Trade: Throwing Oil on the Fire

From The International Herald Tribune. Particularly noteworthy (i.e. scary):

“China will resort to tariff and trade policies to facilitate export of labor-intensive and core technology-supported industries,” Li Yizhong, the minister of industry and information technology, said at a conference Dec. 19.
Increased export incentives by China have the potential to create a trade issue for the incoming U.S. administration of Barack Obama, particularly regarding textiles.

China’s measures to help exporters are starting to cause concern in other Asian countries that compete with it, and raise the risk of a protectionist reaction against China. Indonesia, one of the largest Asian markets, imposed a series of administrative measures Thursday that were meant to reduce smuggling but will have the practical effect of making it harder to import Chinese goods.

Looks more and more like the crash precipitated in no small part due to reliance on the export model and credit is to be combated by redoubling of key policies of the export model; and this without the credit!

Rising desperation as China’s exports drop

International Herald Tribune
By Keith Bradsher
Thursday, January 1, 2009

HONG KONG: At the docks here, the stacks of shipping containers that used to loom above the highway overpass are gone. Logistics managers say they negotiate deeper discounts every week on ships that are leaving half empty.

In nearby Guangdong Province, so many factories are closing without paying employees that some workers are resigning pre-emptively and demanding immediate pay before their employers go bankrupt.

In Sichuan and other interior provinces, municipal officials are desperately searching for ways to provide jobs for millions of out-of-work migrant laborers whose families no longer need them for farming.

Those are the effects of millions of Americans’ cutting their spending.

American retailers, after suffering a dismal holiday shopping season, are delaying payment for Chinese goods 90 or even 120 days after shipping, in contrast to the usual 30 to 45 days, requiring their suppliers to try to borrow more money to cover the difference. Some Chinese suppliers who cannot raise the money – many already operate on thin margins – are going out of business.

At the same time, retailers are demanding that exporters show that they have strong balance sheets and will not go bankrupt before completing orders. Exporters, worried the retailers will fail before paying for their purchases, are reluctant to let goods be loaded onto ships. And banks, for the same reason, have cut back on guaranteeing retailers’ payments to exporters.

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