MARKET. ANALYSIS. PROGNOSES. Baltic-Nordic Countries and China: Trends in Trade and Investment


Jonė Kalendienė

The Chinese “One Belt, One Road” initiative seems to be very promising for Asian and European countries that are on the New Silk Road. For many businesses the Initiative opens new opportunities, access to finance or new customers, especially in smaller and less developed countries. Baltic-Nordic region is also a part of the “One Belt, One Road” initiative, which connects it to China via the New Silk Road or the Artic Road. But the economic relations so far between the parts were not very sound.

Dr Jonė Kalendienė is an associate professor at Vytautas Magnus University (Lithuania) and head of the Department of Economics. She used to work as an economist at the Bank of Lithuania, Macroeconomic Analysis and Forecasting Division. Together with partners from various universities in Europe and China Jonė was enrolled in the project “The New Silk Road: China Meets Europe in the Baltic Sea Region”. At the moment she is involved in the scientific-research project “China-Europe: China’s Belt and Road Initiative and the Baltic Sea Region” that is coordinated by BMI and Chinese Academy of Social Science.

Investment trends

The fast growth of the Chinese economy, its rapid industrial development and increasing foreign trade made China one of the most attractive destinations for foreign investment. On the other hand, the word had experienced the vast Chinese expansion in FDI. Since the end of 2014 China is one of top 3 investors in the world. But recent data of 2017 indicates that China’s outward FDI fell by over 40 % in a year. That was mainly due to China’s Government policies towards greater control of foreign investment as a part of tools against destabilizing capital outflows. However, the Economist Intelligence Unit forecasts China’s ODI flows coming back to the previous level in three years.

Chinese FDI stock is mostly concentrated in Asia. European Union gets only 8%. And so the global share of the Chinese investments in Nordic and Baltic countries is even smaller. Despite the recorded slowdown, China’s investments in Europe continue to grow. They increased by 56 % in 2017 on a year-on-year basis. But it dropped by 37 % in Baltic and Nordic countries. However, China’s investments into Baltic and Nordic countries are more accidental than trendy. There are few big investment projects recorded every 2–3 years in each of the country that in general make China’s outward FDI in the Region very volatile and vulnerable.

China’s inward investment flows from Denmark, Sweden, Norway and Finland are higher that China’s outward investment to these countries both in nominal and per capita basis. It suggests that from Nordic perspective Chinese market is more important as an economy to place the investment than a possible investor and partner for development. Nordic investors change their attitude and purpose of investing in China. It is closely related with government policies and orientation. China used to be a cheap labour country with an exports-oriented market. Thus, most of the Nordic investment is focused on manufacturing. Recently Chinese government introduced plans for technological upgrading and drives the economy towards domestic consumption that makes Nordic investments increase once again and to change the industrial orientation.

China is a minor investment partner for all three Baltic countries. The FDI flows from the Baltics to China are very scattered and do not show any clear trends. In most cases the investments are incidental. These countries are more likely to be recipients than donors in investment partnership with China.

Trading trends

China is also one of the major countries in global trade that promoted export-led economic growth since its fast expansion in 2002–2003. But recent data shows a slow-down. Starting from 2015 the relative size of Chinese exports (export/GDP ratio) has a slightly decreasing trend. That suggests that China’s economic development is concentrated on domestic market more than on foreign markets. That slows down the entire global trade.

From foreign trade perspective China’s role in the Baltic-Nordic Region is not very large. China’s export market share remains stable at about 6 % (about 3 % in the Baltic countries and 6–7 % in Nordic countries). The most of China’s exports to Nordic and Baltic countries is electrical and non-electrical machinery and equipment. They contribute to about 1/3 of Chinese exports into the Region and most of it goes to Norway and Finland. However, the demand for imports of these goods has a slightly decreasing trend. China has the biggest export market share in low-tech industries: textile, toys, furniture. This suggests that cheap labour force is still the main competitive advantage of Chinese exporters in the region.

On the other hand exporters from Baltic and Nordic countries are not competitive in Chinese market. Their export market share is small (about 0.8 %). That is partially natural since these countries have comparatively small economies. But in nominal terms the export form Baltic and Nordic countries to China shows no growth since 2010. It can be considered as a loss of exporters from the region especially knowing that the foreign demand was increasing as the domestic market and consumption in China went up during the same period. However, the importance of imports from Nordic and Baltic countries is much higher in particular sectors in China. Half of the imports from Nordic and Baltic countries (55 % on average) consists of fur and artificial fur manufacturers. All the fur imports come from two countries – Denmark and Finland. The other is pulp and paper industry, where imports from Nordic and Baltic countries (mainly Finland and Sweden) make 14 % of total imports in this industry in China.


One of the greatest threats for Nordic and Baltic countries while trading with China is the huge imbalance. The average exports to imports ratio in Nordic and Baltic countries is about 40 %. It is higher in Nordic countries and much lower in Baltic countries. The exports to imports ratio is highest in Sweden (about 80 %) and smallest in Estonia (about 13 %). This means that imports from China in the region are much higher than exports. Nordic and Baltic countries are unable to sell in China’s domestic market, but they import many of the goods from there. European companies don’t care much about any investments into transport to make the connection between China and Baltic-Nordic region faster. And transportation companies don’t get enough profits from one direction flows.

Looking from the payment balance point of view in the Baltic countries and Norway the imbalances in goods trade are partially compensated by positive inflows of investments from China. China’s investment inflow in the Baltic countries and Norway overstates the outflow at a high rate. But this is not the case in the other three Nordic countries: Sweden, Denmark and Finland. The net flows from these three Nordic countries to China are negative, suggesting that countries should generate positive net flows from other trading and investment partners.

The other threat is the EU policy towards China’s economic initiatives, which still remains unclear. On one hand, financial flows from China could generate multiplication effect on European economies. But on the other hand, it imposes much of the risks related to ownership of strategically important transportation, financial and other hubs. That brings much doubt about the total effect of “One Belt, One Road Initiative” on the Baltic and Nordic economies, as well as the European economy. Nevertheless, the “One Belt, One Road” initiative increases the attractiveness of the Baltic region for Chinese investments. And this could be very helpful for companies in transport, communication, financial and other businesses.


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The magazine JŪRA has been published since 1935.
International business magazine JŪRA MOPE SEA has been
published since 1999.

ISSN 1392-7825

2017 ©