If disruptions affect several countries at the same time, importers would not be able to quickly turn to alternative suppliers. The effects would therefore be seen in the everyday lives of both citizens and companies.
According to a survey coordinated by the Ministry of Foreign Affairs, Finland is among the EU average in total trade dependence on China.
The report states, on the one hand, that although trade dependencies clearly exist, they are not without exception harmful, and on the other hand, that it is nevertheless important to enhance preparedness and spread risks due to the instability of the geopolitical operating environment.
“In most cases, trade dependence is mutually beneficial” said Nina Vaskunlahti, Undersecretary of State for International Trade at the Ministry of Foreign Affairs. – It is almost impossible for statistics to detect indirect dependencies in subcontracting chains. We encourage companies to continue assessing their supply chain for potential commercial disruptions.
“At the same time, there is a lot of untapped potential in our exports to China.”
Although disruptions to trade relations are not currently on the horizon, the report stated that the most likely disruptions are economic or logistical complications, which point to the outbreak of the coronavirus pandemic in 2020 and the blockage of the Suez Canal in 2021. However, the effects of a political crisis or conflict is a more challenging task.
“Even positive bilateral relations would not protect Finland in significant difficulties,” the report says.
The Ministry of Foreign Affairs stated that Finnish and European know-how in the production and recycling of critical raw materials should be strengthened in order to strengthen sustainability. At the same time, companies should improve their commercial sustainability and diversify their exports to China.
According to a previous study, Finland’s exports to China have been increasingly focused on raw materials and intermediate products over the past decade, and have been more one-sided than the exports of comparison countries.
“It is justified to try to diversify exports,” says a recent report. “At the moment, our export of goods to China is dependent on a few industries and a quantitatively small group of companies, which increases vulnerability. The vulnerability of exports is primarily related to a situation where certain companies or Finnish exports as a whole would face difficulties either as a result of changes in Chinese demand or political disagreements at the state level.
Finnish companies generate more than 20 billion euros annually from turnover with China. About 230 Finnish companies export goods worth at least one million euros, which is 97 percent of Finland’s total exports to China. Exports to China make up at least a quarter of the turnover of around 50 companies.
In total, around 12,400 companies do some kind of trade with the world’s second largest economy.
Both imports to China and exports from China have increased. According to Tulli Suomen’s preliminary data, the value of goods imported from the country rose by more than a quarter (27.6%) compared to the corresponding period in 2022 to 8.4 billion euros. Exports to the country, on the other hand, grew by more than a tenth (11%) to four billion euros.
More than 15,500 person-years are estimated to depend directly on imports from China. The employment effects are particularly significant in specialized and non-specialized retail segments, such as supermarkets, department stores, and clothing and hardware stores.
Imports from China are also related to Finland’s economic well-being more broadly than just through direct commodity imports, the report reminds and refers to the use of imported components and other intermediate products.
Finnish subsidiaries in China increased their turnover by more than 50 percent between 2013 and 2020, from more than 8 billion euros to 13 billion euros. Even if disturbances in the operating environment of such companies would naturally affect trade with China, a separate study would be needed to find out their effects.
The Ministry of Foreign Affairs also emphasized that no large Chinese investments have been made in Finland’s basic or critical infrastructure. The infrastructure investments made are aimed at the logistics of port and airport traffic.
In 2021, China’s direct investments in Finland were 4.5 billion euros, which is 5.9 percent of all foreign direct investments in Finland.
China’s global strategic importance is due to semiconductor components, the availability of which is critical for the manufacture of various devices and machines and thus for the global economy.
“Availability of semiconductors has been considered a critical problem in a situation where a conflict would arise in the Taiwan Strait. Almost the entire world economy would suffer from such a crisis,” the report acknowledges.
Aleksi Teivainen – HT
Source: The Nordic Page