FEATURE – After Containing COVID-19, China Manifests Manufacturing Power Amid Global Pandemic
MOSCOW (UrduPoint News / Sputnik – December 17, 2020) From the sharp drop in overseas orders in April to the battle to meet skyrocketing orders in November, Chinese exporters told Sputnik how their fortunes turned so quickly, despite being the first in the world experienced disruption from the COVID-19 pandemic.
Workers were scheduled to return to the factories of Shenzhen Remax Corporation, an electronics manufacturer, by February 9, when the Chinese New Year holidays ended. For more than two months, the company’s managers struggled to find enough workers to fill the production line as Chinese authorities put strict containment measures in place to curb COVID-19 transmissions in the country.
“We had to spend about 1,000 to 1,500 yuan ($ 150 to $ 230) hiring each employee. We used recruitment agencies, posted job advertisements, and even paid commissions to workers who could help recruit their friends,” said Zhang Jilin , Marketing Manager at Shenzhen Remax Corporation, said Sputnik.
When the company finally recruited enough workers to resume production in early April, its overseas customers’ orders dried up as the COVID-19 pandemic spread to Europe and the US and wreaked havoc there.
“After China contained the domestic COVID-19 outbreak in April, the pandemic was emerging in other countries. So everyone was very concerned because our orders dropped to around 30 percent of the level from April to June during the same period Last year, “said Zhang.
However, when the strict lockdowns were lifted in Europe and the USA in the summer, orders for Chinese exporters such as the Shenzhen Remax Corporation recovered. China cemented its role as the “Factory of the World” in recent months as industrial production in the country continued uninterrupted as COVID-19 continued to disrupt production in the rest of the world.
China’s manufacturing strength was evident in November, when the country’s exports saw record growth.
According to official figures from Chinese Customs, Chinese exports rose 21.1 percent year over year to $ 268 billion in November, while the country’s trade surplus rose 102.9 percent year over year to $ 75.4 billion rose.
In addition to high demand for Chinese-made medical supplies, home appliances and electronics were among the country’s fastest growing exports as locked-down overseas consumers bought more such products as they were forced to spend more time at home.
For Shenzhen Remax Corporation, Apple’s decision in September not to bundle a charger with the new iPhone 12 resulted in the company’s 20W charger for the iPhone flying off the shelves.
According to Zhang, the marketing manager at Remax, the company has recorded a year-on-year growth of 50 to 80 percent in orders since September. The company used to produce around 250,000 chargers that can fill a 40-inch shipping container every two days. Today enough products are produced to fill two to three such containers a day.
Due to the high demand, Remax will not be able to process orders from new customers until April or May.
“It is also thanks to the Christmas shopping season in the US including Thanksgiving, Black Friday, and Christmas. This is an important shopping season for our overseas customers,” he said.
With the US and many countries in Europe still not containing local COVID-19 outbreaks in recent months, the lockdown measures affected local manufacturing capabilities and led to more purchases from China, Zhang said.
“Because of the local COVID-19 outbreaks, many countries have had to stop local production of home appliances and electronics. As a result, they have had to buy more from China, which helped Chinese exporters experience explosive growth,” he said.
The skyrocketing overseas orders even resulted in a shortage of shipping containers in China. Shenzhen Remax Corporation had to postpone an order for a customer in Thailand by two weeks this month after the company failed to secure a shipping container to ship its products.
The shortage of containers also brought shipping costs to new heights.
“In early April, it cost $ 1,200 to ship a 40-inch container from Shenzhen to the west coast of the United States. Today the same container costs over $ 4,000 for the same route. That’s not even the biggest increase in shipping costs Containers to India rose from $ 200 before June to over $ 4,000 today, “Long Jianjun, general manager of Shenzhen A&E Container Transportation Corporation, told Sputnik.
According to Long, the shortage of containers forced many shipping companies to operate their ships with a loading capacity of 60 to 70 percent.
As many countries tightened hygiene control and disinfection requirements as part of the COVID-19 pandemic, it took longer for the shipping containers to clear customs, unload the products and return them to the port of origin.
“Before the pandemic, it typically took about 45 days for a container to make a round trip from China to the west coast of the United States. Today, the same round trip would take at least 75 days,” Long said.
Still, Long stated that shipping delays of containers weren’t the main reason for today’s shortage.
“In 2018 and 2019, the entire shipping industry was in a recession and many shipping companies suffered massive losses due to the impact of the trade war between China and the US and the slow development of world trade. As a result, many companies stopped their ships prematurely and led to it Shipping capacity for the entire industry decreased by about 40 percent. As demand increased in the face of the pandemic, the overall industry capacity was clearly insufficient, “he said.
As a result, shipping companies also rushed to order more new containers, which drove up the cost of manufacturing such containers.
“In April or May, a new 40-inch container that could be delivered in 100 days cost around $ 1,800 bail. Today, not only do you have to pay $ 2,800 for the same container, but you also have to pay for the earliest Expect delivery date for the new container is next September, “said Long.
Long expects the shortage of shipping containers to persist until at least the first half of next year as China’s exports are expected to continue to see explosive growth due to strong overseas demand amid the global pandemic.
Before the COVID-19 pandemic broke out in China’s Wuhan last December, the country’s exports came under heavy pressure from high US tariffs as Beijing and Washington were embroiled in a bitter trade war for more than a year.
China’s exports declined for consecutive months from August to November last year as a number of Chinese manufacturers considered relocating production to neighboring Vietnam to avoid high US tariffs.
According to the US Census Bureau, China’s exports of goods to the US fell to $ 451.7 billion in 2019, a 16.2 percent decrease from the previous year.
Although both sides signed an agreement in January that put the bilateral trade war on hold, much of the US tariffs remained in place.
However, production disruptions due to COVID-19 in the rest of the world forced U.S. buyers to turn to Chinese manufacturers again amid higher demand for medical supplies, home appliances and electronics.
According to official figures from Chinese customs, China’s exports to the United States rose 46.09 percent in November and 22.46 percent in October compared with the same months of the previous year.
Chinese economists said the COVID-19 pandemic demonstrates the resilience and strength of China’s manufacturing industry.
“Moving production from China to neighboring countries like Vietnam is a long-term and slow process. I think the COVID-19 pandemic has exposed the weaker production capacity in these countries. Vietnam’s successful containment measures also made it possible to continue production. The same thing Vietnam may not have the full supply chain to complete this massive contract as quickly as China, “Shen Xinfeng, chief macro-economics analyst at Northeast Securities, told Sputnik.
The economist pointed out that Vietnamese exports did not grow as fast as Chinese ones in the second half of this year.
Still, Shen believes the COVID-19 pandemic won’t be enough to reverse the trend of certain manufacturing sectors migrating from China to neighboring countries.
“I don’t think we can say that the relocation will stop happening as it is a long-term trend for China to lose its advantage on labor costs. So I think the relocation will still happen. But the COVID -19 pandemic can change the speed of moving, “she said.
China’s export boom amid the COVID-19 pandemic is not sustainable, the economist emphasized.
“I tend to believe that this is unsustainable. Otherwise our government would not propose a new double-edition strategy to focus on stimulating domestic demand. This strategy is forward-looking and aims to address future problems [with exports]. That trend won’t change because of the pandemic, “she said.
Although the COVID-19 pandemic boosted demand for Chinese goods from overseas, China’s domestic consumption remained sluggish as tough COVID-19 containment measures hurt consumer confidence.
According to the latest data from the National Bureau of Statistics, average consumer spending in China fell 6.6 percent year over year in the first three quarters of 2020.