“We need to stop considering the two countries as purely manufacturers. China has more scientific publications than Europe and the US. India has more engineers per capita than almost anyone else. Both countries want to be knowledge economies, where there are greater opportunities for growth, and China in particular is far ahead,” she explains, continuing:
“We need to admit that we are up against a challenge. To put it bluntly, the question is, for example, should we primarily manufacture wind turbines for the outside world? Or should we also be able to deliver knowledge that aids the green transition? Should Denmark and the rest of Europe simply supply components or also know-how?”
The green transition is expected to generate numerous jobs in the future, and China has already outperformed the European automotive industry in the electric car market. Chinese players are also leaders in the development of solar cells and batteries, just as they have secured access to many of the critical minerals required for the green transition.
Danmark should change strategyAccording to Haakonsson the new reality requires Danish companies to change their strategy. They need to build new and stronger global networks and seek alliances with partners who are highly knowledgeable in some of the areas where China and India are strong. At the same time, it makes sense to stay in close contact with players from China and India and remain in those markets.
“Two years ago, we conducted interviews with the ten largest Danish companies operating in China and all of them said they foresaw investing more in China. They see the importance of having a presence to maintain the relationships they have, and it makes sense,” she states.
Haakonsson also points out how both China and India boast strong innovation and industrial clusters, where many companies are located in the same place, which provides various benefits because they learn from one another.
“We are familiar with this approach in Denmark, for example in the case of a robot cluster that shot up in the city of Odense in Southern Denmark. The cluster is also successful on a global scale,” she remarks, adding that another possible area to exploit is the know-how and experience Denmark has with energy islands. Traditionally, Denmark is also strong in areas such as urban development, food production, pharmaceuticals, biotechnology, digitalisation and shipping.
More challenges aheadThe balance of power in global trade, however, is being challenged by more than just developments in Asia. Geopolitical conflicts and the increasing use of trade restrictions have changed the approach to supply chains. Bringing production closer to the markets that companies sell to is essential to minimising the risk of something going wrong along the way.
Another challenge is due diligence. A future EU directive will require companies to maintain better control of their value chain. The directive’s aim is to ensure that companies do not indirectly contribute to human rights violations or hurt the environment.
In addition, companies must also report on how they contribute to a more sustainable world throughout their value chain in accordance with the Corporate Sustainability Reporting Directive.
This means that companies must take an interest in whether contractors use, for example diesel forklifts or tools that are not energy efficient. Or in the food industry, whether farmers use animal feed that negatively impacts the climate. Then there is the whole issue of human rights.
Innovation “These directives are positive in many ways. They change globalisation from being about markets to being about responsibility. At the same time, however, they put EU companies in a situation that their competitors in Asia get to dodge,” maintains Haakonsson, who believes that the new requirements are yet another reason why Danish companies need to build strong networks.
