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As the Year of the Wood Dragon 木龙年 commences what does the future hold?

At the time of the Chinese Spring Festival it’s a good time to reflect on what has happened over the past year and what may possibly occur over the coming year.

The year started with the final relaxations of Covid restrictions in China and the opening up to trade.  Shipping rates had fallen below pre covid levels making trade with China ever more attractive.   Covid had affected the way all trade was done. Closure of wholesale markets had driven trade on line, increased security and surveillance had also affected trade adding additional administrative burdens, slowing of world economies had dampened demand and trade which helped hold prices of raw materials down.  China was not immune to this and like most other countries experienced a slowing in its economy.  Major world events such as the conflict in Ukraine continued to effect economies and the confidence of businesses.   In the latter part of the year troubles in the Red Sea and in particular attacks on commercial vessels in the Bab al-Mandeb Strait has led to shipping lines rerouting sailings from Asia to Europe via the Cape of Good Hope.  The disruption and delays caused to deliveries has been unwelcome but the exorbitant increase in shipping costs has been far more damaging.  Container rates have more than trebled and although shipping costs have increased due to longer distances, increased time and security costs it’s hard to justify the level of rises and there appears to be a degree of opportunistic profit taking by the shipping lines which is regrettable.  We will see when they announce there latest trading figures whether this is indeed the case.

So what is the outlook for the new year?  On a positive note manufacturing in China remains stable with plenty of capacity, prices are also fairly stable. There continues to be a large highly trained workforce and their factories investments in advanced manufacturing facilities remains impressive enabling the production of very high quality goods.   The country continues it’s longstanding investment in infrastructure which is a huge bonus to trade and manufacturing.  The drive to cleaner manufacturing and to reduce pollution in China continues and this will inevitably drive up prices a little but is a bonus for UK and European countries looking to increase their green credentials.

It seems likely the troubles in the Red Sea will continue in the short term despite efforts by various western countries to create safe passage.  However there is usually a natural falling in shipping prices post CNY due to falling demand and hopefully this will result in a more significant reduction is shipping rates.

Travel to China to inspect factories and goods, something which has been nigh on impossible for the past four years is now much easier and indeed the China government appear to actively encourage such visits with relaxing, and in some cases abolishing visa requirements for visits.  The message clear is China is very much open for business.

We have had a very busy year with an increase in referrals and companies looking to trade with China – many now resulting in productive trading contracts.  Unfortunately there are still unscrupulous traders in China (like many countries) looking to cheat customers and a significant part of our work is protecting customers from these companies and guide them to bonafide traders with whom they can trade safely. We expect this to continue over the coming year as firms look to hold costs down at a time of continuing inflation in the UK and Europe and financial pressures on consumers continue.   China is a natural place to look to reduce manufacturing costs and something we are well positioned to help with.  We continue to enable companies to trade with China safely and with confidence.