Note: Today’s post is part of our “Editor’s Choice” series where we highlight recent posts published by our sponsors that provide supply chain insights and advice.
Geopolitical uncertainties such as Brexit, the China-U.S. trade war, and the trade conflict between Japan-Korea all impact today’s shipping market. A lot of C.H. Robinson’s coverage of these and other disruptions has focused on what it means for companies shipping into North America. But these same disruptions are also causing serious challenges to the transportation industry in China and Asia at large.
The immediate effects in China
As you might imagine, the high tariffs imposed in the China-U.S. trade war have negatively impacted China’s economy. Several trends are already apparent.
Consumption is weakening and retail sales are down
According to The World Bank, this downward path could end up reducing China’s domestic consumption of imported products by 6% before the end of 2019.
Production is leaving China
While once China may have been on track to becoming “the world’s factory for goods” that trajectory has changed. Now China is quickly becoming a consumption country. The South China Morning Post reports that China’s annual GDP growth has already fallen 6.2% in 2019—a downward trend that indicates what’s in store for the future. Labor-intensive products such as textiles, apparels, footwear, and furniture are the first industries whose production will leave China.
China is offering incentives for factories moving west
In an effort to keep production within China, the government has offered many incentives for companies who agree to move production into China’s western region. Areas like Sichuan, Guizhou, Yunnan, Shaanxi, Gansu, and Qinghai come with cheaper labor and lower expenses compared to China’s coastal cities. Unfortunately, moving factories west also creates extra expenses for inland freight as well as added transit time from the port terminal.
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Schnell Jeng is the Director of Product & Services of C.H. Robinson, Asia. He has worked in the freight forwarding and logistics industry for over 35 years and brings a great wealth of expertise and experience in air freight and contract logistics. Schnell serves as the Executive Director, responsible for training and development of the Taipei Airfreight Forwarder and Logistics Association of Taiwan, and Taipei Customs Brokers Association. He holds a Master Degree in International Business Management from National Taiwan University and also a Customs Broker License in Taiwan. He is also a qualified instructor for FIATA (International Federation of Freight Forwarders Association) in freight forwarding and supply chain management courses and qualified instructor for IATA (International Air Transport Association) in Air Cargo Introductory course.
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