All as smooth as Swiss chocolate

Updated: 2013-01-25 09:35

By Diao Ying (China Daily)

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All as smooth as Swiss chocolate

Robert Wiest says China was Swiss Re's third largest market last year and its business will continue to grow in the country. Provided to China Daily

The world's biggest reinsurer is not alone in finding the going good in China

After watches and chocolates, the businesses that Switzerland is most famous for in China are probably banking and insurance, and both have the potential to make considerable gains as China continues to open up its financial industry.

"Doing business in China is nothing new for us," says Robert Wiest, president of Swiss Re Group in China.

Indeed, Swiss Re and China seem to be the perfect match - world's second-largest reinsurer meets world's second-largest economy.

"We did our first about 80 or 85 years ago," Wiest says, referring to the deal the company did when it signed a fire treaty with Taiping Fire & Marine Insurance company in 1931. That was the year of China's greatest natural disaster, the flooding of the Yellow River that claimed up to 4 million lives.

It was not until 1995 that the company set up a representative office in Beijing, and the following year in Shanghai. Changes to its business have become particularly noticeable since December 2003, when it opened its Beijing branch to conduct life and non-life business throughout the country. Within a short time, China has grown to one of the largest countries in terms of business for Swiss Re.

The country accounted for 1 percent of Swiss Re's business a few years ago, and now accounts for 10 to 12 percent. Last year China was Swiss Re's third largest market, and it generated premiums of $2.8 billion (2.1 billion euros), including life and non-life insurance.

"Our business in China in the foreseeable future will continue to grow considerably," Wiest says.

Growth in the insurance industry in a country usually coincides with the country's GDP, he says.

As Chinese society goes through fundamental changes, it throws up opportunities for insurers, he says. For example, two-thirds of the non-life insurance of Swiss Re's business in China is motor insurance. That reflects the booming car industry.

Wiest says Swiss Re is now working under a five-year strategy in China that coincides with the country's 12th Five-Year Plan (2011-15). Many areas in the plan spell potential business for insurers, such as agriculture, food security and infrastructure.

"We have a good position to translate the development into good business."

Demographic changes also offer opportunities for insurers, he says.

The workforce is aging rapidly, and a report by Swiss Re and the Boston Consulting Group shows the country's working-age population will begin to fall as early as 2015. Those above 60 will grow from about 165 million in 2010 to nearly 440 million by 2050, or about 34 percent of the country's total population.

Swiss Re's business in China is growing quickly and changing rapidly, Wiest says. "What we needed for our business in 2008 is very different from what we need today. The challenge is in realizing it and taking the time to build the relationships that enable you to understand the market."

Even with the pace of change, he says, it is important to slow down and take time to think about what is required at each specific stage of development. "We have accumulated tons of knowledge. The challenge for us is to take the time, the patience to sit down and understand what the underlying needs are, what the drivers are."

Swiss Re now employs about 100 people in China. One of the key elements of the company's success in the country is employing more local talent, he says. The company has localized a lot over the past five or six years, he says, and the proportion of people from the Chinese mainland in its work force is much higher than before. It now has fewer foreigners left in its China office, and has taken on more Chinese staff with international experience.

Highly educated Chinese staff can bring in broad experience, and at the same time they are able to translate that knowledge and experience to the local market, he says.

"They know exactly what the clients need. That is why it is working. This helps us to establish a value position which is appreciated by the clients."

Attracting the right people remains Wiest's priority in his work in China.

"With our history, we know the markets; we know the clients. We know they can handle and manage and grow our business. The challenge is to get more people to manage our business, to stay attractive for the right people and make sure everybody gets his and her place."

Wiest started working in China in 2008 after working in other emerging markets. One of the things he has learned over the years is that you often have to accept that things are done differently in China, he says.

"If you are open-minded, a lot of things you are doing are different from the Western way, and in most cases there is a very sound reason for that."

In banking, cooperation on wealth management between China and Switzerland is promising, he says.

Heinrich Siegmann, an expert with the Basel-based Swiss Bankers Association, says Swiss banks have centuries of expertise in wealth management, and there is increasing demand for wealth management among Chinese clients.

"Our banks have the know-how, and that could satisfy the needs of the Chinese," he says.

Last July Bank of China formed a strategic partnership with Julius Baer, Switzerland's largest private bank. Under the partnership, Bank of China will refer customers with international private banking needs outside Chinese mainland to the Swiss Bank, and customers of Julius Baer needing banking services will be referred to the Chinese bank.

The partnership has been formed as international private clients of Bank of China have become much more demanding in recent years, says Li Lihui, president of Bank of China.

The partnership will better serve the needs of customers with private banking requirements, and the cooperation will complement the existing private banking capabilities of the Chinese bank, Li says.

For Julius Baer the partnership offers the potential to enter the Chinese mainland, one of the world's most important and fastest growing wealth markets, says Boris Collardi, CEO of Julius Baer.

The internationalization of the yuan will bring opportunities to banks in Switzerland, says Siegmann of the Swiss Bankers Association. China has quickened its pace in internationalizing the Chinese currency in recent years, and the currency has been on the rise in international trade.

Swiss banks may also be looking at opening renminbi accounts for corporate clients as well as private clients, and to issue offshore dim sum bonds, Siegmann says. These bonds do not have to be issued in Switzerland directly, and investors could seek the investment in dim sum bonds issued elsewhere as a way of diversifying their investment at a time when low interest rates prevail.

There is a large pool of investors in Switzerland, with more than 5 trillion Swiss francs ($5.8 trillion; 4 trillion euros) under management, and they may look to diversify their assets. The renminbi, which is expected to appreciate, is an option, Siegmann says.

Swiss banks may also benefit from increasing bilateral trade. Trade between the two sides will continue to increase as the two governments look to close free trade negotiations this year. Swiss banks are highly international, as about 60 percent of the GDP in the country comes from trade. This means they can offer Chinese firms services such as trade finance products, foreign exchange and renminbi accounts, Siegmann says. As more and more Chinese companies look to expand overseas, there will also be more advisory opportunities for banks in Switzerland.

In China, opening of the banking sector also offers Swiss banks opportunities. The two largest Swiss banks, Credit Suisse and UBS, have been in China for decades. They started their operations in the country in the 1950s. Last year UBS obtained a wholly foreign-banking license in China, the most far-reaching license a foreign bank can obtain in the country.

diaoying@chinadaily.com.cn

(China Daily 01/25/2013 page20)