Boost for Sino-Finnish Economic Cooperation

By MA LING

SIXTY-THREE years after establishing diplomatic relations， China and Finland have decided to significantly deepen bilateral ties. At the Boao Forum for Asia in April， Chinese President Xi Jinping and his Finnish counterpart Sauli Niinisto reached a consensus to upgrade the two countries relations to a future-oriented new-type cooperative partnership.

President Niinisto is the first European head of state to visit China since the countrys new leadership took office. Finland was also among the first Western countries to recognize the PRC 63 years ago.

The consensus has set the direction for the future development of bilateral ties. The realization of this development will nonetheless demand detailed plan- ning and substantive actions. Two fields in which the two countries can work together are green technology and telecommunications， said Alexander Stubb， Finnish Minister for European Affairs and Foreign Trade， during his April visit to China.

Business Opportunities in Green Development

Green development was top of the agenda during President Niinistos state visit to China， which came after months of heavy smog in the Chinese capital. Tekes， the Finnish funding agency for technology and innovation， signed a memorandum with the Chinese Ministry of Environmental Protection on the“Beautiful Beijing” initiative， which aims to improve air quality in the city. Under the proposed program， cross-disciplin- ary expert panels of scientists from both countries will be established to carry out research on technologies and policies that help ameliorate urban pollution.

“Clean technology is one of Finlands most competitive industries， contributing 20 billion to our GDP， which stands at 189 billion，” said Minister Stubb.“Chinas emission reduction goals set in the 12th Five-year Plan create a huge market for clean technologies； its a ‘gold rush opportunity for us， and a win-win situation for both countries.”

On April 10 the Finland-based GreenStream， a provider of energy management services and a developer of emission reduction projects， struck an Energy Management Contract （EMC） with Henglian Shandong Guanghua Paper Group Co.， Ltd， a paper manufacturer in Shandong Province. The cooperation will be the first of its kind to utilize stateof-the-art Finnish technology in China. Minister Stubb attended the signing ceremony in Shanghai.

Medium-sized and small enterprises from Finland involved in clean technology have been faring well in the Chinese market. Switch， for example， a manufacturer of permanent magnetic generators and full-power converter packages that employs fewer than 200 people in Finland， supplies fully half of Chinas wind-power equipment manufacturers， according to its president Jukka-Pekka Makinen.

Grooming Newcomers

Another cooperative project resulting from President Niinistos visit was the FinChi Innovation Center in Beijings Zhongguancun area， Chinas Silicon Valley. The facility is to assist Finnish businesses from highly innovative industries that come to China in ironing out kinks in local business registration and building up marketing networks.

“With the help of the Innovation Center， recently arrived Finnish companies can dispatch native employees to their Chinese operations， find local workers and get the required licenses all in a short period of time. Normally such tasks are very time-consuming，” said Jari Hietala， vice president of Finpro Asia.

The center offers two years worth of supportive services to innovative businesses fresh in China. After the two years are up， businesses are free to carry on in China with the operational models they established with the help of the center.

The Beijing facility is the second FinChi ‘innovation incubator after Shanghai， which opened in 2005. “The Shanghai center is well received by local Finnish businesses， so we decided to copy the format in Zhongguancun. The neighborhood is a hub for telecommunications talent. Our plan got a warm response from the municipal government of Beijing， which promised us preferential land use policies. So here we are，”said Jari Hietala.

The Shanghai center has helped more than 30 Finnish businesses in innovative industries to gain a foothold in the Chinese market. Its Beijing sibling plans to provide assistance to 10-20 Finnish companies every year. The target doesnt seem to be a tall order – Finland is already ratcheting up trade and economic cooperation with China in a bid to tap into the Asian powers growing “reform dividend.” “Sweden and Germany are traditionally the two leading trade partners of Finland. But now trade with China and Russia is of increasing importance，” said Penna Urrila， chief adviser with the Confederation of Finnish Industries EK.

Last year Finnish exports to China and Russia accounted for 15 percent of the countrys total exports， closing in on the 20 percent for Sweden and Germany. “If Finland were to miss the Chinese market， it would lose half its current business deals. China has both the buying power and the demand. Now the old trope “made in China” has been replaced by a new line： ‘made for China，” said Robin Zhang， Business Development Director & Chief Management Officer at BYD Finland OY.

“Last year the Finnish government unveiled its national investment strategies. They focus on three sectors – environmental sciences and technologies， life sciences and mining – and tailored to three regions – China， the U.S. and Russia，” said Minister for Employment and the Economy Jan Vapaavuori.

Gold Rush

Finnish investment in and exports to China are dynamic， especially in the clean technologies， telecommunications and life sciences sectors. But Chinese investment in the Nordic country is less impressive.

Though the Finnish government has listed China among its top three source countries of foreign investment， Chinese investment in the country is well below the level of that flowing the other way. Last year the figure was a mere 100 million， one tenth of the amount invested in China by Finns. So far only a dozen Chinese companies have pursued operations in the northern European country， among them ZPark， a Zhongguancunbased software developer， the Bank of China， and Huawei.

Last December Huawei， the worlds third largest smartphone maker， detailed plans to build an R&D center in Helsinki， which also hosts the headquarters of Nokia Corp. The facility will focus on software development for smartphones， tablets and other devices. Two organizations， namely Invest in Finland and the China-Finland Golden Bridge Innovation Center， are to play a critical role in the whole process of planning for and implementing the project. Golden Bridge introduced Huawei to 50 Finnish telecom companies for acquisition discussions， and later helped with local hiring， meeting with government requirements and locating accommodation for Chinese employees.

“We recommend that a Chinese enterprise entering Finland follow three criteria – that it will hire locally， that its investment will be substantial， and that it works in one of the 18 sub-sectors of Finlands three strategic industries – life sciences， environmental sci & tech and telecommunications，” said Marko Vanska， CEO of Golden Bridge.

Finland has a large pool of engineers and other competent professionals. They are a big draw for transnational companies， including global giants such as Google， which， like Huawei， has an R&D center there. The Finnish government offers “express channels” for review and approval of big foreign investment projects that can create job opportunities in large numbers and bolster technological development in the country. The government has also convened a foreign investors committee to solicit opinions from the business community， and Huawei is on its board.

International investors should find Finland an attractive destination for funds， said Minister Stubb. For one， it is currently the only Eurozone country with a triple-A credit rating. Finlands economy is stable and growing， he said， and the country sits at the crossroads between northern and eastern European countries， and Russia. The combined population of this macro-region is 800 million， the minister pointed out. These advantages have been exploited by some Chinese businesses. Chinese automaker BYD， for instance， cracked the northern European automobile market by passing winter roadworthiness tests in Finland.

So far about 50 Chinese companies have approached Golden Bridge to express interest in innovative Finnish technologies. Ten of them considered investment in Finland， six of which subsequently committed funds. Chinas venture capital and private equity investors are also turning their eyes to Finland. In response to this trend Golden Bridge now organizes three conferences every year at which it presents 10 Finnish companies to Chinese venture capital and private equity investors. As a direct result of the 2011 conference three Chinese funds jointly invested in one Finnish hi-tech company.

To encourage Chinese investment in the country， the Finnish government offers financial aid to Chinese companies coming its way. According to Diao Jiehui， marketing manager for Invest in Finlands China office， new and hightech multinationals are eligible to apply for government funding from Finnish agencies like Tekes and Finnvera. In addition， Tekes has earmarked 50 million for TIVIT， Finlands non-profit strategic center for science， technology and innovation， for joint research and development in six telecom subsectors including cloud computing between local universities and businesses and top Chinese and European best-practice players.

“Our only requirement of funding recipients is to locate their R&D center in Finland and honor the business promises they make in their application papers，” said Jani Kaarlejarvi， TIVITs international coordination director. “And we welcome applications from Chinese universities and enterprises.”

As a government agency promoting foreign investments in Finland， Invest in Finland is fully funded by the Ministry of Employment and the Economy， and runs an office at the consulate general of Finland in Shanghai， which offers free consultation to Chinese companies.

Obstacles to Overcome

There remain several issues to be tackled before economic and trade exchanges between China and Finland can hit full stride. One of them， said Kelly Luostarinen， head of China Practice at KPMG Finland， is that many Finnish companies seeking their fortune in China are small to medium-sized outfits with limited production capacity. They find it difficult to meet demand in the enormous Chinese market， which may cripple their credibility among Chinese customers and impair their growth prospects.

Petteri Suomalainen， CEO of Goodmill Systems， a provider of mobile broadband data connectivity solutions， said that skepticism about his companys ability to meet large orders cost him one big order from Germany. He is afraid that such mistrust would be amplified in Chinas huge market.

On the other side， Robin Zhang， director of the Business Development Department of BYDs Finland operations， says Chinese companies balk at forking out investment in Finland for two main reasons： the high cost of labor– a Finnish engineers salary is two to three times his Chinese counterparts， for instance – and the ambivalence some Finns feel towards globalization. Protectionism is the response to globalization in some quarters – companies seek bigger markets， but can shy away from sharing their technologies with foreign enterprises， which dampens enthusiasm for joint ventures.