Basic Information and Development

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2 Overview Cooperation in economy, trade and investment between China and Sweden has been stable and developing forward in Trade volume between China and Sweden has grown rapidly, With Swedish export to China increasing strongly. The trade volume of 2017 between the two countries reached 14.9 billion USD, increasing 19.5%, much higher than the average of in Europe. The Swedish export to China reached 7.88 billion USD, increasing 28% while Chinese export to Sweden was 7.03 billion USD, increasing 11.3%. Sweden as a main partner for China in the area of technological cooperation has an accumulated contract volume of 25.3 billion USD for technological export. In 2017, the amount is 1.17 billion USD, the second largest country in EU on technological export to China. The investment between Sweden and China has been developing steadily. The total Swedish investment in China has reached 4.85 billion USD with a new increase of 500 million USD in 2017 while Chinese investment to Sweden has reached 3.69 billion USD with 140 million new investments in Sweden is known for its stable market environment and sustainable innovation. Together with its complementarities with Chinese industry lines, Sweden has drawn attention of more and more Chinese industry investors. The study of KHIS shows that with more Chinese companies going abroad and the upgrade of Made in China 2025, Swedish technology and research plus Chinese production and market would bring more Chinese companies and investment to Sweden while more Swedish companies and products would get more opportunities on the vast Chinese market. Kinesiska Handelskammaren I Sverige (KHIS) was established in December of It has 31 members now. Most of the owners of the member companies are from China. The members include subsidiaries of Chinese state-owned companies, Swedish companies invested by Chinese private large companies and SMEs. KHIS has carried out an annual business survey to show how the companies are doing in Sweden. Questionnaires have been sent to all the members and 18 replies received. The report will have 3 parts, including : Basic information and Development Problems and Challenges Swedish Investment Environment and Policies. 2

3 Basic Information and Development In this part, the questions cover location, industry line, investment share, employees, operating income and the reasons for choosing. It shows roughly where the Chinese companies in Sweden are located and how they are doing Locations in Sweden 82% North Middle South Most of the companies are located in the middle of Sweden, in Stockholm area while some are in the South, mainly in Gothenburg. of the companies was set up in the past 5 years while have been in Sweden for over 20 year % 3 25% 2 15% 1 5% History <5 years 5-10 years years >20 years 3

4 Basic Information and Development Number of employees less than more than 201 According to the survey, of the companies have less than 10 employees while only have more than 200 employees Share of Chinese Investment Private owned Partly State Owned (below 5) State owned (above 5) Chinese invested companies with private investment reached up to. The other companies are partly or mainly owned by state investment, respectively and. 3 25% 2 15% 1 5% Buesiness Line The industries invested are not very concentrated, with Information Technology and Service both owning. 4

5 Basic Information and Development 6 Operating Income Euro 7 Result of About of the companies had an operating income of more than 50 M Euro. Operating Income 2017 compared with % profitable breakeven Deficit 82% of the companies are operating without deficit and 64% are profitable % 3 25% 2 15% 1 5% Expectation in 3-5 years for operating income Operating income of 73% of the companies have increased and with more than 2 compared with More than half of the companies are expecting an increase of more than 2 in the coming 3-5 years. 5

6 Basic Information and Development Establish International Brand 82% Develop overseas market Why Sweden (multiple) International management All the companies chose Sweden with Establish International Brand as one of the main reasons. 82% of the companies aim to develop overseas market by investing in Sweden Importance of Swedish market 82% First First 3 one of many others not important Most of the companies, 82% think Sweden is one of the important markets worldwide Advanced technology Not fierce Purchase and supply for Chinese market fairly fierce private reasons Competition on local market normal fierce Very fierce The competition on the local market is fairly normal. 6

7 Basic Information and Development 7 Local competitors (multiple) The local competition comes mainly from local companies and foreign companies operating in Sweden % Advantages comparing with 2 local competitors (multiple) Business Process Professional Administration and Technical Staff 1 Local companies Foreign Companies operating locally Local Chinese companies Chinese companies in China Human Resource and Company Culture Creativity Supply Chain and Logistics Customer Relationship of the companies are confident with their customer relationship and brand when it comes to advantages comparing with local competitors. Price Brand

8 Problems and Challenges In this part, the questions are focused on problems and challenges the companies are facing in Sweden. 7 Main Risks and Challenges in Sweden (Multiple) % 61% 67% % 6% 17% 22% 11% 67% of the companies think the labour cost is too high in Sweden. 61% of the companies believe they have met a different management culture and there is a lack of proper management team in place. 22% of the companies thinks high tax in Sweden is a problem. 8

9 Problems and Challenges Main Costs Concerned (multiple) Tax compared with China % Too Heavy Heavier Same Less much less Echoing the last question, 73% of the companies are most concerned of the labour cost while almost half of the companies are concerned of tax increase Difficulties for local recruitment (multiple) 75% Language and Culture 13% Non competetive salary 63% Hard to find suitable professionals More than 90 % of the companies had difficulty for local recruitment. And the problem of language and Culture is high on the list All the companies think the tax here in Sweden are heavier than in China. Termination by employee compared with % More same 更低 None of the companies have experienced more termination from the employees side comparing with Stable staff. 9

10 Problems and Challenges 5 4 Reasons for sending Expatriates (multiple) Representative responsible for communication and contact with HQ Effective Control over Subsidiary by HQ Training for Chinese Employees Helping Local Staff with Professional know-how Training for Local Staff Lack of local staff with qualified knowledge and skill The companies need expatriates mainly for their communicative and control functions. Only of the companies chose to have expatriats for the training of local staff Recruitment Plan in 3 Years 6 4 More Same Less None of the companies plans to cut down recruitment in the coming 3 years. 6 of the companies plan to recruit more staff. 10

11 Problems and Challenges Challenges for M&A in Nordic Countries (multiple) Support from Management Team and Minor Shareholders Keep Target's Main Clients and Suppliers Cooperation with Employees/Union in the Target Conflict of Enterprise Culture Reorganization after Taking-over Support from Management Team and Minor Shareholders Assets Estimation Tough Competition for Targets with High Estimated Value For companies that entered the Nordic countries by M&A transactions, conflict of enterprise culture and reorganization after taking over has been the main challenges Opinion on M&A Transaction of the companies hold a neutral opinion on the M&A transaction while the rest 4 are satisfied by the transaction. 11

12 Swedish Investment Environment and Policies The questions in this part try to show the opinions of the companies regarding investment and business environment in Sweden and their opinions on local authorities and policies as well as some comparison with China Investment Environment in the Past 2 Years Much Improved Same Worse Much Improved worse More than half of the companies think the investment environment has been improved in the past 2 years. Only hold the opinion that it is worse % Equity Loan from Owners in China Much positive Estimation for future 3-5 Years of Investment Environment in Sweden Positive Neutral Negative Much negative Financing Alternatives for Local Investment (Mutiple) Loan from Banks in China Loan from Foreign Branches of Bank in China None of the companies has a negative estimation for investment environment in the next 3-5 years and of the companies hold a positive opinion. Loan from Stock Issuing Bond Issuing Local Banks Fund and Investment from Fund Company Up to 91% of the companies have their own equity as financing alternatives. Loans from owners in China is also a main alternative for financing. 12

13 Swedish Investment Environment and Policies very bad Assessment on Business Environment of Sweden in the Past 2 Years bad normal good 63% of the companies think the business environment in Sweden in the past 2 years is good. Very good % Legal Environment Opinions on Policies from Local Authorities Stability of Economic System Stability of Industry Policy Bad Tax Regulations Relationship with and Policies to China Acceptable Good Very Good Very positive opinions on local policies. There is only that holds a bad opinion on tax regulations. For legal environment, economic system and industry policy as well as policies to China, the companies hold very positive opinions Opinion on Business Environment of Sweden in the Past 2 Years Up to 63% of the companies think the business environment in the past 2 years are above good. 1 Very good good normal bad very bad 13

14 Swedish Investment Environment and Policies 4 35% 3 25% 2 15% 1 5% Legal Regulations and Rules towards Chinese Companies and Products 35% 2 24% 12% Frequency of Approvals by Local Authorities Companing with China Much more More Normal Less Much less 88% of the companies think the rules and policies towards Chinese companies are above acceptable. More than half of the companies think that approvals by local authorities are less than in China while of the companies think there is no difference. 4 35% 3 25% 2 15% 1 5% Efficiency of Approvals by Local Authorities Comparing with China Very Slow Slow Normal Quick Very Quick Regarding efficiency of approvals given by local authorities, of the companies think it is quick while 35% of the companies think it is slow. 4 35% 3 25% 2 15% 1 5% Transparency of Authority Comparing with China Very bad Bad Normal Good Very good Only of the companies think the transparency of authorities is better than in China and the same amount think there is not much difference. of the companies hold the opinion that it is worse than in China. 14

15 Swedish Investment Environment and Policies 7 How Important is Compliance for Local Operation % 7 6 Legal and Compliance Cost in Nordic Countries Comparing with China % 91% of the companies think compliance is important for local operation. 7 Your Estimation of Sweden-China Relationship in Much Higher Higher Same Lower Much Lower The cost for local compliance is higher than in China according to up to 82% of the companies % Improved Unchanged Worse No company thinks the relationship between Sweden and China would get worse in % of the companies are optimistic and think it will be improved. 15

16 The report is chaired by CCCS; BOC Stockholm branch provides assistance 16