China Imports and Its Impact on the Freight Forwarding Sector

Freight forwarding companies in China are becomingfailed, with a knock on effect for businesses in the
increasingly bullish in the face of the worldwidefreight transport and freight services sectors.
financial crisis. Demand for China import across theVictor Fung, Chairman of the Li & Fung Group,
globe has been a major factor over the last couplethe supply chain management group that connects
of decades and China's exports have seen rapidfactories in China with reailers in the United States
growth. This has taken China to the position of beingand Europe seeking China imports, was quoted in
the world's largest exporter in 2009. Despite a2009 as saying: "Trade finance is collapsing. We've
significant fall off in demand for China imports in 2008got orders we can't ship right now.' It is clear to see
and 2009 as the recession and credit squeeze hasthat the impact of this has been significant on many
meant less disposable income for many consumers ininternational freight businesses, such as freight
key markets for China imports such as the Unitedservices and shipping companies.
States and the UK, the outlook is reasonably positiveDuring the downturn, logistics managers have often
as there now starts to be signs of recovery inbeen able to negotiate significant discounts with
China's key export markets. It is therefore expectedshipping companies, as some ships have left China's
that China will be able to regain its position as worldports with significant capacity still available.
export leader and that the fortunes of theThe downturn in demand for China imports has not
international freight market will recover in tandem.been consistent across all sectors. Consumer
Following an approximate 20% decline in volumes ofelectronics manufacturers have been amongst the
China import goods being sent overseas by shippinghardest hit with a big decline in consumer demand for
companies in 2009, the market is expected to growmini hi-fi systems.
by around 10% in 2010, so this should reassure everyTo help offset the problems, the China government
shipping company and freight company that hashas introduced a raft of measures designed to help
struggled to maintain profitability during the economicbusinesses survive the decline in demand. These have
slowdown. It will also help reassure the Chinaincluded directions to state banks to lend more
government which has taken drastic steps over themoney to small and medium sized exporters, support
last couple of years to try to protect the chinafor letters of credit and a restoration of export tax
import business, in the face of a drop off in factoryrebates for the textile sector. In addition, there has
orders, which in some places in China has resulted inbeen a halt to raising of the minimum wage, again to
factory closures and mounting unemployment, withhelp employers weather the decline.
the various social problems that can cause.One of the factors that has adversely affected
In Guangdong Province, there have been so manyChina imports is the number of trade remedy
instances of factories closing without paying theirmeasures launched by other developed nations and
employees that some other employees are resigningthe growth of trade protectionism.
and demanding payment in advance of theirHowever, with the robust actions taken by the
employers going bankrupt.Chinese government to try to minimise the impact of
The problems have been exacerbated by somethe economic slowdown and the slowly improving
American retailers delaying payment for their Chinaeconomies worldwide, the outlook for overseas trade
import goods, some for example taking 120 days tois now looking more positive. This bodes well for the
pay instead of the usual 30 to 45. This means thatcontinued development and strength of freight
their suppliers need to borrow the difference and fortransport and the international freight sector in China.
many, this has not been possible, so businesses have