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

FTR says both spot rates and contract rates are heading up in a full capacity environment and with the fall shipping season rapidly approaching, it explained conditions for shippers could further deteriorate.

Read how others are using Business Process Management to achieve ERP success with Microsoft Dynamics AX. Download the free white paper now.

Now that Congress has issued another highway funding Band-Aid – a $10.9 billion highway bill through next May that former Transportation Secretary Ray LaHood blasted as “totally inadequate” – what can we expect as the infamously do-nothing 113th Congress winds down in the next month before taking yet another recess to prep for the mid-term elections?

Seasonally-adjusted (SA) for-hire truck tonnage in July headed up 1.3 percent on the heels of a 0.8 percent increase in June. The ATA’s not seasonally-adjusted (NSA) index, which represents the change in tonnage actually hauled by fleets before any seasonal adjustment, was 133.3 in July, which outpaced June’s 132.3 by 0.8 percent, and was up 2.8 percent annually.

Volumes for the month of July at the Port of Long Beach (POLB) and the Port of Los Angeles (POLA) were mixed, according to data recently issued by the ports. Unlike May and June, which saw higher than usual seasonal volumes, due to the West Coast port labor situation, July was down as retailers had completed filling inventories for back-to-school shopping.

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.