China is stepping up as a global investor. In recent years, Chinese direct investments in Sweden have tripled and are expected to increase further.
When Chinese Geely acquired Volvo Cars six years ago, many worried that the new owners would dismantle the company's production facilities in Sweden and blur the brand's Scandinavian identity. Today we know that it did not in fact happen.
In June 2016 the car manufacturer announced a historic sales record, and the brand is perceived as more Swedish than ever.
Geely's Chairman, Li Shufu has every reason to feel proud when he visits Rosenbad for a meeting with Prime Minister Stefan Löfven and Minister for Enterprise and Innovation Mikael Damberg.
On Monday 12 September a Chinese business delegation is visiting Rosenbad. In addition to Li Shufu, twenty or so business executives and investors from some of China's major companies participate. Following round table talks with the Minister for Enterprise and Innovation and the Prime Minister, they visit Karolinska Institutet, Norra Djurgårdsstaden, IKEA, Investor, STING (Stockholm Innovation & Growth AB), Volvo Cars and Business Region Göteborg.
The programme is arranged by Business Sweden and the Sweden China Trade Council, on Li Shufu's initiative. The Chinese entrepreneur and business executive, who as of 2010 is the owner of Volvo Cars, is a strong supporter of Swedish enterprise and Scandinavian business culture. He aims to get more Chinese companies interested in investing in Sweden and Swedish companies. He is particularly keen to direct the attention of his colleagues at Green Companies Alliance to green technology and sustainable enterprise. In Li Shufu's view, investment in Swedish companies is not only a way of entering the European market. It is also a way of learning about and being influenced by a business culture that is associated with transparency, sustainability and respect for the environment.
One of the participants and presenters at the Rosenbad meeting is Lucas Jonsson of Mannheimer Swartling. He is a lawyer and a partner and in charge of the firm's Shanghai and Hong Kong operations. He has extensive experience of international mergers and acquisitions and cross-border investments. The firm's clients include several major Swedish companies with operations in Sweden, as well as Chinese companies with investments or planned investments in Sweden.
"Lately we are seeing that Chinese companies are increasingly interested in investing in Sweden and Europe. It is also a stated objective of the Chinese government to increase foreign investments in certain sectors", says Lucas Jonsson.
An example of this is Hong Kong-based DeTai New Energy's acquisition of Swedish EPS (Emission Particle Solution) in August 2016. EPS manufactures a vegetable additive to vehicle fuel that reduces carbon dioxide emissions and improves combustion.
The deal is in line with the focus areas formulated by the Chinese government in relation to investments abroad. In addition to the automotive industry, investments are encouraged in industries such as renewable energy, automation, food safety and power transmission.
Politics to boost investments
The latest Chinese five-year plan, which was presented at the Communist Party Congress in 2016, states clearly that the government wishes to pursue policies that lead to sharply increased investments abroad. For the Chinese government, this is a way of achieving increased influx of knowledge and reducing the country's dependence on exports. China does not want to be the world's factory competing with low costs – China wants to be an equal player that develops proprietary technology and nurtures future entrepreneurs.
"To date we have seen acquisitions where Chinese investors buy entire company structures as a way of entering the European market. Soon we will also see major deals aimed at purchasing technology and knowledge", says Lucas Jonsson.
China's adaptation to the rest of the world is progressing rapidly, making cross-border transactions easier.
Mannheimer Swartling is the only Swedish law firm with operations in mainland China and Hong Kong. Today, the firm has two offices on the Chinese market – one in Shanghai and one in Hong Kong. In both offices, the firm is represented both by Swedish lawyers with knowledge of Swedish companies and Swedish business law as well as Chinese lawyers with knowledge of Chinese companies and Chinese business law. Clients include both Swedish and Nordic companies with operations in China and Chinese companies wanting to establish their businesses in Sweden. Mannheimer Swartling acts as a bridge in both directions.
"There are major differences between Sweden and China in terms of both business culture and business law. However, China's adaptation to the rest of the world is progressing rapidly, making cross-border transactions easier", says Daria Yan, Legal Assistant at Mannheimer Swartling in Hong Kong.
"The rule of man"
Daria Yan holds a Bachelor of Laws (LLB), from the University of Hong Kong, a Master's degree in European Law (LLM) from Stockholm University and speaks fluent Swedish, Mandarin, Cantonese and English. She believes that there are significant differences between China and Sweden in terms of how business is done and the business cultures of both countries. The local and central authorities have a major influence over business, permits are required to move capital abroad and to invest in companies outside China. In China, laws and contracts are treated pragmatically and, "the rule of man" tends to have precedence over "the rule of law" and in the absence thereof, something which is best termed "the rule by law" is applied. This is changing slowly but surely as the exchange of goods, services and knowledge with the world is increasing.
Last year, foreign direct investments in Sweden amounted to approximately SEK 100 billion. Of these, by far the largest part – SEK 47 billion – came from Germany. Meanwhile, Chinese direct investments in Sweden amounted to SEK 7.2 billion.
While this is significantly less than German investments, it exceeds US investments. In addition, China's investments in Sweden tripled between 2014 and 2015. If Li Shufu gets his way and the development continues at the same pace, it will not be long before China overtakes both Norway and Great Britain in terms of direct investments in Sweden.
Chinese investors are attracted by a dynamic research environment where industry and academia are accustomed to cooperate,
a legal system where it is quick and easy to start a business and a market that can act as a test market or springboard to the rest of the EU internal market. At the same time, it is clear that two very different legal systems must be reconciled in negotiations, agreements and clauses. This places high demands on legal advice.
2017 marks ten years since Mannheimer Swartling opened offices in Shanghai and Hong Kong. Currently we have over 15 Swedish and Chinese lawyers/legal consultants on site in China, who primarily advise clients from Sweden and the other Nordic countries. The offices in China primarily focus on the Chinese legal and business environment, including foreign direct investments, establishments and acquisitions, restructuring of existing investments, compliance and sustainability, dispute resolution, banking and finance, as well as commercial agreements.