Swedish Companies and China’s Digitalization

Background

China is, among other current reforms, shifting its economy towards more value-added sectors of the global production chain, as part of the “Made in China 2025” strategy. Underlying is a drive towards applying the tools of information technology to production. Digitalization can be seen as a vital component in achieving these goals, as detailed in the State Council documents outlining the plan back in 2015.

In parallel, China is witnessing the rapid development of e-commerce as a mainstream phenomenon. By February 2017, e-commerce represented 15.5% of total retail sales in the country, having generated ¥5.16 trillion in sales in 2016 according to the latest report from the National Bureau of Statistics.
It is, accordingly, no surprise that Swedish companies in China are now considering digitalization a main strategic priority, with 1 in 10 putting it ahead of all others.

prioritiesdigitalization
Outlook

The broader picture for Swedish enterprises in China appears rather positive with the Chinese market being considered one of the most important for the interviewed Swedish firms and almost two thirds of the respondents to the Business Confidence Survey looking at increasing investments in the country during 2017.

Among the companies interviewed for this paper, there is a consensus recognizing enormous opportunities offered by this push towards digitalization for “lowering costs with more efficient processes, purchasing and marketing [...] both in terms of market access and process development”. Swedish companies are moving to position themselves in that respect, with all of the respondents indicating that they already have or are currently developing a digital strategy.

Hurdles

The two single most important challenges affecting the respondents to this years Business Confidence Survey are a perceived discrimination against foreign companies by the Chinese authorities as well as difficulty of access to skilled labor.

In terms of digitalization more specifically, the issue raised most often is that of the recently implemented cyber-security law, as it “seems somewhat unclear exactly how the new law will be implemented, and the consequences [it] will have for companies”. In particular, the ability to transfer customer and employee data in and out of the country, as well as an announced crackdown on VPN providers, affecting the connectivity of foreign firms, are pointed at.

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