Visit to Swiss Center Shanghai

On June 4th, 2013, the Swiss Center Shanghai (SCS) kindly invited Mélanie, Isabel and Lennart to their site in Xinzhuang Urban Industrial Park in Minhang, South Shanghai. After the team meeting, Aline Ballaman (Operation Manager at SCS) gave us a very informative presentation about the work that SCS, a non-profit organization, does in China.

SCS was founded in 2000 with the support of its members and sponsors such as several Swiss cantons, the SECO and had established a Joint Venture with the local Chinese Government of Xinzhuang Industrial Park. In 2003, SCS was officially opened with the presence of the former Federal Councilor Pascal Couchepin. Working together with a pool of professional partners and Chinese entrepreneurs, SCS’s mission is to support Swiss small and medium enterprises (SMEs) during their early-stage establishment on the Chinese market. Among numerous other services, SCS provides Swiss SMEs with the necessary network to professionals and government officials, essential market knowledge and industry sector expertise, and different facilities such as workshops and instant offices to rent. SCS has currently 66 members and sponsors and, over the last 12 years, has served more than 200 Swiss SMEs in entering the Chinese market with a success rate of ca. 95%.

Three points in Aline’s presentation and following discussion about her personal experience struck us as particularly interesting:

  • Swiss companies have to understand Chinese market and adapt their product according to the local consumer needs in order to successfully establish themselves in China.
  • China is not a market for everyone: One has to operate in a niche market segment and/or offer a service or product with a high added value. Otherwise, the non-locally produced product is simply too expensive compared to the Chinese competitors.
  • Among its new member companies, SCS has noticed a trend away from machinery and tool production to more promising sectors such as IT and clean-tech, which also reflects a macro development in Chinas economy.

Among its new member companies, besides advanced machinery and tools, SCS has noticed a trend towards promising sectors such as IT and clean-tech, which also reflects the macro development in Chinas economy. One of the many success stories of SCS’s work with Swiss SMEs is the producer of high quality glass and steel doors and windows, Jansen. Based in Oberriet, SG, in Switzerland, Jansen has had a competence center in Xinzhuang Urban Industrial Park for more than 10 years. During this time, Jansen has completed more than 160 projects, which include the Hong Kong Pavilion at the 2010 Expo Shanghai and the Beijing National Stadium, commonly known as “Bird’s Nest”.

We would like to thank Sharon Ren, Executive Manager at Jansen, Aline Ballaman and the whole SCS team for this special visit and the delicious lunch.

 

Reported by Mélanie Boillat and Lennart Bolliger

 

AmCham's food safety conference instructive

On May 30, the American Chamber of Commerce (AmCham) held its annual „China Food Safety and Sustainability Conference“ in Shanghai. Mostly attended by around 100 business representatives and other practitioners, its focus lay on solutions for the food safety and sustainability challenges China faces.

The conference showcased, that on all sides - government, society, and business – efforts are made to tackle the problems. In his open and frank keynote, Dr. Chen Jun Shi from the China National Center for Food Safety Risk Assessment, explained the recent re-organization of the Chinese food safety system. In his view the new setup is a change for the better as it increases the effectiveness of the government system. However, he added, it needs furthers improvements and therefore he predicts it to be only temporary solution. NGOs like the World Wildlife Fund (WWF) are running projects to strengthen China's sustainability. They represent the growing influence of societal actors in China. A number of presentations demonstrated the contribution of private businesses to food safety. For companies, it simply is a business case, it became clear. Strict food safety standards are necessary in order to sustain reputation and business. Consequently, most apply standards higher than the Chinese. Although it was not a topic of itself during the conference, it became clear that the collaboration and coordination of all these actors involved in improving food safety remains a big question.

The conference also was a reminder how complex the issue of food safety is. In some instances it is linked to cultural aspects. For example, market research showed that China developed its own strain of food products that incorporate the approaches of traditional Chinese medicine. Another aspect was the kind of food risk. When Scott Minoie presented the sophisticated food safety measures in Element Fresh's internal production chain, he was instantly asked whether he merely deals with microbiological risks or also with risk associated with others substances in food (which he does). What is more, at several points of the conference, the role of media and unnecessary fearful population was raised. However, these issues of risk communication were only partially if at all addressed. It rather became clear, that a one day conference cannot fully grasp all aspects linked to food safety. There is a danger in raising but not really addressing issues. Risk communication is a good example. Media should report in a more objective manner and people just need to receive the correct information and figures about the real scope of a food safety problem, it was more then once proclaimed during the conference. However, risk communication research has long ago revealed that both will not work. Finally, bringing sustainability and food safety together in a conference turned out to be a challenge. The examples of water management were well chosen to display the connection between both areas. However, due to the limited time it was impossible to carve out the complex relationship between sustainability and food safety. Again this can be misleading, as it covered the fact that both can actually be contradictory.

As swissnex will continue to develop projects on the issue of food safety, the AmCham conference was very valuable. The presentations itself were very instructive and detailed. What is more, the conference was attended by many experts and relevant persons in this field.

Reported by Kai Kottenstede, advisor on food safety, friend of swissnex China.

Event Swiss Business in China: Success, Challenges and Innovation

 On the occasion of the Swiss Week, swissnex China organized a conference on Swiss business in China in cooperation with Swiss Center Shanghai and China Integrated.

With the recent publication of the “2013 Business in China Survey” realized by China Europe International Business School (CEIBS), Swiss Center Shanghai and China Integrated took the opportunity to particularly highlight the survey outcomes of Swiss businesses in China.

Mr. Pascal Marmier, Executive Director of swissnex China, was giving an introduction on the topic.

  

The specific analysis of Swiss companies was at the center of the conference in which Maria Puyuelo, Nicolas Musy and Sarah Edmonds presented an overview of the general survey and then, more specifically, the most important trends among Swiss business in China. One especially interesting trend is that Swiss companies, on average, increased their profit level in 2012 by an impressive 9% in comparison with 2011.

 MS. Maria Puyuelo

 Mr. Nicolas Musy and Ms. Sarah Edmonds from China Integrated

Professor Dominique Jolly, renowned expert of the Chinese market at CEIBS-SKEMA, emphasized important changes in the driving factors that push companies and R&D centers to move to China. Whereas 10 years ago costs were the key driving factor, now foreign companies’ interests in coming to China are driven by market and knowledge factors.

Pierre-Alain Cerrali from Firmenich shared his observations from an operative point of view and stressed the importance for companies coming to China to establish R&D centers in order to keep a sustainable competitive advantage on the worldwide market.

Professor Dominique Jolly

 Mr. Pierre-Alain Cerrali

The conference was a great success. All speakers shared their personal perspectives and expectations for the future with the audience and both Chinese and Swiss participants received lots of interesting up-to-date information.

After the conference the participants had the opportunity to attend the official opening ceremony of the Swiss Week where they enjoyed a typical Swiss aperitif in company of members of the Swiss community.

Contributed by academic intern Mélanie Boillat

 

Few updates about innovation in China

Start-up contest is heating up in China

With influx of Chinese overseas returnees and increasing maturity of business start-up environment, start-up roadshow and contest is grabbing great enthusiasm of start-ups from diversified industries, as well as active engagement of venture capitalists and government.

Positioning own company in the industry spotlight to attract investment and increase  awareness and reputation are main triggers for popularity of start-up contests across the country.   On the other hand, competition for high-quality projects among venture capitalists are getting more intense, start-ups have much more bargaining power and usually chased by several VC now.  Governments in different cities or even regions are motivated to provide generous fund to support start-ups because the number and quality of companies newly recruited are important performance index on local government science& technology achievement.

Now the Dark Horse Series and Demo China are two leading business contests in china and organize tour match across China.

An emerging Medtech Cluster in Suzhou, China

China medical device industry is growing at a fast speed with 21.3% CAGR in past ten years, stakeholders in the value chain are quite active and bring about significant changes.  More advanced technologies for premier market or technology that can be localized for mass market are sought by leading domestic medical device companies in China, distributors are facing fierce reshuffle and consolidations.

Government-backed science parks are also active in this field, Suzhou Science & Technology Town is an emerging player dedicated to develop medical device and diagnostics industry locally, currently a group of SME have been present there, along with Suzhou Institute of Biomedical Engineering and Technology Chinese Academy of Sciences and Center for Medical Device Evaluation. More importantly, Jiangsu province where Suzhou city is situated is taking the lead in Chinese medical device industry, followed by  Guang Dong and  Shan Dong Province in terms of industry sales revenue.

Local government SSTT is keen to attract international medtech companies to have R&D and manufacture bases there.  It aims to become a hotbed for medtech in china.

Suzhou Institute of Biomedical Engineering and Technology Chinese Academy of Sciences 

Few updates about innovation events

Shanghai BioClouds Event   11th April

Shanghai Juke Biotech Park organized 7th Shanghai Bioclouds event on April 11th. Swissnex China Executive director Pascal and Project Leader for Innovation & Technology Lijun Zhang have been invited and joined the event and discussion.

 The activity gave a good stage to six enterpreneurs  who are either overseas returnees or western  companies representatives in china, They  shared their valuable experience and opinions of doing business in china, who all have gone through mindset or behavior confrontation. With the globalization trend, more and more Switzerland companies and entrepreneurs will come and explore this booming but challenging Chinese market.  How to understand Chinese business culture before setting up footprint is always  a hot discussion topic.

Venture Day Shanghai  9th April

Venture Day is a worldwide start-up entrepreneurs contest in Spain, Italy, Brazil, Colombia, Mexico, Singapore, India. On 9th April, it’s the stage for Venture Day Shanghai.  Innovation & start-up entrepreneurs are in the spotlight in China right now, in conjunction with the rise of china’s incubator trend, according to data of Quest VC, the number of science & technology business incubators has grown from 131 in 2000 to 1,034 in 2011, some are playing a role as an accelerator and mentorship, like Innovation Works,  Microsoft Cloud Accelerator etc. However, starting business in china is still tough, especially for fledging start-ups offshore, “you should try to  be yourself, but at the same time, you need reach a balance on how much comprise you can make” “ you don’t need speak Chinese as so to be successful , but always keep in mind the localization….”  Valuable comments gave by keynote speakers  in the contest.

China regional innovation capability of China 2012

From the newly released survey from China Technology Development Strategy Research Group, Jiangsu Province tops the ranking of regional innovation capability in China with Guangdong Province following as second. Beijing and Shanghai have fallen to third and fourth. The foundation  for economy and technology development,  education level, openness of economical market, the attractiveness of foreign investment, the entrepreneur start-up environment, the collaboration level between academic and industry are all key criteria for the assessment and evaluation.  

Creating the cleanest toilets in Asia

​Teo Borschberg and Pierre Rousseaux are the founders of the start up Good Toilet Ltd. Their main goal is to create the cleanest public toilets in Asia. This sounds like a crazy idea, but in the end it is an innovative opportunity for young entrepreneurs to enter the Chinese market. They both have already participated at our Chinese New Year Celebration and now we have interviewed Teo about his experience as an entrepreneur in China. Check out the interview in the video below! If you are in China and cannot access Youtube, please watch the video on our Youku (Chinese Youtube) account: Click here

Is China on the path to become a knowledge society?

​Since 1978, the start of the 改革开放 (Chinese economic reform), China has experienced a tremendous growth. Nowadays China is the second largest economy in the world, but it is facing new challenges. China Integrated has focused on these new challenges in there latest report. They quote a CEIBS study: For both foreign (70%) and Chinese (72%) companies 'Finding & retaining talent' is the biggest Challenge cited in the survey. China Integrated concludes, that finding, training and retaining the right human resources will be the key factor for the future. It is a strong indicator, that the demand for high skill labor must be high.

​What are the greatest management challenges facing your company? (Source: Ceibs Business in China Sruvey 2013, p. 17)

​What are the greatest management challenges facing your company? (Source: Ceibs Business in China Sruvey 2013, p. 17)

Another indicator pointing towards a knowledge society is the fact, that China has started to focus on "Seven Emerging Strategic Industries" (e.g. Biotechnology, New-Generation IT) in their latest 5-years plan in 2011. Big internet and telecommunication companies such as Huawei are already big players based on the numbers of internationally filled patents. Furthermore in the CEIBS survey IP Infringements are not being cited as a main challenge, even by foreign companies. 

China Integrated also quotes a study of McKinsey that focuses on the demand and supply of labor in China. In the future years there is a considerable shortage of high-skill workers expected. China Integrated concludes, that China is on the path to quickly build a knowledge society, if it can overcome its biggest challenge - the reform of its education system.

Check on China Integrated for further information and more reports.​

Advertising Restrictions as a Double Edged Sword

Just recently the Chinese Government has announced that TV ads for luxury watches, rare stamps and gold watches are now banned from TV and Radio. The ban is about moral issues in the Chinese society, but the interesting part of this change are the consequences for the Swiss luxury watch industry. This news has already hit the biggest wristwatch retailers in China hard and their stocks went down last Wednesday. This is the logical conclusion, if one takes into account the obvious drawbacks of such a ban. For the famous Swiss luxury watch industry, the same could be assumed, but on closer look, it might be an opportunity for them.

Swiss luxury watches remain popular in Mainland China
Swiss luxury watches remain popular in Mainland China

Opportunity for Swiss luxury brands

It is very likely that retailers will feel cuts in revenues, but for the luxury wristwatch brands itself, this might not be true. Brands like Rolex, Patek Phillipe or Omega are well known in China. The purpose of TV or Radio ads is mainly to raise brand awareness. For a company like Rolex or Swatch a general ban for luxury wristwatches might not be a threat in the long run, it will be an opportunity. Companies with big market shares and already high brand awareness do not rely heavily on TV and Radio ads anymore. But a ban will be a problem for new market entrants, it will be very difficult to reach a high level of brand awareness, without the advertising impact of TV commercials.  Just keeping a famous brand's awareness high doesn't require TV commercials. Therefore a ban of broadcasted ads will not have an heavy impact on the Swiss luxury watch industry. From the point of view of Swiss luxury watch brands, the ban can have an strategic defensive effect to keep new entrants away from the market.

Beyond classic advertising: Social Media in China

Chinese consumers spend more time online than in front of the TV (source: marketer.com)

Chinese consumers spend more time online than in front of the TV (source: marketer.com)

Wristwatch billboard advertisings or print ads in lifestyle magazines are well known in the west. But especially in China, additionally Social Media is of utmost importance. The the general shift from desktop to mobile devices will even more increase the importance of social media. Strategically the famous Swiss luxury brands are already all well represented on Weibo or even Douban, a platform for online reviews. If TV or radio ads are not an option anymore,  online platforms and social media will become the focus of advertising and marketing activities. TV commercials for example can be placed on Youku (the Chinese Youtube) and directly promoted over other online channels. Big brands like Rolex are already present on all important Chinese Social Media platforms. Additionally, the modern Chinese first tier city citizens spend more time online than watching TV. This trend is even more prominent in 2nd and 3rd tier cities. In general this is an opportunity for luxury brands. They can create a whole brand experience with the interactivity of Social Media and directly interact with their potential customers. Furthermore it is easier to track potential clients in the online environment. 

Luxury Watches and the Internet

Top 3 of online search inquiries in China are Swiss brands (source: Digital Luxury Group)

Top 3 of online search inquiries in China are Swiss brands (source: Digital Luxury Group)

As mentioned above, online activities will become more and more important in the future. A recent report showed a 40% increase in online search activities in China for luxury watches in 2012 compared with the year before. The top 3 most searched luxury watch brands are all Swiss: Omega, Rolex and Longines. Basically Chinese consumer inform themselves over Baidu or Google before they travel abroad. The number of Chinese tourists traveling to Switzerland will increase in the future and so will also the sales of luxury watches. Furthermore China will soon be the biggest online market place in the world. Chinese people still prefer to buy their luxury watch in Switzerland, because then they know they won't buy an imitation. Big online market places like Taobao (a Chinese online market place for everybody) tackle this trust issue with a certification system for sellers. 

Swiss luxury watch brands are well prepared

All in all it can be concluded, that Swiss luxury brands will not be affected by this ban. First of all they already have a high brand awareness and don't rely heavily on broadcasted ads. It can even be an advantage in the future, to keep new market entrants away. Secondly, social media and the Internet will be the future in China and Swiss luxury watch brands are already well represented there. The stock markets did not show a strong reaction after the news (between -1.9 and -3.3 percent). The future will show, if Swiss companies can keep their number one position in China

Chinese investments and acquisitions in Switzerland

Who is Baoshida? If you have never heard of them before, then as a Swiss it is high time to get interested in China: They are the savior of Swissmetal. Through their acquisition jobs could be saved in Switzerland. 

In the past Switzerland was mainly known amongst Chinese for its natural landscapes, but nowadays Chinese investors become also interested in Switzerland's attractive business landscape. Chinese companies starting to open branches in Switzerland and acquire Swiss companies. First of all Chinese are interested in the luxury and metal industry. Luxury hotels or the wristwatch industry are on top of the list. Secondly green energy and commodities are of big interest. One example is China's petrol giant Sinopec: They paid 7.3B USD to acquire the Geneva based Addax Petroleum. Based on information of the Swiss magazine L'Hebdo, 60 Chinese companies are already in Switzerland.

Map showing Chinese acquisitions in Switzerland (Source: L'Hebdo and Workzeitung)

China holds huge dollar money reserves. This enables them to invest in foreign companies. On the map created by L'Hebdo, the presence of Chinese companies in Switzerland is clear. In the future, this trend should become even more important. This development is a double edged sword. On the one hand, critics fear the competition and power of Chinese companies, such as Jinko Solar, that are now operating in the middle of Europe. On the other hand, Chinese companies such as Baoshida are saving Swiss jobs. Altogether, the importance that Chinese companies might take in Switzerland in a close future has to be taken into consideration by politics and investors.

Intellectual Property in China: Expert Interview

Watch our interview with Nathan Kaiser, a partner with the firm Eiger law to learn more about his professional career. As the amount of Swiss business has continued to increase, a group of entrepreneurial lawyers have started offering services in China. In the short video, Nathan shares some observations on China as a market for Swiss companies and some advice about how to approach the difficult question of IP management and protection.