70 years of trade with China - what do you need to know right now? 

Written by Kolster | 06.06.2023

Now, in early June, it has already been 70 years since the signing of the trade agreement between Finland and China. Kolster has been operating in China for a long time. What is the current state of the Chinese market? How has the country emerged from the pandemic, and how can small and medium-sized enterprises (SMEs) get involved in the Chinese market?

Finland has long-standing trade and diplomatic relations with China. Finland recognized the People's Republic of China on January 13, 1950, among the first Western countries, and it has been 70 years since the signing of the trade agreement between the two countries.

Timo Helosuo, the CEO of Kolster, explains what Finnish companies need to know right now when heading to China and how to consider factors such as geopolitics in their operations.

What are the current Chinese markets like?

The Chinese economy appears to remain strong due to domestic consumption, a robust service sector, and growth in technology-driven industries. Despite the impact of the COVID-19 pandemic and the trade war with the United States, China's gross domestic product (GDP) continues to grow.

GDP is estimated to grow by about 5.5 percent this year, which represents a slight slowdown compared to the pre-pandemic years. The Chinese themselves have acknowledged that the pace of growth is not the same as before the pandemic, but it is still impressive by global standards.

What is good to know about China?

It is important for those heading to the Chinese market to understand that the Chinese business environment is a unique blend of traditional culture, political reforms, and technological innovation.

China is the world's second-largest economy after the United States and a global leader in some sectors. Technological development in China has been extremely rapid. The country is at the forefront of artificial intelligence, robotics, 5G, quantum computers, and e-commerce.

Healthcare, elderly care, and education are sectors that companies should follow in terms of their development. These sectors have not yet been fully opened up to the market in China, but I believe the situation will change in the coming years. It is good to be prepared when the market opens up because there will be significant demand, and Finnish companies have a lot to offer.

How to take geopolitics into account?

The COVID-19 pandemic and the Russian aggression have brought geopolitics into the economy and the business world. International companies have so far largely considered their operations from an economic perspective, but now geopolitics must also be taken into account in strategies.

International crises, for example, may postpone planned investments to the distant future. I believe that the winners will be those actors who can adapt flexibly to changing situations.

It is important to understand that alongside economic discussions, political rhetoric has also emerged. This is particularly emphasized as the trade war between China and the United States continues.

I also call for a sense of proportion. There has been much talk about the strong dependence of the EU and Finland on China, but things should not be viewed too black and white. For example, in the battery industry, we need China as our partner. Central Ostrobothnia has abundant lithium reserves, and Finland's battery industry is growing rapidly. However, China will still dominate the global battery market far into the future.

Who succeeds in China?

In China, those who have familiarized themselves with the country's politics, legislation, and culture and have succeeded in establishing personal contacts have thrived and will continue to do so.

We Finns have done well in China with our own style and a collaborative attitude. Successful examples include UPM, but even smaller companies can succeed if they find their own networks.

The huge consumer market, the accelerating pace of innovation, and the business-friendly political solutions of the Chinese government offer good opportunities for companies of all sizes in China. Now, after the pandemic, doors are also opening for new entrants. China is still a good growth market if approached correctly.

Where to find information and assistance for your own considerations?

Companies planning to enter the Chinese market should get in touch with us. Our Kolster China Desk and intellectual property rights experts help assess the situation and provide guidelines. Support and advice can also be sought from the Finland-China Trade Association

Timo Helosuo
CEO
timo.helosuo@kolster.com
+358 40 576 1659