In the news: China-Switzerland FTA takes effect, SPC appoints top environmental judge and Hugo Boss buys back China JV stake

China-Switzerland FTA takes effect

Swiss companies are poised to jump ahead of their European and US rivals in China with a free trade deal that came into effect July 1 cutting tariffs on watches, machinery and chemicals. Many of the charges will be reduced immediately while others will be pruned over the next five to 10 years. Credit Suisse expects China to surpass Germany as Switzerland's biggest export market by 2035. Switzerland is only the second European country after Iceland to sign a free trade agreement with China.

Source:
Bloomberg

The FTA improves mutual market access for goods and services. Chinese import tariffs are reduced for 92% of Swiss products. The duty on Swiss watches will be reduced by 60% over the next few years and the FTA is also expected to improve the protection of IP as it will make it harder to counterfeit watches. Swiss companies are excited at the prospect of free trade with China as they consider the market more dynamic due to its growth rate being substantially higher than that of Europe. The FTA is predicted to save Swiss companies about 5.8 billion francs in tolls between this year and 2028, and a 50% growth in China over the next five years is a realistic goal for many of them.

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China SPC appoints top environmental judge

China's Supreme People's Court (SPC) has appointed a senior judge to handle environmental cases as the country seeks to crack down on polluters and improve the enforcement of its laws. China Environmental News, which is published by the Ministry of Environmental Protection, announced that Deng Xuelin had been appointed as the presiding judge of the Environmental and Resources Tribunal of the SPC. The tribunal was formally established two weeks ago.

Source:
Reuters

China has vowed to reverse the damage done by three decades of unstopped economic growth as it has recently been hit with a series of pollution scandals and scares. Though it has traditionally struggled to impose these anti-pollution measures upon big industrial enterprises and the local governments that protect them, the report stated the new tribunal would provide more formality, coordination and unified guidance to the 134 specialist environmental courts set up by the local governments. Litigators have long complained that lawsuits filed against polluters have been consistently rejected or even ignored by local courts, many of which lack the independence and ability to take on powerful government-backed entities. With the new Environmental Protection Law in force and the added judicial strength, maybe China is getting serious after all.

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Hugo Boss takes control of China and Macau stores

German fashion house Hugo Boss is taking full control of its store network in China and Macau as it seeks to improve the way its brand is presented and perceived. Hugo Boss will buy a 40% stake in its JV in China and Macau from franchise partner Rainbow Group. It seeks to run more of its own stores around the world instead of selling through partners. The move reflects a broader trend followed by many luxury goods groups in emerging markets.

Source:
Reuters

Big brands have been opening more directly-operated stores, by buying bank franchises and purchasing stakes in retail partners in Asia, Russia and the Middle East to give them more control over designing their stores and marketing their goods. Gucci, Hermes and Prada have bought out their retail partners in Russia, Burberry has done so in China and Japan while Swatch has also in the Middle East. Though this does not necessarily imply anything unique about the franchising business in China, there may be subtleties to consider when operating in such a complex and competitive market.

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