November 19, 2019
Do you know what the metro ride to China International Import Expo, host to 250,000 daily visitors, is like? Tight. The amount of passengers is on an entirely different level than here – and the same difference in scale goes for the economy and consumer spending as well. Kolster CEO Timo Helosuo points out that China is a rapidly developing economy that offers a wealth of opportunities for Finnish companies.
I attended China International Import Expo in Shanghai in the first week of November. The Expo is a venue for foreign companies to showcase their technologies, products and services to the Chinese market. It vindicated my opinion that we are not talking nearly enough about China’s development and potential here in Finland.
Facebook had its own area at China International Import Expo. Is China opening its doors to the social media giant?
China is the main driver of the bank and financial sector’s transformation. Traditional banking is in big trouble because the industry cannot keep up with development and is losing its grip on payment systems. You can see the change on the streets of Shanghai: nearly everyone pays for their groceries and metro tickets with their mobiles. There’s not a bill or credit card in sight!
One of the most popular mobile applications is WeChat, which combines various social media and e-commerce functionalities. Users can upload money or their credit card details into the WeChat service, which was opened to Western credit cards in the beginning of November. WeChat bypasses traditional currency conversion and has consigned the constant struggle that paying with Western credit cards was to history. This small practical detail makes a surprising difference to business travellers in China.
Even though people only upload small amounts to applications like WeChat, it provides tremendous cash flow to app companies because the user base is so large.
When a billion users put one hundred euro each into the app, it adds up to a nice sum for investment and financing your operations. Traditional banks face enormous challenges in this environment, and banks such as Handelsbanken are already pulling out of Asia.
The Finnish and European banking sector is under a lot of pressure when people are finding lenders and credit outside their branch offices. Finnish companies should take Chinese and global digitalisation into account: credit cards will probably be history here too in a couple of years.
China is a pioneer of digitalisation. On the street, you can see this in the number of mobile payments. There’s hardly a bill or credit card to be seen!
There’s no comparing China’s and Finland’s economies; the scale is completely different. Finland is a featherweight compared to China, which has raised hundreds of millions from poverty in just a few decades. Chinese buying power is growing constantly, and even if it’s not at the US level yet, the sheer volume of the Chinese market makes it a powerful force. Singles’ Day, the 24-hour November shopping festival of Chinese origin (11 November), generated nearly 31 billion euro in sales for Alibaba last year. That’s more than the revenue of Blackfriday, Cybermonday and Thanksgiving put together.
Singles’ Day is a 24-hour shopping festival invented by the Chinese, which defeats both Blackfriday and Cybermonday in sales.
A developing China presents an undeniable opportunity for Finnish companies. But it’s crucial to keep a close watch over your intellectual property rights when seeking to enter the Chinese market. China’s IPR environment is only about 40 years old, but is constantly developing and approaching that of the West. The Chinese authorities are cracking down on IPR infringements with increasing severity.
Cases such as the Lego incident, in which the authorities raided a factory making illegal Lego copies, have received a lot of press lately. The case is a good indication of the scale of the problem: the authorities destroyed 120 full trailers of copied Legos. The benefits of IPR infringements are huge, so the Chinese authorities have their work cut out for them.
Finland has a good reputation and position in the Chinese business world. That’s a strong advantage that can open a lot of doors for exporting our products and services. The growth of the Chinese economy has slowed, but the volume of the market is so immense that Finnish companies should go for their slice of the pie.
Chinese investment in Europe is going through its second wave. In the first wave, China focused on Europe's established large economies, such as Great Britain, France and Germany. The second wave is now sweeping across Northern Europe. The fact that Chinese banks are opening branches in the Nordic Countries speaks volumes.
Finnish companies need to keep their eyes open, because the capital is flowing. Finnish technology is in demand.
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