Understand why conflict in the Red Sea begins to weigh on the Chinese economy

[ad_1]

Attacks by Houthi rebels against merchant ships they consider “to have relations with Israel” are weighing on Chinese exports. Container ship in the port of Shanghai, in eastern China, in a photo from April 2022 Chen Jianli/Xinhua via AP After years of health restrictions due to Covid-19, the crisis in the Red Sea is the last straw for China, and worries exporters on the country’s east coast. In addition to delays in deliveries, they face rising prices. “There are two main impacts of this crisis”, explains Marco Castelli, founder of IC Trade, based in Yiwu, in the southeast of the country, which exports mechanical parts manufactured in China to Europe. “The first is the extension of shipping times. Transit times are longer. It takes about 20 to 25 days longer than usual. This is then a liquidity and inventory problem for customers and suppliers,” he says. “And the second impact is transport prices, which are increasing,” he explains. Container costs were multiplied by 3 or even 4, says the expert, depending on the urgency of delivery. Some importers have already canceled part of their orders. “It’s still better than it was during the virus. There are ups and downs in business, we are trying to adapt”, explains the intermediary, who works with many clients in Europe and Africa. “But I hope it doesn’t last. At the moment shipping is super expensive. We went from €2,000 to €6,000 a container to France. So those who aren’t running low on supplies say they will wait for the Chinese holiday next month, hoping that prices will fall again”, he laments. “I have a Moroccan customer who told me that they still had some stock and that they would wait until after Chinese New Year for delivery because shipping is very expensive at the moment. But customers who really need their products have no choice. For traders, stores must function and it is the end customer who will pay the price”, he says. Brazil-China trade balance breaks record in 2023 Slowdown Inflation weighs on consumers, but it can also slow down the entire production chain. The risk, in the long term, is that some customers will relocate their production with, again, two consequences in logistical terms, assesses Marco Castelli. “The first is that you have longer delivery and transit times, and you have to order more products to maintain your inventory level. Therefore, if you need more time, you will need more goods in your stock, as the next stock will arrive later,” he explains. “So, you have to spend money and eventually think about relocating your orders. But change is not that easy and, above all, it cannot be done quickly. The first consequence is, then, that the company has to buy more products and this leads to liquidity problems”, he adds. For some factories in China, trade with Europe and Africa represents up to 40% of global activity. That’s why , the crisis in the Red Sea could also weigh on employment. This explains Beijing’s concerns. “The waters of the Red Sea constitute an important international trade route for goods and energy,” said Mao Ning, spokesman for the Ministry of Foreign Affairs Chinese, on Friday. There is urgency, because in less than three weeks the Lunar New Year holidays begin, when around 300 million migrant workers go on vacation and factories close. FIND OUT MORE Who are the Houthis, an allied rebel group of Hamas attacking ships in the Red Sea EditorialAutomaticSELECT IMAGETitleMulticontent *Insert the title of the multicontent to be attached

[ad_2]

Source link