In terms of its level of direct investment abroad, Switzerland comes sixth in an international comparison. Roughly 5,000 companies, i.e. 2%, have participations abroad. Not only multinationals operate abroad, however. In fact, the percentage of small and medium-sized enterprises (SMEs) is considerable, accounting for 95% of all direct investors. Seen in absolute terms, however, SME participations are actually rather modest. At the end of 2004, Swiss companies employed 1.8 million staff abroad – this corresponds to half the number of employed persons in Switzerland. In total, Swiss companies employ 5.3 million persons at home and abroad. Since 1985, Switzerland’s capital stock abroad has increased ninefold – two-thirds are held by service providers, one-third by industrial enterprises.

The main motivational factors for investing abroad include market presence, which provides contact to clients; cost savings; and full use of market potential, which facilitates growth. Many Swiss companies manufacture abroad and import their products back into the country, from where they are then often re-exported after having been processed further. Switzerland also serves as a hub for direct investment – foreign capital is invested in Switzerland, only to be exported later as Swiss capital. In 2003, holding companies accounted for one-quarter of new direct investment abroad. Their success may not only be attributed to the tax benefits, but also to the relatively problem-free relations with the Swiss authorities.

A total of 50% of the capital stock invested abroad by Swiss companies is held in Europe. North America follows with 18%. These proportions have remained unchanged since records began in 1985. While China occupies twentieth place when measured by its share of capital stock, it already holds seventh place when measured by the number of persons employed. Given the low wages and flexible workforce in China, the majority of products manufactured there tend to be more work intensive; and with capital intensity low, the financial risk for Swiss investors can be kept within bounds. China’s contrasting culture and state-run economy are further sources of risk which can sometimes lead to excesses and poor investments.

Where financing is concerned, self-financing is the most prominent form. One indication of this is, that for the past seven years, capital exports have been fully backed by earnings. A further sign of the high level of self-financing are developments in the capital market – these tend to reduce industry debt, as can be seen from the decreasing volume of bonds being issued and the higher redemptions. One of the reasons for the decline in the amount of capital market borrowing is likely to be the regulation of the market, with the result that the ability of companies to perform in the market is being restricted, in other words, that the attractiveness of the capital market as a source of finance is being narrowed.