Do not underestimate the development of China! Don't miss the key related trends and the growing impact this emerging nation is having on our global economy today.

The consequences for Swiss Enterprises, particularly for SMEs, are major and urgent. Facing direct competition from Asia, as well as making good on opportunities in China, are challenges that need be met fast in order to remain globally successful in the coming years.

Switzerland's high cost and quality production structure have brought its economy to a good position to benefit from China's development, better than the rest of the developed world's. Nevertheless, the time has come for Swiss niche leaders to develop clear strategies to take a stronger position in China and Asia, to ensure long term global success. Doing so, they will keep generating the innovations and value that support the Swiss quality of life.

• Workshop of the World
• Supermarket of the World
• Lasting low production costs
• Impact on International SMEs
• The ladder to global leadership
• Priority to Swiss SMEs

Workshop of the World

Further to the world's conquered mass consumer goods markets (clothing, household appliances, and electronics, among others), industrial components, machinery and all other types of equipment are becoming a growing part of Chinese exports.

The figures, among others, are staggering:

China already produces 80% of the world's consumption of tractors, 60% of the penicillin, 50% of the vitamin C, 70% of the DVD players, 50% of the telephones, 60% of the artificial diamonds and 75% of all watches manufactured in the world.

In addition, with the cancellation of the global multi-fibres agreement and the removal of the textiles export quotas by the end of 2007, China's share in the world textile output is predicted to jump from 30% to 50% within a couple of years.

Moreover, China's world market share of the lowest-tech items is growing constantly. By 2009, the country is expected to produce 74% of all manufactured mobile phones.

Supermarket of the World

The current middle class of about 100 million consumers is expected to grow to 400-500 million by 2012, making China's domestic market larger than the North American domestic market.

In the coming 10 to 15 years, all signs indicate that China will be the largest world market and the number one world economic power. Unless the current development process be halted by any – unlikely - social, financial or epidemic catastrophe.

Lasting low production costs

About 300 million Chinese (a population the size of the US today) live in cities. Anticipating the on-going competition generated by joining the WTO Agreement and the world economy altogether, China's Government is planning to urbanize 300 million surplus farmers in the coming 15 years.

As a result, for the time being, unemployment in cities is growing. To compensate, families have put education as their top priority, slowly but surely increasing pressure to many fields: in Shanghai for instance, salary expectations of newly-graduated students have dropped by an extraordinary 30 to 50% between 2003 and 2004.

Even as the Yuan increases in value against other world currencies, it is very unlikely that the level of cost of labour will rise within the next 10 to 15 years. At least, until this surplus labour force is absorbed.

Impact on International SMEs

While the Chinese consumer goods market is the main turf of large companies and mostly a battle between Chinese and locally-established multinationals, the supply of equipment and industrial goods to the Chinese enterprises and the locally-established foreign subsidiaries is a market in the making; with considerable and growing opportunities for Swiss SMEs.

The smaller the company, the more timing is of the essence. Small firms cannot afford to invest too early and wait for returns. Neither do they have the required resources if they enter late and have to catch up the market.

The ladder to global leadership

As Chinese producers become able to better serve more and more international companies in China, they will inevitably start to export and become major players on all world markets. Chances are, the fierce competition will soon affect even the Swiss niche champions. Therefore, over the medium and longer term, success on the Chinese market is a must in order to maintain competitive production and global leadership.

Priority to Swiss SMEs

Since 2001, China (including Hong Kong) has been buying more Swiss goods than any other nation in Asia.

Meanwhile, the demand for machinery and equipment to satisfy the production needs of this Workshop of the World' is indeed a considerable opportunity for developed economies and especially for Switzerland.

The Swiss Center Shanghai provides the most adequate instruments for SMEs to enter the Chinese market in the safest possible conditions with the full backing and guidance of a dedicated organization. Quite naturally, the Swiss Center Shanghai offers premium service to all - and priority to Swiss SMEs.