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

When the United States House of Representatives last week voted extend current law and authorizes surface transportation programs through the end of July by a steep margin, it was widely expected that the United States Senate and follow their lead. That is exactly what happened on Friday, May 22, with the measures headed to President Obama to be signed into law.

For the month of April, Cass and Avondale found that truckload rates in April, which measures truckload linehaul rates paid during the month, were up 3.8 percent annually, while intermodal dropped 1.9 percent annually during the same period.

Following the Pacific Maritime Association (PMA) signing off on ratifying a new five-year contract with the International Longshore & Warehouse Union (ILWU) on May 20, the ILWU followed suite on May 22, saying that 82 percent of its longshore worker members voted to ratify the tentative contract agreement between the parties that was reached on February 22.

Straying from its typical seasonal trajectory, United States-bound waterborne shipments dipped from March to April, according to data recently issued by Panjiva, an online search engine with detailed information on global suppliers and manufacturers.

One theme tied together all of the presentations, regardless of the topic: The importance of data.

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.