BOFIT Viikkokatsaus / BOFIT Weekly Review 2023/44

The value of goods imported to Finland from China grew rapidly in recent years, but this year the trend has come to a halt. Finnish Customs figures show that in the first eight months of this year, the value of goods imports from China (including Hong Kong) was 4.5 billion euros, a decrease of 20 % from the same period a year earlier. The change is fairly dramatic as Finland’s imports from China grew by 29 % in 2022 and by 22 % in 2021. Finland’s weaker imports from China, however, are not unique. Finland’s imports overall have contracted by 17 % y-o-y so far this year, a reflection of Finland’s weak economic performance and the fading of pent-up goods demand after the country emerged from pandemic restrictions. China is Finland’s third-most important source of imports after Sweden and Germany. Nearly a tenth of Finnish goods imports come from China, about half of which consist of machinery and electronic devices.

While Finland’s goods exports to China continue to sputter, their situation is still better than for imports. In the first eight months of this year, exports to China were valued at 2.5 billion euros, about 4 % less than in the same period a year earlier. During 2022, Finland’s goods exports to China rose by 10 %, when last year they grew by 19 %. China’s current economic problems and weak domestic demand explain this year’s lacklustre performance. Nevertheless, a slowdown in the global economy is also reflected in the Finnish external sector, with Finland’s total goods exports down by 6 % from the same 8-month period in 2022. China is Finland’s fifth most important goods export market after Germany, Sweden, the US and the Netherlands. China accounts for about 5 % of Finnish goods exports. Finland’s largest export product categories for China are pulp & paper products, as well as machinery and electronic devices.

Finland-China trade has been in flux this year

Sources: Finnish Customs, Statistics Finland and BOFIT.

With respect to bilateral services trade, the situation is somewhat different. Statistics Finland reports that Finland’s services imports from China (including Hong Kong) amounted to 763 million euros in the first half of this year, an 11 % increase from 1H22. In the first half of this year, exports of services to China contracted by about 6 % y-o-y to around 684 million euros. China accounted for just over 4 % of Finland’s total services imports and exports.

Finland’s top services exports to China included licensing of Finnish R&D patents (28 % of services exports to China in 2022), data processing services (26 %), as well as various transportation services (15 %). Finland’s top imports from China include technical or trading services, and other commercial services (20 %), as well as various transportation services (28 %). Before the pandemic, tourism services were also an important part for Finland’s services exports to China. Following a stark drop during the pandemic, the number of Chinese tourists visiting Finland has only recently started to recover. According to preliminary information released by national tourism promoter Visit Finland, Chinese tourists accounted for less than 3 % of overnight stays by foreign tourists in September, down from over 6 % before the pandemic in 2019. The outlook for China’s foreign trade was discussed at BOFIT’s briefing (in Finnish) on the Chinese economy held at the Bank of Finland on Monday (Oct. 30).

The popularity of Finland with Chinese tourists increased rapidly in pre-covid years
Sources: Visit Finland and BOFIT.

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