Swiss machinery industry benefits big from trade with China

The sector now exports four times more to China than two decades ago. Chinatopix

The Swiss machinery, electrical engineering and metal industry says it hopes that growth with China will help it recover from pandemic losses. This comes amid more scrutiny over the human rights situation in China.

According to annual figuresExternal link released on Wednesday, the Swiss MEM industry saw sales drop by 9.8% and incoming orders by 6.5% in 2020. The situation started to improve in the second half of the year with new orders in the fourth quarter of 2020 returning to the previous year’s level.

This was thanks in large part to trade with China, which recovered quickly after the shutdown in the first quarter. “The Swiss industrial companies that do business locally or with exports with China were able to benefit quickly,” said Martin Hirzel, President of the Swissmem, manufacturing industry association, in an interviewExternal link with Swiss public television SRF. 

The Swiss industrial sector has boosted business with China with the help of the free trade agreement in force since 2014 – the first signed between China and a European country. The sector now exports four times more to China than two decades ago. Exports to the country making up 7% of all Swiss MEM exports.

Hirzel highlighted that the Swiss industry’s high-tech and innovative goods represent a particular niche, where Chinese companies can’t yet compete. 

Criticism

With closer ties to China, it is also facing more criticism amid concerns over the human rights situation in the western region of Xinjiang.

The South China Morning Post reportedExternal link this week that Switzerland is the second highest exporter of textile machinery to the Xinjiang region after Germany, shipping US$680,279 (CHF617,065) worth.

Xinjiang produces 85% of China’s cotton and 20% of the global total. The textile industry has been implicated in alleged human rights abuses in the autonomous region, which is home to large populations of Uygurs and other Muslim minorities. Several countries including the United States and Canada have declared the treatment of the Uyghur population as genocide.

Hirzel told SRF he was worried about the situation, saying that “we have to address that openly.” However, noted that it is the work of politics and that the countries can build on the basis of trust established through the free trade agreement. 

Recovery in view

Exports of goods by the MEM industries shrank by a high 11.2%, representing a loss of CHF7.6 billion. All major sales regions suffered with exports to the US falling the most by 12.6%.

Exports of goods in mechanical engineering were the hardest hit (12.4%), followed by metals (11.2%), electrical/electronic engineering (9.4%) and precision instruments (8.5%). Some 6,600 jobs were lost in the sector as a result of the slowdown.

The industry hopes that the recovery will continue but warns that a possible third wave of the pandemic could lead to a renewed global slump, with consequences for Swiss industry.