Support for small firms

Finanacing schemes

To rekindle export growth, Switzerland is starting to develop its government soft loans to China. In 1997, they will total just over US$40m, divided into two batches ?one of US$14m devoted to industrial infrastructure products and the remainder to environmental and social infrastructure. Where strict criteria of priority development and financing are met, the Swiss government will pro-vide a 40 per cent grant on the project. But while several projects have already been identified for the first batch, the Swiss authorities are more likely "to make substantial efforts to finance environmental projects in China", according to the Swiss embassy. That means more business for environmental companies.

Regarding investment of small and medium-sized companies, the Swiss government is starting to implement an innovative new funding programme, the US$20m Swiss-China partnership fund. The initiative started last year and is rap-idly taking shape.

"This is a first experience for the Swiss government and also for China," says Dr Daniel Christen, special consultant to the federal Government of Switzerland for the Sino-Swiss Partnership Fund. "Last May, we visited a dozen small and medium-sized companies in Switzerland to better understand which will be our future customers and we selected three projects." Christen adds that it is important to concentrate on a few projects rather than become distracted by the high demand for investment funds.

The Swiss government is financing 80 per cent of the fund, with the rest coming from the Chinese State Development Bank. The aim is to help medium-sized businesses ?Swiss companies initially but broadened to European companies at a later date ?to gain a foothold in China by creating a joint venture with a local partner. Importantly, the fund can provide loans in yuan ?a privilege granted by the central bank to only a handful of foreign banks in Shanghai. It can also operate as a shareholder, besides the Chinese and the Swiss partners, by buying a minority stake in a joint venture (up to 33 per cent of the capital with a ceiling of US$3.5m). "After the concerned parties have gained experience, the fund will withdraw from the invested joint ventures," explains Christen. "There could be a new partner or a listing. It can also be envisaged that the Swiss government will eventually withdraw when the fund is able to develop by itself."

Swissair in waiting

Tlluee years after it first started negotiating with the Civil Aviation Administration of China (CAAC) to in-crease the frequency of its flights between Zurich and Beijing, Swissair is still awaiting to receive official approval. Currently, Swissair flies three times a week to Beijing, a service ex-tended in 1995 to include Shanghai. The company estimates a 90 per cent load factor on its China-bound flights and believes that without an increase in frequency, it may have to turn away 9,000 passengers in 1997. Air China operates one flight a week but with a much lower load factor.

Although the relationship with the Chinese side is described by Swissair as "exceptionally good", little visible progress has been made in securing a much-needed expansion to its China operations. Certainly other European ear riers have been winning new slots. For example, Lufthansa now has six weekly directs flights to Beijing and three to Shanghai, Air France has four weekly direct flights to the capital and SAS will next month increase from four to five the number of its direct flights to Beijing. Austrian Airlines ?a newcomer to China compared with Swissair three directs weekly flights to Beijing, two of which serve Shanghai.

Austrian Airlines has established good relations with the Chinese government and officials from CAAC. It has a partnership with Air China, whereby the Chinese carrier has a block allocation of 80 seats to fill on each Austrian flight. This alliance has taken some time to bed down but there are now clear benefits to both carriers.

Swissair started flying to China in 1975 when it secured the Zurich-Beijing-Shanghai route, this last destination being cut six months later for lack of passengers. In 1995 the company was allowed to re-open the Shanghai route, an agreement briefly in doubt after a misunderstanding over an advertisement mentioning Taiwan. The flight was briefly suspended, re-installed and the incident forgotten.

At the moment, Swissair is negotiating to secure one more weekly service and it hopes conditions will allow another flight in 1998. The solution may lie in a partnership deal, also possibly with Air China.