Finnish companies experience rapid growth in China

Finnish-owned corporations are expanding rapidly in China. New factories are being built, and subcontracting by Finnish companies is increasing. The number of Chinese working for Finnish companies has approximately doubled in about two years.
      Esa Rantanen, commercial secretary of Finpro, an organisation dedicated to helping promote the activities if Finnish businesses around the world, said in Beijing recently that subcontracting for Finnish companies is on the increase in China.
      "Companies are not necessarily coming to China themselves, but they are looking for suppliers of construction materials and components, for instance", Rantanen says.
     
China has the fastest-growing economy in the world, which has attracted more than 200 Finnish companies to the country. Of these companies, more than 50 are already manufacturing goods in China.
      Companies that have been operating in China the longest have expanded and deepened their partner networks. For instance, the engineering industry is buying more components from China than before.
      "The trend is that the proportion of Chinese manufacture in machines is on the increase. Key components come from Finland, but subcontracting from here is increasing, both for our own deliveries and projects in other parts of the world", says Ari Harmaala, head of Asian operations at Metso Paper.
      However, Harmaala does not believe that it is a viable proposition to get all machine components from China. "It is worthwhile to make parts which require much manual labour here. They are the ones that offer a cost benefit."
      In 2000-2005 half of the world's new paper machines were sold to China. Metso Paper has been receiving between five and six large orders from China each year.
     
The Chinese operations of the Metso Concern have followed a pattern that is similar to that of many other companies: first exports alone, then a joint venture, and now fully-owned factories and a service centre. By the autumn, Metso Paper will have put the finishing touches on a Chinese facility employing 600 people.
      Finpro estimates that fewer than ten percent of Finns operate in China via joint ventures. About ten new Finnish companies begin operations in China each year.
      Finpro estimates that Finnish companies currently employ about 30,000 people in China.
      Two years ago the number was estimated at about 20,000, indicating a strong rate of growth. Key factors in the trend include the growth in China of the largest single Finnish employer, Nokia, and its various subcontractors.
      Nokia is currently expanding its factories in both Beijing and Dongguan. Perlos is nearly doubling its manufacturing capacity in China, with two new factories to be completed later this year. One fifth of Elcoteq's manufacturing output is in China.
      Companies in the mobile phone cluster have also increased their product development in China.
     
Some of the companies that have been growing in China have laid off staff in Finland, raising bitter comments about the "China syndrome".
      "Companies and capital gravitate where there are possibilities of growth", says researcher Matti Nojonen of the Helsinki School of Economics.
      "However, we do not have any research-based information on how Chinese operations have influenced corporate competitiveness, stock market prices, overall employment, and Finnish well-being."
      As production by Finnish companies in China has grown, the balance of trade between Finland and China has begun to show a deficit from Finland's point of view. Finnish exports to China last year were at about the same level as in 2000. Products manufactured by Finnish companies in China are classified as imports when they are delivered to Finland.
      China is expected to become the world's largest economy by 2050.
     
Over the years Finnish companies have invested an estimated EUR five billion in China. According to Finpro, the turnover of Finnish companies in China was EUR 10 billion last year.
      Finland has invested significantly more in China than in Russia, for instance. Matti Nojonen is also concerned of the weak knowledge about China in the Finnish business community.
      "We lack an overall picture of the change in China's business environment. We also do not have a research institute or a training programme where such an image could be formed."


Previously in HS International Edition:
  Chain of Finnish industrial villages to be set up in Russian Karelia (17.5.2006)
  China smothers Vanhanen in cordial language (29.4.2006)
  Finpro: High demand for Finnish energy efficiency in China (27.4.2006)
  Finnish and Chinese PMs discuss bilateral relations and EU affairs in Beijing (26.4.2006)
  Border Guard concerned about increased direct flights between Finland and China (15.2.2006)
  Stora Enso plans to set up paper factory in South China (11.11.2005)
  Finnish Prime Minister says fears of China exaggerated (16.9.2005)
  Perlos to shut down Ylöjärvi component factory - 600 jobs on the line (28.4.2005)