Products made in China face new logistics problems

On Thursday, July 22, 2021, the ship will depart from the container port in Lianyungang, Jiangsu Province, eastern China.

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Beijing — Chinese companies wanting globalization are facing transportation problems.

Access to cheap manufacturing at home has given Chinese companies an advantage abroad. But it is now becoming a disadvantage as pandemics and trade tensions disrupt international supply channels.

Fang Xueyu, vice president of international marketing and general manager for the Asia-Pacific region of Chinese consumer electronics company Hisense, said many products could not be shipped.

In a Mandarin interview last month, she said that shipping costs for containers have each quintupled from about $ 3,000 to up to $ 15,000, but it will take about a week longer to reach Europe.

From the congestion of the Suez Canal in March to the reappearance of the Covid incident around Guangzhou’s major Chinese export hub in June, logistics turmoil has hit world trade one after another.

Alexander Roth, Executive Vice President of Overseas Business at a Chinese electric vehicle startup, said: Aiways.

“So I had to rebook the shift and I had to delay the shift because neither the ship nor the container was available. That definitely affected us,” he said in June. I told CNBC in an interview.

For the company, which manufactures cars in China and sells them to Europe, Mr. Claus said the turmoil was “delaying some shipments by a few months just because the cars were sitting in the port and not being transported. “.

Foreign demand for products made in China remains strong, both from corporate accounting and official data. Customs said in the first half of this year, exports to the European Union were up 35.9% year-on-year to $ 233 billion and exports to the United States were up 42.6% to $ 252,860 million.

Hisense remains enthusiastic about expanding overseas, earning $ 7.93 billion in the international market during last year’s pandemic. By 2025, the company said it aims to triple its contribution to total sales from overseas markets to $ 23.5 billion.

Chinese multinationals are probably rediscovering what they have known for a long time. Their best growth opportunities are right in front of them.

However, shipping delays represent the latest challenges facing Chinese companies as they seek to enter the international market.

James Root, a partner at management consulting firm Bain, said that of the approximately 3,400 Chinese companies operating internationally, about 200 have sold more than $ 1 billion overseas. He said it wasn’t too much.

“Digging into it, early pioneers Lenovo, Hier and Huawei seem to be real exceptions, rather than paving the way for many Chinese multinationals (avant-garde). “Follow abroad,” said Route, referring to three internationally renowned Chinese brands.

He said these companies tend to “implement more export models for international business.” “Chinese multinationals are probably rediscovering what they have known for a long time. Their best growth opportunities are right in front of them.”

China is the second largest economy in the world, and many economists predict that China will outperform the United States and become the largest in the coming years.

Amazon bans, taxes and other risks

Other Chinese companies selling abroad have recently faced challenges from Amazon’s crackdown on fake reviews.

LiXinggan, Head of Foreign Trade at the Department of Commerce, said: Press conference earlier this month. It is due to the CNBC translation of his Mandarin remarks.

“We have always required companies to comply with the laws and regulations of each country, respect local customs and customs, and operate in accordance with the law.”

Chinese merchants may also face higher costs as the EU implements new tax systems on goods exported to the region.

The Chinese Communist Party’s official newspaper, the People’s Daily, wrote in an article in late June about the latest release of the Business Association: “Political, economic, compliance, logistic, and personnel issues that Chinese companies face when traveling abroad. Challenges have increased significantly. ” Report on the risks of Chinese companies going abroad.

“In recent years, improper identification and prevention of risk has become an important issue for Chinese companies’ (ability to go out),” the article said, according to the CNBC translation of the Chinese text.

Alibaba Air Cargo Benefits

For Alibaba, a major player in China’s domestic e-commerce market, its overseas expansion strategy includes investing in Cainiao, a logistics division.

William Wang, general manager of Alibaba’s international e-commerce business AliExpress Spain, France and Italy, said through partnerships with Cainiao and air freight charters from various companies, “a stable supply of air transport to European countries. I am doing it. “

As a result, he claimed that the AliExpress seller was able to deliver the product to the customer at no additional cost or delay.

However, air freight is usually much more expensive than freight transportation, making it impractical for exporting automobiles and large appliances.

More overseas warehouses and acquisitions

Logistics challenges mean that Chinese companies will further localize to the international market.

E-commerce companies build or rent warehouse space near European customers, allowing sellers to pre-ship products for storage there. When a customer places an order, the product simply moves from a nearby warehouse rather than crossing the continent.

According to statistics from the Ministry of Commerce of China, Chinese companies built about 100 new warehouses abroad earlier this year, following an increase of 800 last year.

Chinese companies are looking for other ways to establish their presence in overseas markets.

Next year, AliExpress plans to double its staff in France, Spain and Italy from just over 200, Wang said.

In the case of Hisense, Fang said he plans to buy more and build factories in different countries as tariffs make selling Chinese products more expensive in some markets, such as the United States. I did.

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