1. Team Finland China Day
Future Watch China signals

2. China's Future Signals Looking 2-5 Years Ahead
China Skinny 3/2013

3. Increasing Education Needs
Disposable Income Growth versus Household
Education Spending
Education spending will grow faster than
incomes overall creating a significant
opportunity for tools that capitalise on
Finland’s lead in education, tech and
gamification
China's Future Signals Looking 2-5 Years Ahead
China Skinny 3/2013

4. Social Media-Integrated Rich Mobile
Entertainment
Figure source: iResearch
There are more than 500 million online smartphone
users in China.
Of the 14.7% of Chinese smartphone users who paid for
an app in the first half of 2013, 63.7% paid for a game,
more than double the next highest category.
Chinese consumers’ lifestyles are ideally suited to
mobile entertainment, with a high portion of public
transport users, and a low percentage doing out-of-
home evening activities such as sports and going to the
pub.
Over the next 2-5 years, the mobile gaming industry will
grow at a faster rate than mobile penetration overall.
China's Future Signals Looking 2-5 Years Ahead
China Skinny 3/2013

5. Soaring Staff & Operational Costs
for Businesses
Wage Inflation in China
Figure source: The Ministry of Labor and Social Security for the PRC
Labour costs in China are rising more than 10% a
year.
Related costs such as office rental are also mounting,
with Beijing now the forth most expensive location in
the world.
Chinese businesses are increasingly moving away
from low-skilled industries such as low cost
manufacturing and focusing on higher value sectors.
The shift to efficient workplaces in China over the
next 2-5 years presents significant opportunities for
Finnish businesses who provide technical solutions
that meet the need.
China's Future Signals Looking 2-5 Years Ahead
China Skinny 3/2013

6. The Trend Towards Wearable Technology
Wearable Tech
Expected Uses by Chinese
Figure source: Baidu
A Baidu survey discovered
93% of Chinese Internet
users were aware of
wearable technology, with
75% willing to purchase,
although the industry is
still in its infancy.
Whilst wearable tech is
not a essential pressing
need in China, China’s
large population and love
of gadgets presents a
significant niche well
suited to Finland’s tech
and sporting strengths.
China's Future Signals Looking 2-5 Years Ahead
China Skinny 3/2013

7. In-Car Telemetry Integration with Everyday
Lives
China's Future Signals Looking 2-5 Years Ahead
China Skinny 3/2013
The China auto industry has become the
largest in the world. China is forecast to buy
half of the world’s new cars by 2020.
China’s smartphone usage amongst the middle
class who own cars is among the highest in the
world, leading to increasing consumer demand
for integrated in-car technology.
New Vehicle & In-Car Telemetry Sales in China
(Millions of Units)
Figure source: BAIH, NBS China, CAAM, IHS

8. Rising Independent Travellers
China's Future Signals Looking 2-5 Years Ahead
China Skinny 3/2013
Outbound Chinese Tourists
Figure source: CORTI, CNTA, CTA, CLSA
More Chinese tourists are going overseas
every year. In 2012, 83 million Chinese
travelled internationally, growing to 94
million in 2013.
Although Chinese have traditionally joined
tour groups on overseas trips, an
increasingly confident traveller wanting
new and unique experiences is travelling
independently.
The majority of these tourists will have a
smartphone, ensuring that there will be a
significant market for mobile tools that
meet the unique needs of Chinese
travellers

9. The Worsening Likelihood of Ill Health
China's Future Signals Looking 2-5 Years Ahead
China Skinny 3/2013
China's Worsening State of Health
Health is already an
industry of primary
importance in China,
and will continue to
grow over the next 2-5
years based on current
trends, presenting
significant opportunities
for Finnish companies.
Health is the number 1 concern
for affluent Chinese. Saving
money to cover future health
issues is the top reason for
China’s high saving rates.
By 2019, increasing ailments and
awareness of health will create
significant opportunities for
healthtech tools and products.
Demand for proactive solutions,
online/app developers and
smartphone accessories will also
rise.
Cancer, diabetes, obesity, infertility, premature births and antibiotic
usage rates are all soaring, attributed to rising pollution, food safety
issues, increasingly stressful urban lifestyles and an aging population.

10. Smarter Environmental Intelligence
China's Future Signals Looking 2-5 Years Ahead
China Skinny 3/2013
Daily Average PM2.5 Pollution 2013
China's Worst 10 Cities
Figure source: China's Ministry of
Environmental Protection, ALA, WHO
China’s environment is among the worst in
the world
• Just 1% of China’s 700 million urban dwellers
breathe air considered safe by the European
Union.
• 90% of China’s cities’ groundwater is polluted
to some degree
Rising non-renewable electricity
consumption and car usage will continue to
worsen pollution levels over the next 2-5
years.
Tools that can measure, monitor and address
China’s pollution at any level stand to
significantly benefit.

11. Food Production Corporatisation
China's Future Signals Looking 2-5 Years Ahead
China Skinny 3/2013
Food Consumption Trends in China
Figure source: SSBc
As a key Government focus, there will be
significant investment into efficient farming in
China, creating large opportunities for
synergies between heavy machinery
manufacturers and tech companies.
Part of this shift will be the trend moving
away from small individual farmers to
company-operated farms, who will start to
utilise connected technology to monitor and
produce food more efficiently over the next
2-5 years.
China’s rising middle class are eating more food every year, with China
forecasted to account for almost half of the global increase in food demand
between now and 2050.

12. The Food Safety Movement
China's Future Signals Looking 2-5 Years Ahead
China Skinny 3/2013
China's Food Safety Issues & Sentiment
Figure source: PEW Research
Finnish tech firms have opportunities from
both
• B2B standpoint, such as agricultural
technology and processes, and
• B2C such as tech developers and food
producers working together to create
competitive advantages selling to Chinese
consumers through smartphone and web
tracking of food origins, to packaging.
China’s infamous 2008 melamine dairy scandal
brought China’s abysmal food safety standards
to light.
Social networks and state media have raised
awareness further and as consumers become
wealthier, they are demanding safer food.

13. Macro view on manufacturing
Shifting landscape from 1970 to 2009
Renewing manufacturing in China including
the industrial internet. China Materialia 3/2014.

14. Macro view on manufacturing
Since 2010, China is first in total value added from
manufacturing
Rank Country/Region (Millions of $US) Year
World 9,963,056 2010
1 China 1,924,961 2010
2 United States 1,800,500 2011
3 Japan 1,091,175 2011
4 Germany 610,184 2010
5 South Korea 315,885 2012
6 Italy 306,196 2010
7 Russia 260,435 2012
8 Brazil 253,642 2012
9 France 253,608 2009
10 India 235,248 2012
11 United Kingdom 229,615 2010
12 Indonesia 210,176 2012
13 Mexico 198,199 2012
14 Spain 172,433 2009
15 Canada 169,120 2008
16 Thailand 124,345 2012
17 Turkey 122,743 2012
18 Australia 108,163 2012
19 Argentina 84,360 2012
20 Poland 76,421 2010
http://data.worldbank.org/indicator/NV.IND.MANF.CD/countries/1W?order=wbapi_data_value_2010%20wbapi_data_value&sort=desc&display=default
Renewing manufacturing in China including
the industrial internet. China Materialia 3/2014.

15. Various manufacturing sectors evolve differently
The manufacturing sector should be subdivided into various categories when thinking about
trends. Looking at China, we use the following 9 categories:
- Aerospace and defense
- Automotive and transportation
- Chemicals and process industries
- Telecommunications
- Energy, Utilities and Mining
- Forest, paper and packaging
- Metals
- Information technology
- Semiconductors and electronics
1
2
3
4
5
6
7
8
9
10
2014 2016 2018 2020 2022 2024
GlobalCompetitiveness
Year
Aerospace and defense
Automotive and
transportation
Chemicals and process
industries
Telecommunications
Energy, Utilities and Mining
Forest, paper and packaging
Metals
Information technology
Semiconductor and
electronics
Renewing manufacturing in China including
the industrial internet. China Materialia 3/2014.

16. China goes from low-cost to high-quality manufacturer
5-Year Plan contains clear direction. “…more emphasis on value added manufacturing across seven
priority industries: new energy, energy conservation and environmental protection, biotechnology, new
materials, new IT, high-end equipment manufacturing, and clean energy vehicles.”
It is thus a national economic imperative to move up the value chain, and “multinational companies have
been quick to grasp the opportunities that China’s economic evolution provides. The number of R&D
centers in China funded by foreign companies rose from one in the early 1990s to more than 750 by
2005.”
It is not a question of “if” China will transition from low-cost to high-quality
manufacturing; it is a matter of “how soon” and “to what extent.”
http://www.kpmg.com/cn/en/IssuesAndInsights/ArticlesPublications/Pages/Global-Manufacturing-Outlook-O-201206.aspx
Political will from the top
http://www.kpmg.com/cn/en/pressroom/pressreleases/pages/statement-20120604-manufacturing-outlook.aspx
http://www.accenture.com/SiteCollectionDocuments/PDF/China.pdf

17. China Academy of Social Sciences – Bearing manufacturers
Building new competitive advantages should help to give China new opportunities:
• Government should provide an environment which helps to cultivate human capital.
• Enterprises should promote technology innovation and research to upgrade their products and build
strong brands.
The mass production cheap bearings markets have been pretty much developed already. Further growth
is possible only in a direction of high quality medium and large size bearings, produced in small and
medium series for industrial applications – machine tools, energy, including wind power, mining, off-road
machines, metal and paper mills, aerospace etc.
China goes from low-cost to high-quality manufacturer
http://www.china.org.cn/opinion/2013-02/25/content_28049447.htm
http://www.bearing-news.com/chinese-bearing-manufacturers-are-aiming-for-of-high-tech-high-margin-and-
high-precision-bearings
“Bearing manufacturing in China is in
transition from growing in terms of quantity
to its development in terms of quality”

18. Rise of active Unions
Facing a PR nightmare that included hunger strikes and threats of suicide by its workers, Foxconn has
been forced to allow its employees to unionize. With a Chinese mainland workforce of over 1 million, the
development may have enormous ripple effects within China’s secondary sector, which accounts for
roughly 45% of the country’s GDP2.
http://www.reuters.com/article/2013/02/04/us-foxconn-china-idUSBRE9130EM20130204
http://www.nytimes.com/2013/11/11/business/international/service-sector-gaining-steam-in-chinas-economy.html?_r=0
At present, “The official All-China Federation of Trade Unions controls all enterprise unions throughout the
country… But pressure from Apple, as well as other major foreign firms, is projected to yield substantive
reforms, unlike past efforts.
https://www.wsws.org/en/articles/2013/02/13/foxc-f13.html
http://www.nytimes.com/2010/06/11/business/global/11strike.html?pagewanted=all
Pressure from Chinese government – Strikes
Foxconn public issues – Pressure from Western companies
“There were 1,171 strikes and protests in China recorded by the Hong Kong-based
labor advocacy group from June 2011 until the end of last year. Of those, 40 percent
occurred among factory workers, as China’s exports suffered a slowdown and its
overall economy cooled.” (The China Labour Bulletin)
http://www.clb.org.hk/en/sites/default/files/Image/research_report/Searching%20for%20the%20Union.pdf
http://www.businessweek.com/articles/2014-02-20/behind-chinas-labor-unrest-factory-workers-and-taxi-drivers

19. Social security and other increasing costs
In order to increase Chinese household consumption, the Chinese social security system is being
implemented aggressively. Exact numbers vary per province and cities, but the total percent of employee
salary paid to the system, including health insurance, unemployment insurance, retirement insurance,
maternity insurance, worker Injury, is often above 30%.
http://www.chinabusinessreview.com/cost-of-doing-business-in-china-rises/
Other costs are also increasing, such as:
- Cost of energy and quality of the power, including power rationing.
- Cost of safety measures that need to be implemented.
- Cost of environmental regulations.
- Import and export taxes on key commodities.
Rise in social security and other costs

20. RMB/USD exchange rate
A currency move of (8.26
– 6.10) / 8.26 = 26%
between the two largest
economies in the World
Rise of the RMB

21. Death of the lowest margins
Low-margin manufacturers, in particular in the Pearl river delta around Shenzhen, did not survive the first
phase of RMB appreciation.
To make certain the smartest companies prosper
and accelerate China’s exit from low-margin, low-
pay, low-tech industries, Chinese regulators have
purposefully crafted a difficult corporate
environment.
They have authorized a yuan to appreciate,
aggressively enforced labor and environmental
regulations, and increased the typical minimum
salary in 24 provinces and cities by 18 percent in
2013.
RMB/USD exchange rate

22. Cost comparison various countries
After a decade of nearly 20% annual wage increases in China, companies are moving their operations to
countries with cheaper labor, including Asian neighbors like Vietnam, Cambodia, and India, and describing
it as “a matter of survival.” http://online.wsj.com/news/articles/SB10001424127887323798104578453073103566416
Competition from cheaper locales:

23. Cost comparison various countries
Competition from cheaper locales:

24. Increasing productivity
“Chinese wages may be rising fast, but so is Chinese productivity. The precise numbers are disputed, but
the trend is not. Chinese workers are paid more because they are producing more.”
http://www.economist.com/node/21549956
From “Made in China” to “Innovated in China”
Following the Asian tigers
Like Japan and the Asian Tigers
– Hong Kong, Singapore, South Korea,
and Taiwan –
China is trying to remake its
secondary sector, shifting from
low-cost/low-value manufacturing
to higher-quality/higher-cost
operations.

25. Consumption stable at 35% of GDP
Source: National Bureau of Statistics of China
39,7%
38,0%
36,1%
35,0%
35,3% 35,4%
34,9%
35,4%
32%
33%
34%
35%
36%
37%
38%
39%
40%
41%
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
2004 2005 2006 2007 2008 2009 2010 2011
Domestic Consumption (Billion RMB)
GDP (Billion RMB)
Consumption/GDP (%)
China is a global market. When you are dealing with a population of 1.4 billion people, even a nominally
wealthier populace can translate into a disproportionate shift in demand for higher-quality products and
services.
2012 GDP - composition,
by end use:
household consumption: 35.7%
government consumption: 13.5%
investment in fixed capital: 46.1%
investment in inventories: 2%
exports of goods and services: 26.9%
imports of goods and services: -24.1%
Huge and growing Chinese internal
consumption

26. More automation and robotics
“The International Federation of Robotics tracked a 50 percent jump in purchases of advanced industrial
robots by Chinese manufacturers in 2011, to 22,600 units, and now predicts that China will surpass Japan
as the world’s largest market in two years.”
http://www.kurzweilai.net/migrant-workers-in-china-face-competition-from-robots

27. Internet of things - Huawei
Chinese companies like Huawei are already articulating a vision for what the newly remade IoT world will
look like: “Power companies read meters through tele-metering systems instead of visiting houses; doctors
remotely monitor the conditions of their patients 24/7 by having the patients use devices at home instead
of requiring the patients to stay at hospital; vehicle-mounted terminals automatically display the nearest
parking space; sensors in smart homes turn off utilities, close windows, monitor security, and report to
homeowners in real time.”
Industrial internet becomes ubiquitous
China has shown strength in architectural innovation
To prepare for integration and maximum exploitation of IoT, companies need to focus on “architectural
innovation,” which, “at its most basic level is the idea that you can take an existing product or process,
break down its components, and modularize them. This might seem like mere reverse-engineering and
mimicry, but there’s a crucial difference – by modularizing components you can also standardize them
across an industry. That means you can establish a robust supply chain of components and produce
goods on a massive scale incredibly quickly.”
http://www.industrialinternet.com/blog/chinas-innovation-revolution/
Industrial internet is bigger in China
A GE executive speculated that – with infrastructure in place – its Industrial Internet network in China
“would create about $3 trillion in accumulated growth opportunities for Chinese companies by 2030.”

28. China needs the smart grid more than any other country
Chinese power generation is still mostly based on polluting coal-fired power plants.
Smart electric grid

29. 3D printing as a National priority
The 3D printed parts market alone shows enormous growth potential through 2025, as well
as the 3D manufacturing equipment. Automobile parts are expected to account for an
increasing percentage of the 3D printed parts market.
http://www.designnews.com/author.asp?dfpPParams=ind_183%2Cindustry_auto%2Cindustry_aero%2Cindustry_consumer%2Cindustry_ma
chinery%2Cindustry_medical%2Cbid_27%2Caid_262205&dfpLayout=blog&doc_id=262205&image_number=1
3D printing
China has built the World largest 3D printers
China is already on the vanguard, building the world’s largest 3D printer, and then beating
its own record in 2014. The behemoth 3D printer will be “able to print out metal objects
approximately 6 meters, or 18 feet in diameter.
China will be able to manufacture and assemble automobiles in fully automated facilities,
going a long way towards sating the hundreds of millions of domestic auto buyers over the
next handful of decades; with inexpensive, efficient domestic vehicles instead of foreign
imports.
http://3dprint.com/733/chinas-huge-3d-printers-soon-able-to-print-automobile-sized-metal-objects