This report analyses the effect of Swedish sustainable city export promotion activities towards China. Few Swedish companies have in fact been involved in business activities and the report discusses various ways to improve the effectiveness of promotion instruments.

China is one of the high priority countries in the Swedish Government’s inter-nationalisation strategy, particularly in the fields of the environment and energy. Several Swedish official bodies have been tasked with supporting research and development activities, and with exporting Swedish environmental technology to China. Two special functions have been set up to coordinate this work – Centec at the embassy in Beijing and the International Environmental Technology Office (IMT) in Stockholm.

These represent substantial investments in time and money. For example, Vinnova (Sweden’s Innovation Agency) and the Energy Agency are investing in a 3-year project  in 2013-2016, with SEK 40 million to support the development of strategic research and innovation collaborations on environmental projects between Sweden and China.

It is essential that this and other investments are based on well-founded considerations and detailed analyses of circumstances in China if the investments are to provide long-term returns for Sweden. Growth Analysis has been tasked by the government to produce documentation that increases people’s understanding of developments in China and the significance of such developments for Sweden.

This report is intended to contribute to this process by utilising experience from two Chinese eco-city projects with Swedish participation – Tangshan Bay Eco-City and the Sino-Swedish Low Carbon Eco-City in Wuxi – in order to discuss which specific success factors or obstacles for this type of project can be identified.

However, what the report demonstrates is that so far not enough has been done to realise the high ambitions attached to these investments in China. The experience to date just about the export of Swedish solutions for sustainable cities can be summarised in a few key points:

• Very few Swedish companies have been successfully involved in the construction of Chinese eco-cities. In the implementation phase, Swedish companies participating in the process have often been deselected in favour of cheaper Chinese or other foreign alternatives. Those who have been successful have been primarily service companies who have contributed skills in design, planning and project management.
• The challenges faced in involving Swedish companies have proved to be considerable, and competing with other countries is hard. The Chinese side often demands subsidies and other forms of financial support from official bodies in order to push down prices. Details which still require confirmation (work that Growth Analysis and others have already commenced), indicate that Sweden’s support is relatively small-scale, which in turn is a competitive disadvantage for Swedish companies.
• At the political level there is a lack of continuity, largely because of job reshuffles by politicians and poor project management on the Chinese side – an aggravating factor. Much effort needs to be expended continuously on maintaining a happy collaborative climate and good relationships with our Chinese opposite numbers. This requires extensive resources and a farsighted approach in the Swedish promotional activities.

Sweden still has an excellent reputation and good relationships with the Chinese authorities. Deriving benefit from these two factors lies at the heart of our efforts to develop future strategies and collaborative projects.

The way forward – a policy discussion

Against the background of the priorities in the Government’s environmental technology strategy, the main objective for official bodies and Swedish companies is to bridge the gaps between the marketing of Swedish sustainable city development, environmental engineering and business opportunities that lead to clear contracts, and also to ensure that those contracts entered into, are complied with by the Chinese counterparties. The Swedish presence in China helps to create the right preconditions for this – but there is good reason to consider in what ways ongoing and planned initiatives might have greater effect.

There are two key questions in this connection, summarised below.

What are the objectives and focus for collaborating with China?

Currently several objectives have been defined for the Government’s initiatives for greater collaboration with China in the areas of the environment and energy. Overall, it is all about the exchange of know-how and experience that may influence China’s development in a more environmentally sustainable direction which in the long run can create opportunities for increased exports to China of Swedish environmental technology. There are contracts about collaboration both in pure environmental management, research and engineering or the implementation of solutions to specific problems. The focus for this report is the latter, even if there are obviously connections between the various areas (with the potential for strengthened connections and synergy effects).

Formulating the top-level objectives is obviously the Government’s task, but arising from this report there are two questions which may be relevant to bear in mind when the objectives and focus for the future are discussed.

• Is it possible to formulate clearer objectives both at an over-arching top level and for specific projects? Previous experience shows that specific goals and thorough following-up­ increases the opportunities for Swedish companies to obtain contracts and the chances that projects will deliver the intended results. There are good examples of companies, including the architectural practice Tengbom, who have insisted on clear result indicators being included in the legislative-packages which circumscribe the project. Later this prevents the Chinese counterparty from backing out of the project’s explicit environmental ambitions and from selecting cheaper solutions with inferior performance – something that unfortunately happens all too often.
• Would it be possible to limit the initiatives in some dimension, thereby concentrating resources in a smaller number of projects? For example, we might consider imposing limits relating to the geographic region, or procedures in the Chinese system in which Government initiative from the Swedish side could do the most good and also imposing limits relating to technical or problem areas.

How can the objectives be achieved, and what is the Government’s role?

In previous analyses, Tillväxtanalys has shown that it is hard to quantify any general positive effects from Government initiatives for promoting exports, and the effects which can be measured are not particularly great.¹ The question being put is whether it is possible to achieve a greater effect by designing the support efforts differently? No definitive answer is provided, but based on the case studies which have been analysed, some factors with the potential to contribute to this have been identified.

One recurring observation is that Sweden could do more in offering package and system solutions rather than focusing on specific technologies or products. This approach is already established and has been manifested in the Symbio City concept. But experience shows that in practice the message is still broken down into components rather than into coherent system – solutions. One proposal put forward is to set up consortiums or other forms of close collaboration, consisting of several small companies who together can deliver more wide-ranging solutions. This might enable official bodies to play a role by setting up meeting places and other platforms for collaboration between companies, also to provide advice and other support in the early stages.

Another important factor is to identify projects that have particularly good potential to actually be implemented to plan and which suit the solutions and companies available in Sweden. But there are strong indications that the most ambitious and comprehensive high profile projects described in this report do not in fact do so. Instead, more suitable candidates that better match the Swedish companies’ profiles and capacities can be found at local level and in progressive smaller cities.

Furthermore there are many indications that even more effort should be devoted to building long-term relationships and to deriving benefits from Sweden’s good reputation. In this, government bodies can play an important role by producing better decision-making documentation, investing in long-term business relationships, with a build-up of capacity on the Chinese side, and by devoting effort to clarifying and formalising the objectives that create better business opportunities for the Swedish companies. 

Finally, the initiatives being developed to strengthen the know-how and trading relationships with China should be set in a wider policy perspective. What matters is how these initiatives relate to equivalent initiatives in other countries, and how the internationalisation initiatives relate to initiatives for greater research, innovation and business trends generally in Sweden. In view of these dimensions, it is important not only to try to optimise the system as a whole in order to increase the total cost efficiency, but also to analyse the various initiatives one at a time. The Government, with its analytical and promotional agencies, has an important task in producing the required knowledge materials in the form of evaluations and strategic analyses, as well as setting the necessary priorities based on the results that have emerged.

¹ For example, see Tillväxtanalys’s Report 2009:05 Export promotion – a cornerstone in a future internationalisation strategy?