Dear Members and Friends

In my last article I wrote about the actions taken by the Chinese government to support economic growth in China. As of today I think it is clear that the task is more challenging and it will take stronger measures which are actually already in the pipeline. Starting this week the National Peoples Congress will come together to discuss how the various measures will be actually put in motion and I believe that this is the time where we as the SCCC need to stay close to the current developments. Hence, my attempt to shed a bit more light on it.

As we navigate through a dynamic global economic environment, China remains a focal point due to its significant impact on global markets, supply chains, and international trade dynamics. The Chinese economy is undergoing several pivotal transformations that are shaping its future growth prospects and interactions with the world, including Switzerland. Hence it will be important for swiss companies to follow those changes closely as any change means also new opportunities. Four points are emerging which I believe need to be in our focus.

China is actively shifting from an export-led growth model to a more balanced approach with its dual circulation strategy. This new economic policy framework prioritizes domestic consumption (internal circulation) while remaining open to foreign markets (external circulation). The aim is to create a resilient economic structure less vulnerable to external shocks, such as trade disputes and global economic downturns. So the one question for swiss companies will be how to contribute to this transformation and how to focus on products fit for the domestic market.

The ongoing trade tension with the United States continues to pose significant challenges for China’s economy. The tariffs imposed by both nations have disrupted trade flows and forced businesses to reconsider their supply chain and manufacturing strategies. Despite these challenges, China has been seeking to broaden its trade partnerships, evidenced by the recent signing of the Regional Comprehensive Economic Partnership (RCEP) and its applications to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Beyond the US, China’s trade relationships with other major economies such as the European Union and its neighbouring countries in Asia are crucial. Balancing these relationships amidst rising protectionism and strategic rivalry requires adept economic diplomacy and policy adjustments.

Switzerland with its FTA has certainly a very good position in a world which seems to move away from a global trade approach to a more multi-partnership approach. With the discussions going on to upgrade FTA1 to FTA2 this should further help swiss companies to engage with China.

In the technology sector, China has placed significant emphasis on achieving self-sufficiency. The U.S. restrictions on Chinese technology firms have spurred a national drive for technological independence, particularly in critical areas like semiconductors, artificial intelligence, and telecommunications. The government has pumped substantial investments into research and development, aiming to reduce its dependence on foreign technology, which presents both challenges and opportunities for global tech industries.

Domestically, China faces challenges including an uneven economic recovery across different sectors and regions, exacerbated by the recent outbreaks of COVID-19. The technology and export sectors show robust growth, while consumer services and construction have lagged. Additionally, regulatory crackdowns on large tech firms and property developers have jolted markets and raised questions about the future of private enterprise in China’s economic model.

Strict regulations aimed at controlling debt levels, particularly within the real estate market, signify a move towards mitigating financial risks; however, they also bring to light issues related to housing affordability and urban development.

As China continues to evolve economically, understanding these issues is crucial for businesses, investors, and policymakers globally. The country’s pursuit of a balanced growth model, strategic trade relationships, technological self-reliance, and domestic policy shifts are likely to have profound implications on both its internal economic stability and its economic relations worldwide. The outcomes of these strategies will not only determine the trajectory of China’s economic future but also reshape the global economic landscape in significant ways.

This time I have taken more of your time to highlight the ongoing changes. More in light of potential opportunities rather than a subdued view. I believe it is important for all of us to maintain the dialogue with our Chinese partners and ensure that we identify opportunities. We have organised a number of promotional events in recent months to connect Swiss and Chinese governments and enterprises with opportunities for cooperation. At the end of September we successfully held the Heilongjiang - Switzerland Economic and Trade Cooperation Conference, and on 12th November we will organise the China (Zhejiang) - Switzerland Trade and Investment Forum. This forum offers an exceptional chance for Swiss businesses to connect with high-level executives from Zhejiang companies across diverse sectors, fostering potential partnerships and business expansion. All the three chapters of SCCC are busy hosting missions from China, as well as organising forums, seminars and promotional conferences. Our beloved Christmas apéro is planned on 18th December. This cherished tradition brings together our members for an evening filled with delicious seasonal treats, warm beverages, and joyful company. It’s the perfect opportunity to connect with old and new members and network with friends as we gather to share in the festive spirit. Please visit our website to register for the upcoming events or click on the event notices in this monthly newsletter to sign up directly.

The next newsletter will be out in early December.

Kind regards

Literal translation: "Sharpening the axe will not delay the chopping of firewood."