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 Patrick Burnson, Executive Editor
October 19, 2011 - SCMR Editorial

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

image
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 .(JavaScript must be enabled to view this email address).

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!

Recent Entries

Total POLB volumes dropped 9.1 percent in August at 573,083 TEU, and POLA volumes in August were up 6.7 percent compared to August 2013 at 757,702 TEU.

Following a week in which the average price per gallon was flat, diesel prices resumed their decline, falling 1.3 cents to $3.801 per gallon, according to the Department of Energy’s Energy Information Administration.

Read how others are using Business Process Modeling to implement Microsoft Dynamics AX with reduced risk.

While diesel prices have largely been out of the spotlight in 2014, freight transportation and logistics stakeholders always need to keep a close eye on what prices are doing, as it has a significant impact on transportation budgets and forecasting.

Railroad service issues and rates, which many rail shippers deem as unreasonable, are front and center in a piece of legislation to be introduced soon by Senators Jay Rockefeller (D-WV) and John Thune (R-SD), chairman and ranking member of the Senate Committee on Commerce Science and Transportation.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers 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. Contact Patrick Burnson

Comments

Post a comment
Commenting is not available in this channel entry.