Seven Reasons to Invest in Your China Strategy Now
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WHY CHINA? Michael Plougmann, partner in VIRKON – a consulting company that has been working with practical business development and innovation for many years and became an Innovation House partner in 2020 – gives his answer to the question. Why is it important, perhaps even a requirement for development and survival, that Nordic business owners and innovative startups look at their opportunities in China now?
China is known among most companies as a very large and highly digitalized market where the opportunities for trade and innovative collaborations are numerous – but which also place difficult demands on preparation, security and cultural understanding. By asking a number of professionals with special insight into the topic to answer the question “why China” in more depth and detail, we hope to make it easier for you to decide if China is a route you should consider right now.
5 minute read
Summary: Nordic-Chinese collaborations are proving increasingly competitive internationally. While Chinese investment in Europe underlines the importance of collaboration, several new agreements and opportunities are making entering into business and partnerships more attractive.
shows that Danish exports fell by 8.1 percent in 2020 compared to 2019. The decrease in exports of goods was 4.0 percent, while services exports fell by 13.9 percent. The decline affected all product groups with the exception of chemicals including medico, which increased by 12.5 percent. Machinery, one of the major product groups, fell by 12 percent.
The Ministry predicts rapid recovery of Danish merchandise exports if the COVID-19 situation globally comes under control in 2021. The background is an expected strong economic growth in Denmark’s large export markets in 2021 and 2022, but the prospects for economic growth vary for the individual markets. A recovery to the 2019 level is estimated to be realized already in 2020 for China, Switzerland, Sweden, and the Netherlands, where relatively strong growth is also expected in 2021 and 2022.
Among the most promising major Danish export markets are Sweden, Norway, China, Poland, the Czech Republic, Australia, and South Korea, as well as the United States. In Germany, which is Denmark’s largest direct market for goods, growth is also expected. Brexit is far from over yet, but Denmark’s fourth-largest export market, the UK, still offers expectations of moderate growth, even though the UK economy shrank by 9.9 percent in 2020 due to the coronavirus crisis and Brexit.
If we look at the markets that may contain extraordinary growth potential, it is especially China, Taiwan, South Korea, Australia, and India that can be highlighted.
China’s trade volume with the 17 Central and Eastern European countries amounted to USD 103.5 billion last year, an increase of 8.4 percent from 2019. This, together with a 60 percent increase in investment, underlines China’s interest in the European market – and illustrates the benefits of establishing partnerships. Intensified China-Eastern Europe co-operation can mean increased competition in the EU for Nordic companies.
The opportunity may seem difficult to seize - but the reality is that it is too important to ignore and easier to participate than you might think.
The ASEAN markets, including China, constitute almost 30 percent of the world’s population and provide growth and progression driven by a range of strategic initiatives. Just like in all other markets, the path to success includes thorough preparation, real market understanding, and long-term planning. You need expertise before you leave as well as when you are there, and you need to hold on.
Here are seven reasons why you should start your preparation now:
The growing consumer market and your advantage: If your Nordic company’s products are aimed directly at the consumer, then you must address China if you want to keep up with the competitors in the future. China is the world’s fastest growing consumer market – and the only major global economy to grow last year. The growing middle class of 400 million people has increasing purchasing power and taste for high-quality international goods, and Nordic goods in particular have a reputation for high quality, so as a Nordic brand, you even have an advantage from the start.
There are special opportunities in a wide range of areas – you just have to find the one that suits your business: China has the largest economy, the largest population, the highest degree of digitalization, the largest domestic market, and expanding international reach. Not only is there a great demand for products – the demand also applies to solutions, knowledge, and innovation. There are several ways your company can contribute to or collaborate around these important development tracks.
The road has been cleared by, among other things, the ACFTA agreement, involving market access to 2.2 billion people including China, and the Silk Road program (Belt and Road) which includes more than USD 1500 billion in investments focused on trade corridors and transport hubs in Asia, Europe, and Africa. In addition, the recently presented strategy for the green agenda paves the way for many direct and indirect export opportunities. Your company can contribute by offering relevant products and services. Main contracts are typically put out to tender and both local and international resources are needed. As a Nordic SME it is an advantage to attach yourself as a subcontractor.
China has introduced e-Yuan, the first state-controlled digital currency based on blockchain, and is the world leader on digitalization – 44% of grocery shopping is estimated to be taking place online. The markets offer new opportunities for Nordic companies and invite the mobilization of new innovative collaborations and business models. If you want your company or organization to be able to access to the future arteries for trade and innovation, then you have to find the opportunities you can benefit from among those that present themselves in the Asia-Nordic collaboration.
Learning and cooperation between the Nordic countries and China offer benefits on both sides. The potential for co-operation with Chinese companies is enormous, especially for Nordic companies, and the opportunities are favorable for both sides: Nordic and Chinese competencies, values, and activities combined seem highly competitive – internationally and in the domestic markets.
Investments are being made right now – also in Chinese companies outside China: an enormous investment force is behind the drive towards technological leadership, widespread increased cooperation, and an expanding international reach. For Nordic companies, competitiveness in the local markets is increasingly related to the ability to cooperate with China – just as success for Chinese companies, in the domestic market as well as internationally, is influenced by the ability to include Nordic innovation, design and values.
The crisis of the past year has given digital access to Chinese consumers a boost: China has 985 million internet users, 50% of all world e-commerce, and 90% of the internet access is mobile. Almost everything, not only product shopping, is done and paid digitally: consumers follow experiences, stories, and knowledge digitally. While the pandemic has put tourism on hold, Chinese consumers are increasingly interacting online with European brands. Continued digitalization, vast e-commerce along with digital payments and free trade agreements (FTAs) significantly facilitate international customer engagement and new digital opportunities.
VIRKON is one of the partners behind Innovation House China-Denmark and has a large network with extensive experience, especially in Asian and Nordic countries.
Follow VIRKON on LinkedIn.
Do you have questions about YOUR journey to China? Send your comments, questions, or feedback or book a meeting at service@china-denmark.com.
