CHINA (OBSERVATORY NEWS) — The approach of the end of the central role of the Middle Kingdom in global supply chains is becoming increasingly evident. The microbe and the reaction of the Chinese government are rapidly destroying the supply chain of the planet.
Americans are very unhappy. “I spoke on the phone with the leaders of several hospitals in New York and they told me that they have contracts with Chinese companies, according to which they should be supplied with products such as medical rubber gloves and masks. All this was loaded onto ships and was already preparing for shipment to the USA, but the Chinese government said: “No, no, no, unload, we ourselves need these products,” Maria Bartiromo said on February 19 in her program on Fox Business Network. “Who will now trust China when he signs new contracts?”
Peter Navarro, another well-known American television presenter, in his program on Fox News on February 23, named additional reasons for the decline in ties with Chinese suppliers. According to his data, China first imposed export restrictions on medical masks used to protect against COVID-19 coronavirus, and then nationalized the American factory that produces them there.
Whatever the goods, interruptions in supply will last longer than many analysts predicted. Giant container ships do not call at Chinese ports or leave them only 10% full. At Long Beach, California, container shipping decreased by about 40%, mainly due to closed Chinese facilities.
Chinese factories were supposed to open on February 9 or 10 days after the lunar new year. However, many of them are still not working.
Some experts expect that the shortage of goods will become noticeable in US retail stores in mid-April. Hypermarkets are most vulnerable, as they usually have minimal inventory, so Walmart shelves may be empty as early as March.
What about the availability of an iPhone phone this spring. On February 17, Apple announced that it was likely to fail to meet its revenue forecast for the current quarter, in part because of delays in deliveries, writes Gordon Chang, author of The Coming Collapse of China, in The National Interest.
The slowdown of the Middle Kingdom turned out to be more serious than many expected. Analysts, relying on the SARS experience in 2002-03, predicted “V” – fast – recovery.
But this time, recovery may resemble the letter “L”, in large part because interruptions and destabilization are more widespread than then. Even the most successful companies were taken by surprise. Apple, which is highly dependent on the Chinese market, has released a highly optimistic forecast on January 28 or less than three weeks before announcing an expected decline in revenue – an eloquent testament to the rapid erosion of the Chinese economy.
It also points to America’s dependence on China for the supply of essential goods (more important than telephones). China’s problems seem to lead to a shortage of 150 prescription pharmaceuticals, some of which are “unparalleled” in the United States. Meanwhile, Beijing said last week that it wants to have an even more important role in global health supply chains. The epidemic, however, suggests the need to move in the opposite direction. After all, why would anyone become even more vulnerable to an unreliable supplier?
Foreigners were strategically short-sighted, relying on China’s unstable and authoritarian regime for the supply of goods. Although any addiction can be dangerous. “In such crises, we have no allies,” says Navarro. – Back in 2009, during the swine flu epidemic, our best friends in Australia, the UK and Canada, in fact, denied us what we really needed. Australia refused to ship 35 million doses of the vaccine. ”
The United States is currently working on supply chain issues. On July 21, 2017, President Trump issued a decree “On Evaluating and Strengthening the Industrial and Defense Industrial Base and Ensuring Sustainable Supplies from China to the United States.”
The desire to maintain the US industrial base, as is known, prompted the administration in 2018 to impose duties on imported steel and aluminum in accordance with section 232 of the Trade Expansion Act of 1962. These heavily criticized duties were a sure step, primarily for national security.
In this light, the duties that Trump imposed against China in accordance with section 301 of the Trade Act of 1974 should also be taken into account. These duties, which cast doubt on the future of US-Chinese trade ties, are encouraging companies to move part of their supply chains from the Middle Kingdom.
Of course, with the opening of factories in China, companies were able to offer goods at a lower price, but now the world sees better the other side of inexpensive goods. A shift to self-reliance will make products more expensive, but at least they will always be available.
This article is written and prepared by our foreign editors writing for OBSERVATORY NEWS from different countries around the world – material edited and published by OBSERVATORY staff in our newsroom.
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