Finland’s trade dependence on China at EU average

Commerce accounts for most of Finland’s imports from China, while exports to China are centred around large industrial companies, according to a report on Finland’s trade dependence on China coordinated by the Ministry for Foreign Affairs, said the ministry in a press release on Friday.

The report is a collection of information and figures to support discussions on Finland’s dependence on China.

The report showed that China has a particularly strong role in imports to Finland.

Any disruption of imports from China would soon be reflected on commerce and industry especially as shortages of mobile phones, laptops, other electronic devices, and batteries.

The imports of components and other intermediate products are centred on certain sectors, such as the electronics industry.

It would not be possible to quickly pivot to alternative sources of imports especially if many countries were affected simultaneously by the disruptions.

“Research evidence reveals certain direct trade dependencies on China especially with regard to our imports. In most cases, however, trade dependence is mutually beneficial. It is almost impossible for statistics to detect indirect interdependencies in subcontracting chains. We encourage companies to continue to assess their supply chains for potential commercial disruptions. At the same time, there is a lot of untapped potential in our exports to China,” said Nina Vaskunlahti, Under-Secretary of State for International Trade at the Ministry for Foreign Affairs.

It is estimated that more than 15,000 person-years depend on imports from China. The indirect employment impact is even greater through subcontracting chains.

Large companies account for two thirds of exports to China. There is a strong focus on industry. The turnover of Finnish subsidiaries operating in China is significant, and companies have made major investments in Finland, too, because exports to China are so profitable.

So far, no significant Chinese investments have been made in the Finnish basic infrastructure or critical infrastructure.

The Bank of Finland Institute for Emerging Economies (BOFIT) has estimated the direct links between Finland's financial sector and China as moderate.

In Finland and elsewhere in Europe, the pace of the green transition in society and industry has so far been tied to the availability of critical raw materials from China. This meets the criteria for strategic dependence as defined by the EU.

The report made five key observations:

Finland’s trade dependence on China in the sectors examined in the report is at the EU average.

It is important to further promote Finnish and European capabilities in the production and recycling of critical raw materials in sustainable ways.

Finnish companies are encouraged to diversify their production chains and supply chains and to increase the transparency of their value chains. The Ministry for Foreign Affairs contributes to promoting this objective by supporting the elimination of country-specific trade barriers and by promoting the EU’s trade agreement network.

There is still significant growth potential in China in terms of exports of end products and services that yield higher added value.

There are good grounds for further sector-specific studies on how to compensate for vulnerabilities. More information is also needed on the significance of trade dependencies for the security of supply in the Finnish society.