Helsingin Sanomat enquiries suggest impact of "China Syndrome" relatively minor

Executives claim Chinese operations are not taking Finnish jobs; more than 20,000 now work for Finnish firms in China

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By Sami Sillanpää in Beijing
     
      So far at least, the much talked-about "China Syndrome" is not really a very widespread phenomenon in Finland, if we are to believe the results of a Helsingin Sanomat  study carried out in the Chinese capital, Beijing.
      The discussion about the China Syndrome began just under a year ago, when Salcomp, a firm manufacturing mobile phone battery chargers, announced it was to close its plant in the town of Kemijärvi in Lapland, and that it would henceforth be moving its production to Guangdong Province in Southern China.
      As jobs do not exactly grow on trees in Kemijärvi, the abrupt loss of nearly three hundred of them caused quite a stir. Thereafter Salcomp has often been mentioned any time the subject comes up of jobs being moved abroad. Other examples are not often produced.
      "That's because there aren't really any. Salcomp was an exception", says Jouni Maaranto, who heads the Beijing office of Finpro, an expert and service organisation set up to help Finnish firms that want to go international.
      Helsingin Sanomat examined the operations of fifteen Finnish companies currently active in China. They have increased their production inside China, but for the most part this has not meant an end to manufacturing back in Finland.
     
In the view of Finnish executives who are based in China, the whole discussion about the subject of a job-drain to the east has been grossly oversimplified.
      Nearly 170 Finnish companies operate in China, according to the Finpro statistics. The majority are sales offices and local representatives. There are a total of 55 production plants.
      The findings of a study carried out late last year by Finpro and the Finnish Consulate in Shanghai indicated that around 22,000 people are employed by Finnish companies in China. A series of telephone calls suggests that this figure has grown by at least 2,000 in the intervening period. Nearly all those interviewed for this article said they intended to take on additional staff this year.
      In China, a good deal of the work carried out by robots in the West is performed by hand. This is one salient reason why a factory in China employs more people than a plant of similar scale here in Finland.
     
China attracts companies, because its fast-growing economy creates a huge demand for almost any goods you care to name.
      Most Finnish firms have started out by exporting their products from Finland to China. However, an exported item is more expensive than one produced in situ, and the exporter's customer-base is limited, since only state-owned enterprises in China have the right to trade in hard currency, explains Jouni Maaranto.
      By actually manufacturing the items in China, the company can get around these obstacles.
      One unit of the power and automation technologies giant ABB sells frequency converters that were developed in Helsinki into the Chinese market. Equipment and parts are still exported from Finland, but they are also manufactured in China itself.
      Tauno Heinola, CEO of one of ABB's manufacturing plants in Beijing, says that the sales growth achieved would not have been possible without on-site manufacturing, and he argues that the decision to set up production facilities has had benefits for the Finnish end of the business, too.
     
The largest Finnish employers in China are engaged in the datacoms/telecoms sector. China boasts 300 million mobile phone users, more than anywhere else in the world, and this was a point that was not lost on Nokia when they decided to set up four production plants in Beijing, Guangdong Province, Shanghai, and Chongqing.
      A whole raft of companies have since followed in Nokia's wake, subcontractors offering products and services to the mobile phone giant.
      Of these companies, Elcoteq now employs some 4,600 people in China, or more than Nokia itself. Another Finnish firm, Perlos, which claims to be the world's largest manufacturer of precision plastic and metal components for the mobile phone industry, says it has nearly doubled its permanent payroll numbers in the past year. Perlos employs around 1,200 in China.
      Companies like these have also found new customers in China, and they have been able to expand their markets in a way that would never have succeeded from Finland.
     
"It is important and useful for Finnish companies to have a presence in the Chinese and Asian markets. Without a local footprint there is no scope for building commercial operations. For this reason alone, all the talk about China stealing jobs away from Finland seems rather bizarre", charges Kari Häyrinen, Perlos's Executive Vice President for the APAC region.
      It is not always easy for the sub-contractor if a significant customer increases its production in China. The company has to tag along, particularly if competitors decide to do so.
     
The engineering industry is expected to be the next branch in which the smaller firms start moving to China in pursuit of the big boys.
      "The question of increasing sub-contracting on the ground will have to be addressed in the future", confirms Ari Harmaala, who heads up the Chinese operations of Metso Paper.
      Harmaala notes that the manufacture of the company's main products - paper machines - requires so much by way of specialised expertise that it cannot be done in China alone. Metso is currently building several PMs for Chinese customers, with the most important components brought in from Finland and Sweden.
      "When a deal gets signed here, it is good for the company's health back in Finland, too."
     
If we look at the longer term, a trend begins to emerge: when a company increases its production in China, there is no longer such a need to invest in plants or machinery here in Finland.
      This development leads in turn to a situation where a greater and greater share of the products sold by Finnish companies in China, and the components that go into these products, are also made in the country of sale. In other words there is less need for exports. This is not an attractive proposition for jobs in the Finnish export sector, or for the country's balance of trade.
     
The companies themselves view things rather differently: they believe the China Syndrome ought to be seen in a broader perspective.
      Their approach goes roughly as follows: China's growing economic might is going to change the global economy, whether we like it or not, so account has to be taken of China. If a company is successful in the Chinese market then it will improve profitability and the company's ability to take on more staff in Finland as well. On the other hand, if a Finnish company competing in the international market place misses the China train, things could go badly for it.
      "To some extent it is a matter of these companies' staying alive. This has tended to be forgotten in the discussion", says Hannu Toivola, the Finnish Consul-General in Shanghai.
      Survival was the motive put forward by Salcomp for its move to China, out of which the entire debate sprang up.
      "We were turned into a symbol, and also into a kind of scapegoat. Some of the comments made were way over the top", says Osmo Oja, who manages the Salcomp plant in Shenzhen.
     
Helsingin Sanomat / First published in print 19.6.2004

More on this subject:
 A change of tune

Previously in HS International Edition:
  Nokia to increase research and development activities in China (24.5.2004)
  Minister of Finance believes Finland will benefit from Chinese economic surge (2.2.2004)
  Battery charger plant moves from Lapland to China (25.11.2003)
  Yes, but why did I lose my job? (7.10.2003)
  One in three industrial jobs now abroad (18.9.2003)
  Salcomp to close charger plant in Kemijärvi; all production to transfer to China (11.9.2003)

Links:
  Finpro

SAMI SILLANPÄÄ / Helsingin Sanomat
sami.sillanpaa@hs.fi