Eurozone’s financial crisis still has supply chain implications for China

The largest risk facing China’s global supply chains is the ongoing Eurozone crisis, economists in Beijing reported this week

By ·

The largest risk facing China’s global supply chains is the ongoing Eurozone crisis, economists in Beijing reported this week.

According to IHS Global Insight’s China analyst, Alistair Thornton, this should be a concern as it will impact the nation’s short-term expansion trajectory.

“Indeed, China is locked in its monetary policy stance until inflation recedes, and remains extremely exposed to weakness in developed markets,” Thornton told SCMR in an interview. “China’s exports appear to be softening as demand falters from the U.S. and Europe, which will have a significant impact on its growth path.”

Meanwhile, China’s economy continues to “chug towards a soft-landing,” with data released this week showing that GDP expanded at an eight-quarter low of 9.1 percent year-on-year (y/y) in the third quarter, a touch below IHS Global Insight’s forecast of 9.2 pecent and the Bloomberg Consensus Forecast of 9.3 percent y/y. Year-to-date, GDP was up 9.4 percent y/y, after recording growth of 9.5 percent in the second quarter and 9.7 percent in the first. GDP grew at an annualized quarter-on-quarter rate of 9.5 percent in the third quarter.

Industrial production data for September appeared to belie this slowdown trend, picking up to 13.8 percent y/y from August’s 13.5 percent y/y. Industrial production was up 15.4 percent, on a month-on-month (m/m) annualized basis. Much of this was driven by a pick-up in heavy industry, which increased 14.3 percent y/y in September, up from 13.5 percent in August. Light industry, more directly affected by credit tightening, pulled back to 12.8 percent y/y, from August’s 13.4 percent.

“Some cracks are also showing on the domestic front,” said Thornton, “primarily in terms of the plight of small-to-medium sized enterprises.”

He added that market rates remain high, compounding the problem, and should show no sign of falling until the central government signals a shift in monetary policy stance.

“We are not at that point yet, although a drop-off in inflation or a rapid downturn in the Eurozone would hasten that moment,” Thornton added.

 


About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

All Topics
Latest Whitepaper
Unlock the Value of Your Supply Chain Through Embedded Analytics
Learn how embedded analytics can provide deeper supply chain intelligence and help you extract maximum value from data for your supply chain operations
Download Today!
From the May 2017 Issue
Everyone is talking about terms like digitization, Industry 4.0 and digital supply chain management, but what sort of technologies fall under these broad terms, and how will they change the management capabilities at our disposal? To find out, we talked to some noted supply chain analysts, consultants and technology executives and gathered six digital trends to watch.
Transportation Trends and Best Practices: The Battle for the Last Mile
2017 Technology Roundtable: Are we closer to “Intelligent” Logistics?
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Going Beyond Rate Negotiations for Logistics Cost Savings
The pressure to reduce cost is a fundamental part of every organization today leaving many supply chain professionals constantly renegotiating rates. This webcast examines four areas that may hold untapped savings potentials and even help organizations negotiate better rates.
Register Today!
EDITORS' PICKS
The Evolution of the Digital Supply Chain
Everyone is talking about terms like digitization, Industry 4.0 and digital supply chain management,...
2017 Salary Survey: Fresh Voices Express Optimism
Our “33rd Annual Salary Survey” reflects more diversity entering the logistics management...

LM Exclusive: Major Modes Join E-commerce Mix
While last mile carriers receive much of the attention, the traditional modal heavyweights are in...
ASEAN Logistics: Building Collectively
While most of the world withdraws inward, Southeast Asia is practicing effective cooperation between...