The Ministry of Foreign Affairs is now mapping Finland’s dependencies on China. After the corona pandemic and the war of aggression in Russia, an overview is needed of where there may be shortages in a crisis situation, writes economic reporter Anna Karismo.
If China increases the pressure on Taiwan and the United States imposes sanctions on China, can Finnish companies continue to trade with China normally? Will our pharmacy shelves be empty if the import of pharmaceuticals from China runs out?
When the coronavirus spreads in China and quarantines prevent Chinese workers from entering the factories, which products will be in short supply in Finland?
What if China’s debt and housing bubble pops, and a financial crisis arises? After that, the Chinese would no longer have money to buy Finnish export products.
Among other things, these are risks that have started to be taken even more seriously after the Russian war of aggression. China is an autocratic country, where the government’s grip on the economy is only getting tighter. At the same time, relations between the great powers are tightening.
The authorities are now considering whether a risk, if realized, could cause a shock in the economy, the effects of which are reminiscent of the depletion of Russian gas flows in Europe in recent months.
We live on a knife edge with China. If it starts cooperating more closely with Russia than it does now or tightens its grip on Taiwan, Europe may find itself in trouble.
Finnish jobs are also in the game
On Tuesday, the Ministry of Employment and the Economy, the Ministry of Foreign Affairs, the Bank of Finland and Business Finland published the report (you go to another service)according to which a clear majority of companies exporting to China believe that the situation there will develop in a weaker direction than the current one.
Based on the report, Finnish companies’ actions in China also have a direct connection to Finnish jobs.
Two-thirds of the companies estimate that their business activities in China have increased work and research also in Finland. If Chinese business fades, jobs in Finland will also decrease.
Trade with China, especially imports, is just grown (you switch to another service) this year. According to Statistics Finland, Chinese products are especially used by the metal industry.
However, the trade has changed its form: while at the turn of the millennium Finns sold mainly finished devices and consumer products to China – mainly thanks to Nokia mobile phones – now the export is primarily raw materials with a lower value added such as pulp.
China is more dynamic than Russia
Russia and China are different trading partners. The importance of China for companies is greater.
China is a huge market for the business world, which has been economically booming for years. Not as much was invested in Russia even before the war, because there was not the same kind of growth as in China.
China is a more technologically advanced and innovative country than Russia. There are demanding consumers, whose reactions have also been used in product development for the western market.
There are many times more Finnish companies doing business with China than there are companies doing business with Russia, according to Statistics Finland. It ranks 4th in exports and 5th in imports, but its importance is greater according to the business world.
– China is, along with the United States, the most significant trading partner if we measure the value added of international trade in Finland, Director of the Confederation of Finnish Business, EK Timo Vuori says.
The risks are greater when importing
When the situation turns into a crisis, it is not necessarily the export companies that face the biggest problems, but those that import from China, for example, raw materials or parts of their equipment.
If for some reason imports stop, the whole of Europe will suffer: China is the largest importing country in the European Union.
In Germany, the government has already demanded that local companies reveal the scale and pain points of their dependence on China. It no longer wants to support the expansion of companies in China, but instead hopes for them reducing (you switch to another service) China relations.
China already is six years (you move to another service) was Germany’s largest trading partner. The country’s government is now preparing a special for the first time China strategy (you switch to another service).
In Finland, the Ministry of Foreign Affairs is investigating
Even in Finland, not all business risks of local companies are known.
For example, the dependence on Ukraine and Russia in fertilizers was revealed to the authorities only after the war of aggression began. In the corona pandemic, we waited a long time for vaccines, when it had turned out that their production was dependent on only a few companies.
That is why the Ministry of Foreign Affairs is now mapping out which Chinese products and raw materials are critically important to Finland.
According to customs, for example, in laptop computers and some parts of telephones and wireless networks, China’s share is well over half of the imports.
Did the story arouse thoughts about China risks? You can chat below until Friday night at 11pm.
The prices of industrial raw materials, from oil to steel and soldering materials, rose sharply after Russia invaded Ukraine.
When Russia started the war, Europe realized that it was too dependent on another eastern economic power as well
Europe has woken up to discuss reducing its economic dependence on China, see ‘s morning discussion.