The Chinese economy is clearly recovering. Coronavirus infections have already fallen sharply, and stringent quarantine measures are being lifted. The recovery of the Chinese economy gives hope also to Finnish companies. What can we learn from China and what should we do now?

In China, the number of infections has fallen sharply from the peak in February with 14,000 new confirmed infections in a single day. Life is coming back to normal in China as quarantine measures are lifted.

There have been reported very few new domestic coronavirus infections in China in recent days. Almost all new cases come from travellers returning from abroad. This will have a significant impact on the real economy as people can move again and shops and factories are being reopened. As a result, the Chinese economy is gradually returning to normal.

China’s role in the world economy has grown significantly in recent years. According to the OECD, China already accounts for more than 20% of the world’s industrial output, so the slump and disruption in production have also been reflected in Finland.

The layoffs of many Finnish industrial companies have been caused by production disruptions and difficulties of component manufacturers caused by the Chinese coronavirus. China’s industry is now recovering rapidly, and continuity in supply and component manufacturing is being restored. China is now able to provide solutions also to companies who have problems, for example, with their European component manufacturers.

China’s rapid economic recovery is also a valuable asset in restoring investor confidence in the future of the economy.

 

What could be the pace of economic recovery in Europe?

Since the beginning, the Chinese have been extremely effective in preventing the spread of the virus. Industrial recovery has been rapid and steady when looking at the industrial capacity recovery index. Since mid-February, satellite imagery data from the Industrial Capacity Recovery Index has been collected daily. Prior to this, the index was based on monthly measurements.

Figure 1. Industrial Capacity Recovery Index measures satellite activity in industrial areas of China. Index level 100 represents the pre-coronavirus economic activity level. Source: China Merchant Bank

Of course, cultural differences also influence how the industry recovers, but the Chinese example creates faith in a speedy recovery also in Europe. From the graph in mid-February, we see an increase from a 40% level to almost 70% in just one month.

Life is also continuing in Chinese cities where people already use public transport. At its worst, Shanghai’s metro traffic fell to 10 percent of normal, but has already returned to about 60 percent. According to our information, metro traffic is expected to return to normal within one month.

These are also good goals for us in Europe after the corona.

 

Looking towards China – a market where the economy is growing, and exports and imports are driving

Voluntary and proactive action is key to overcoming the effects of coronavirus. To revive the economy, both the government and businesses need to take determined action.

Our current challenging markets which are suffering from the coronavirus can be alleviated by China’s rising numbers. Even before the epidemic, many companies have realized the importance of the purchasing power of China’s 400 million and rapidly growing middle-class.

If the traditional market for Finnish companies is still torn by the corona for the rest of the year, why not go where the economy is already pulling? Many Finnish companies have built a good position in China. It is now possible to utilize these investments and help both themselves and Finland. Although airline connections will not been operational for some time, local help is available and remote connections have proved their functionality.

 

Once the virus is defeated, companies will face the first day of the rest of their lives

The day will come when the coronavirus has been defeated in Finland and life will return to normal. Economic recovery and the disruption caused by the coronavirus are also creating opportunities for new business.

A positive will to fight should be harnessed throughout society. First and foremost we obviously need to ensure people’s health and business continuity, but at the same time we need to think about how we will do business after the coronavirus.

In many industries, the post-epidemic period is leading to a restart of a F1 race, where active companies are getting a better position in the competition. Those who follow the F1 races know how radically a restart can change the outcome of the race. If there is enough courage, the underdog may well override the pre-favorites. Thus, many companies may even benefit from the current situation in the future.

Korkia opens up China’s growth market for Nordic companies seeking to establish themselves permanently in Asia and generate profitable and sustainable business through their local operations. Asia Gateway builds on China’s and Finland’s growing economic ties and leverages extensive local knowledge and contacts from Korkia’s partners, Jiuyou, a Chinese fund and development company, and Asia Perspective, a consulting firm operating in China.

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