Uh-oh! What’s happening with China?
In the past two weeks,China has been in the news for all the right(?!) reasons. Last week,the World Bank informed that China’s economy is showing signs of softening while yet forecasting a 9.5% growth in 2010,though it grew 11.9% in Q1. But,as we all know so well,exports has been China’s forte for years and the cracks have started to appear for several reasons.Rising costs for raw materials have eroded the country’s cost advantage as prices of manufactured goods have not risen at the same pace.The recent labour upsurge among migrant workers has only added to the woes.While the baby boomers are manageable; the younger,more assertive workers in their twenties may be harder to corral and that’s where the issue lies.The fact that average rural wages increased by 16.4% year-on-year says it all.
China’s most recent announcement to end the yuan’s 2-year peg against the dollar has resulted in short-lived joy,as was to be expected; since the timing was more politically motivated with the intention of appeasing member nations at the forthcoming G20 summit meeting(in fact,the summit is in session as I write this post) in Toronto .The fact that the yuan is still to appreciate significantly is noteworthy and it will be awhile before that happens. A stronger yuan means higher prices for Chinese exports-the base of their economy,whilst at the same time implying competitive prices for the rest of the world’s merchandise.The silver lining,however,would be the surge in domestic demand,reduced inflation and a cut in import costs for the resource-hungry nation.Focus on internal growth would be the new maxim. For a populous nation,that is good news.
I am no political analyst,but definitely an economic analyst with a yen for market research.The reasons are obvious-the fortunes of the composites industry are so entwined with regional economies as also that of individual nations.Glass fiber producers outside China would have probably started rubbing their hands in glee at the prospects of the “unfair price advantage” fading and “an-almost” level playing field emerging-it has been a long wait indeed for them.
There have been numerous instances over the years of various Governments trying(unsuccessfully) to slap anti-dumping duty on low-priced glass fibers reinforcements from China without much success-that led many producers to embrace the “if you can’t beat them, join them” bandwagon.However,the unity with which the European Union(EU) came forward late last year in voicing their dissent and recommending a high anti-dumping duty on Chinese glass imported into the EU is indeed commendable.The grapevine has it that the Chinese glass fiber exporters may be in for some “news” on this front.Let’s wait for the official final verdict, however it may pan out. EU trade legislators earlier this month have started investigations into indiscriminatory dumping of textile glass fibers/open mesh fabrics and ceramic tiles also from China . This speaks volumes of the ripple effect being caused by underinvoiced products in the glass & ceramics industry that is hurting Europe in a significant manner. If China considered itself smart,the EU has shown that it is smarter(though belatedly)!
There is already talk of Mexico being the new China-what with its $7 an hour labour all-in cost,including benefits which matches the Chinese and makes it an attractive haven for manufacturers. Over the years,we have already seen glass and carbon producers set up shop in Mexico-it was more for reasons of low manufacturing cost than tequila,for sure!! A June 25 press notification,in fact,mentions plans of shifting of automobile manufacturing activity(by U.S. majors) from the U.S. to Mexico to a greater extent to take advantage of the attractive(lower) labor cost.
Readers should not castigate me as a China basher and think they have been zonked by this post! The composites industry,globally, has been very patient on this vexing issue for a long time.Perhaps justice,in its own convoluted way,is being meted out,albeit slowly.
Apparently,what goes down must ultimately come up!
Is this how the Chinese cookie crumbles? Time will tell. You can be the jury!!!
For all those soccer fans who are fervently praying for their country’s advancement to the quarters in the ongoing FIFA World Cup,the knock-out stage has just commenced.Good luck to you irrespective of your nationality.The winner will be crowned before my next post.
Till then……
Cheers,
Email: SS@essjaycomposites.com
Twitter: @essjaycomposite
Sundaram
ESSJAY Composites 