ticino, which is discussed further below. Over the next few years, privileged access to the Chinese market will give Swiss enterprises a competitive advantage over firms from countries which do not have a free trade agreement with China (like the EU and US).