Nordic firms boost investments in China – but fear lower margins.

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Senior managers at Swedish and Northern European companies are stepping up the race on the Chinese market as they move to a more aggressive strategy with increased investments and more recruitments, SEB said in its semi-annually China Financial Index report.

Still, profit expectations are falling. That is indicating lower margins due to increased production costs and increasing competition.

"When Nordic and German multinationals look into the crystal ball of 2010 there is now doubt that China is a top priority in relation to other markets”, Fredrik Hähnel, Client responsible at SEB in China, said.

“Companies are now moving back into an offensive strategy in China and 83 per cent of the companies in our survey are planning for continued investments during the coming six months. 20 per cent of those are planning major investments".

Last year the Chinese economy swelled 8.7 percent, outperforming all other major markets in the world. But more and more economist now warn that the economy is overheated due to massive fiscal stimulus financed by huge bank lending.

“Property prices have gone up dramatically and there are signs that inflation is coming back, which make more observers expect a tighter policy going forward”, the bank said in its report.

48 percent of respondents see lower customer demand as the greatest cause for concern the coming 6 months, while 13 percent see lack of qualified labor as the larges worry. Other issues are complex rules and increasing costs of raw material.