China’s exports have suffered the greatest share under the circumstances of a shaken economy by the covid lockdown, the Ukraine war, and the increasing interest rates in the U.S and E.U. The higher shipping costs and increasing demand from consumers have resulted in the augmentation of the price of basic consumer goods. In the current months, China’s exports exhibit an evident slowdown. The data exposes a decrease in China’s exports to 3.9% in April 2022 from 14.70% in March of 2022 shown in the following graph,
Graph 1
China exports yoyapril 2022 data – 1991-2021 historical – may forecast – calendar. China Exports YoY – April 2022 Data – 1991-2021 Historical – May Forecast – Calendar. (n.d.). Retrieved May 12, 2022, from https://tradingeconomics.com/china/exports-yoy
Some economists have addressed the situation expressing their concern about the risk this issue represents to the global economy and to the supply chain. China is the World’s second largest economy and was accounted for approximately 18% of the global gross domestic product in 2021, according to HSBC. Moreover, according to the World Trade Organization, China accounts for 15% of the entire global goods exports, and according to the data provided by the United Nations in 2020, for 29% of the global manufacturing output.
According to the World Shipping Council, Shanghai is the world’s busiest container port, however, the city has been locked down for more than a month enabling the exports to fall by 0.9% in April. Consonant to data, shipping accounts for at least 90% of the movement of goods around the world, becoming the principal and most efficient method of transportation, however, due to the diverse issues previously mentioned, the cost of transporting by sea has considerably increased in the past year. In fact, the Drewry world container index indicated that the cost of moving a 40ft container increased approximately 170% in comparison to last year. Moreover, the price in demand for transportation routes from Shanghai to Rotterdam has increased by almost 200%. In addition to the sea transportation disruption, more than a million containers that were meant to travel to Europe from China by train, on a route that passed through Russia, must now make their journey by sea, as a sanction. Therefore, Russia’s invasion of Ukraine has also affected the supply chain causing the prices of certain commodities to skyrocket.
The supply chain is quite complex, interconnected, and delicate to be made utterly immune to shocks, exclusively ones such as seismic as a global pandemic equally to Covid 19 or a major war. Therefore, continuing pressures introduce in this new reality obligate companies to embrace new strategies with an advanced approach to grant the flow of goods worldwide. However, the disruption in the supply chain has represented some serious consequences in the global economy where the new reality is characterized by backlogs and breakdowns as disruptions have become the new normal.
The supply chain disruption can be represented in the following graphic which emerges from a mathematical model of the feedback between global supply chain disruption and covid 19 dynamics, developed by the University of Michigan and the University of Georgia in 2021. The graphic illustrates the current scenario with critical stock availability; rapid increase in demand and shortage in essential raw materials due to the disruption in the global supply chain.
Graph 2
Li, X., Ghadami, A., Drake, J. M., Rohani, P., & Epureanu, B. I. (2021, July 29). Mathematical model of the feedback between global supply chain disruption and Covid-19 Dynamics. Nature News. Retrieved May 12, 2022, from https://www.nature.com/articles/s41598-021-94619-1
Figure 1a of the graph it is illustrated a digital supply chain network that includes the activities, individuals, entities, information, and resources across the diverse industries in the market. The arrow line represents the supplier customer relationship enhanced between supplier-customer and manufacturers in the supply chain. Figure 1c exposes the feedback between shortages of healthcare resources, supply chain, and local disease dynamics. Under the pandemic conditions, the supply chain is disrupted as the production process is threatened due to the restrictive transportation, shortage of raw materials from suppliers, lockdown restrictions, and changes in demands.
According to economists and experts the emerging issues due to the disruption in the supply chain could persist as the delicate calibrated network of world trade is weakened due to months of shipping backlogs, labor shortages, and geopolitical tensions that have triggered a chaotic “ripple effect” worldwide. The global supply chain has buckled and is at risk of being broken completely.
References:
Douglas, J. (2022, May 9). China’s trade slows as demand drops and covid-19 lockdowns hit supply chains. The Wall Street Journal. Retrieved May 12, 2022, from https://www.wsj.com/articles/chinas-trade-slows-as-demand-drops-and-covid-lockdowns-hit-supply-chains-11652088372
Farrer, M. (2021, December 18). Global Supply Chain Crisis could last another two years, warn experts. The Guardian. Retrieved May 12, 2022, from https://www.theguardian.com/business/2021/dec/18/global-supply-chain-crisis-could-last-another-two-years-warn-experts
Knight, W. (2022, March 28). The supply chain crisis is about to get a lot worse. Wired. Retrieved May 12, 2022, from https://www.wired.com/story/supply-chain-crisis-data/
Li, X., Ghadami, A., Drake, J. M., Rohani, P., & Epureanu, B. I. (2021, July 29). Mathematical model of the feedback between global supply chain disruption and Covid-19 Dynamics. Nature News. Retrieved May 12, 2022, from https://www.nature.com/articles/s41598-021-94619-1
China exports yoyapril 2022 data – 1991-2021 historical – may forecast – calendar. China Exports YoY – April 2022 Data – 1991-2021 Historical – May Forecast – Calendar. (n.d.). Retrieved May 12, 2022, from https://tradingeconomics.com/china/exports-yoy
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