SHANGHAI The state of emergency that lasted almost three years ended in the spring and winter, but Shanghai, with a population of 28 million, still seems to be recovering from the corona virus.
Or the city has changed irrevocably.
Business management consultant during the years of wildest growth Brother Antti Ruismäki had to fight for a seat in the subway in order to get to work on time. Now there is room in the wagon even on a rainy weekday morning.
The size of the Chinese economy quintupled between 2001 and 2021. Compared to that, economic growth has now slowed down to a modest 4-5 percent pace.
At the same time, remote working has become more common in Shanghai. Among those who still travel to work, electric bikes and mopeds are currently challenging the subway.
There is no going back to the past, says Ruismäki, who heads the China operations of the China Sage Consultants company. He has been consulting foreign companies aspiring to China since 2007.
– Then everyone was eager to come here and the Chinese government welcomed them. The peak years were between 2010 and 2013, until 2016 when storm clouds also started to appear on the horizon, says Ruismäki
He is not the only one concerned about the dark clouds over China’s economy. Also the leader of the country Xi Jinping warned of “storms on the horizon” after the “era of peace and development” in his policy speech at last year’s party conference.
Tax cuts are an important gesture from the Chinese administration
Just under 400 Finnish companies have operations in China. During the corona, many companies got rid of these connections.
There is no exact information on how many have failed to return after the corona. Companies that have been operating in the country longer will continue as normal.
OP’s Business Pulse survey however, several large Finnish companies have reduced their dependence on China.
Companies are under suspicion due to China’s trade war with the United States, as well as long-standing disputes over, among other things, the protection of intellectual property rights and the control of foreigners. An internal security law came into force in China in the summer, which is feared to increase spying on foreign companies.
China’s leadership is sending mixed messages about the state of the country’s economy and whether or not it wants foreign companies in the country at all.
According to Ruismäki, it clearly wants to.
– Chinese companies are happy to do business with foreigners, there is no doubt about that, but the government also seems to have started some kind of propaganda campaign, he says.
According to Ruismäki, examples of this are the guidelines revised in August to increase foreign investments and the tax reductions for foreigners working in China. They are carrots that companies use to attract skilled workers to China.
– Income tax reductions were extended until the end of 2027, which is a significant change. Previously, tax decisions were only made for one year at a time, and they had to be delayed until the very end of the year, says Ruismäki.
Opportunities in health and elderly care
Foreign companies operating in China have to rethink their strategy. According to Ruismäki, in addition to the slowdown in general economic growth, the market of 1.4 billion consumers has changed.
The competition has intensified.
– In the past, Finnish companies competed here with other foreigners, but now the locals also have many new, competitive products, says Ruismäki.
– The Chinese dominate the service culture, so local companies have captured considerable market shares in several different fields, he continues.
Chamber of Commerce AmCham’s China unit according to research conducted by foreign companies, the expectations of China’s development vary by industry. The most positive are companies that sell products and services aimed at consumers.
– Three out of four foreign companies see great growth opportunities here, because the consumer market continues to grow, says Ruismäki.
He especially considers biotechnology to be a booming field that could also have opportunities for new Finnish companies. He also names health and elderly care as rising sectors of the future.
In the summer, China lost its place as the world’s most populous country to India. China’s population is expected to decline in the coming decades as the population ages.
The Chinese are becoming more environmentally conscious
Mirka, which manufactures grinding and polishing products, and Lindström, which offers textile services, have been on the Chinese market for 17 years. Family-owned Finnish companies have grown their operations at a steady pace.
– For the past three years, our growth has been in double digits and the current year looks very promising, Lindström’s China director Yanxun Fan says.
Mirka’s manager By Jacob Sandel says, like Ruismäki, that the competition is getting tougher all the time.
The increase in prices has stopped with the freezing of economic growth. China would even be on the side of deflation in the summer, when consumer prices fell. At the same time, the market has become oversupplied, as new local companies have entered it.
– We have succeeded because our products are ones that our competitors cannot produce, says Sandelin.
– We don’t necessarily aim to be the biggest, but we strive to keep our market share and grow in a controlled manner. If we can do that, I think we will stay here for a long time, Sandelin shares.
Yanxun considers the biggest challenge for Lindström’s future to be the growing level of demands of Chinese customers.
– Better and more environmentally sustainable service is required of us all the time. By offering such, we will continue to do well in this large market, Yanxun reflects.
You can discuss the topic until Wednesday at 23:00.