"In this room women check under a microscope every one of the roughly five billion balls for ballpoint pens that we produce each year," explains Walter Eglin, owner of this SME (small and middle-sized enterprise) outside Shanghai. With evident pride, Eglin gives a tour of his factory to the approximately ten participants in the "China Business Excursion“ group, organised by the ETH Forum for Supply Chain Management. In 1997 he put his savings in a suitcase, travelled to China and built a small factory on a green field outside Shanghai. Today one in eight of the roughly 40 billion ballpoint pens produced globally contains a ball produced here. He now employs around 200 workers: the epitome of a patron.

Stony paths

Eglin is 68 years old and not a blue-eyed adventurer. He was in this business – self-employed in America and Japan after 1980 – for decades before it drew him to China in 1997. Starting up here was not easy, recalls Eglin. At his first location the authorities were so bureaucratic that one day he loaded all his machines onto a lorry and left for another community, where he pitched his tents anew.

SMEs mustn't miss the boat

"Today it is no longer a question of single enterprises competing against one another, but the competition of partnership enterprises in the international value-added chain“, says Siegfried Walter, co-initiator of the motivation-enhancing excursion to China. "This is why it is vital that Swiss SMEs do not miss the boat in this global network.“ The aim of this excursion is to bring Swiss SMEs closer to China's rapidly developing production and research.

Double the cost required

Kurt Haerri, head of the Shanghai excursion, knows from his own experience that starting a business in China is difficult. In 1997 he took over the management of Schindler's new trade dealings in China. At this time Schindler had already invested a lot of money in the country, but sales were far lower than expected. "Europeans are accustomed to a business culture where affairs are conducted step-by-step and expeditiously. The Chinese, on the other hand, take a holistic approach and can always come back to points that have already been decided.“

Rising in just ten years: the Suzhou Industrial Park, a special industrial zone covering 70 square kilometres which offers foreign large

Hearing-aid manufacture in Suzhou Industrial Park. large

The Chinese also wanted to get to know their business partners on a personal level, explains Haerri - something that, from a western point of view, led to unnecessary delay. "You need to reckon with twice as much money and twice the time that you would in Europe," is Haerri's recommendation to people wishing to start up an SME in China.

Vital personal contacts

Another aspect not to be ignored is that laws in China leave wide scope for interpretation. For this reason it is important to understand how, for thousands of years, personal relations have played a decisive role in doing business in China.

For instance, a Chinese technical manager from another province with no relationships in the new location, however highly qualified, cannot solve his personnel problems as easily as a native businessman who has studied at a local university and whose former fellow students probably now hold influential positions. Such relationships open many a door which is closed to foreigners or Chinese from other provinces.

"If one takes full account of the particularities of this huge market," says Haerri, today a member of Schindler's executive board, "then profitable business is possible – as for Schindler today.“ However, foreign businesses should prepare their initial entry with great care, he says. Entering the market for mass goods was not to be recommended. As a rule Chinese enterprises, mostly nationalised industries, were already installed here and would defend these markets with all available means. Intruding foreign companies, especially in markets seen as strategically important, were thwarted by all means, fair or foul.

China as a place of research

Han Zheng from the Asia Research Center at the University of St. Gall amplified in a recent lecture how, in the coming years, China must be considered not only as a place of production but also of research. At present, 66,000 students per year leave Chinese universities with a Master’s degree and 14,000 with a Ph.D. Although not all universities in China were up to western standards, there were those in the big cities that could hold their own with the best research institutions in the world today. The large numbers of well-educated academics working for a fraction of the salary of their western counterparts make opening research centres in China very interesting for western companies . The Swiss business consultant William Keller, Honorary Citizen of Shanghai, cites the example of Motorola, which employs around 1,600 Chinese researchers.