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Red Sea crisis pressures China's exporters as shipping delays, costs mount
The rupture of one of the world's busiest shipping routes has exposed the vulnerability of China's export-reliant economy to supply snarls and external demand shocks.
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Yantian Port in Shenzhen in China's southern Guangdong province - pictured on June 22, 2021 - is China's largest container terminal. (AFP/STR)
F
or Chinese businessman Han Changming, disruptions to Red Sea freight are threatening the survival of his trading company in the eastern province of Fujian.
Han, who exports Chinese-made cars to Africa and imports off-road vehicles from Europe, told Reuters the cost of shipping a container to Europe had surged to roughly $7,000 from $3,000 in December, when Yemen's Iran-aligned Houthi movement escalated attacks on shipping.
"The disruptions have wiped out our already thin profits," said Han, adding that higher shipping-insurance premiums are also taking a toll on Fuzhou Han Changming International Trade Co Ltd, the company he founded in 2016.
The rupture of one of the world's busiest shipping routes has exposed the vulnerability of China's export-reliant economy to supply snarls and external demand shocks. In a speech at the World Economic Forum in Davos on Tuesday, Premier Li Qiang emphasized the need to keep global supply chains "stable and smooth", without referring specifically to the Red Sea.
Some companies, such as US-based BDI Furniture, have said they are relying more on factories in places such as Turkey and Vietnam to mitigate the impact of the disruptions, adding to recent moves by Western countries to reduce dependence on China amid geopolitical tensions.
At stake for China now is the danger that other firms will follow suit and reassess their de-risking strategy, opting potentially to shift production closer to home, an approach known as "near-shoring".
"If it's permanent, and it could be permanent, then the whole mechanism will be readjusted," said Marco Castelli, founder of IC Trade, which exports Chinese-made mechanical components to Europe. "Some [companies] may also consider moving more production to India, which is one week closer to Europe. Companies need to reevaluate everything."
