What does the Year of The Ox hold for China Trade?

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As the year of the Rat comes to an end and we celebrate the start of a new year, the Ox is perhaps appropriate given the current world climate where hard work will be required by all to pull out of this.

It has of course being a challenging year for all and at China-UK TC we have had a very busy year.  The year started with disruption in China caused by the outbreak and ensuing lockdowns.  Then we saw some of our customers putting plans on hold whist seeing how the pandemic evolved.  Supplies of PPE became a big focus for us as many companies approached us for supplies.  Because we routinely check certification of products for our suppliers we were in a very good position to ensure the PPE we sourced did meet the certification requirements of our customers (unlike many well publicised examples of sub standard PPE).  Many of our customers continued to trade often driven by a thriving online market.  Over the past 3 months we have seen a very significant increase in enquiries with companies looking beyond Covid and planning for the future, some looking to invest in and export to China, others looking to manufacture and source in China.  We never cease to be amazed by the ingenuity of UK citizens to invent new products, many if whom need to be manufactured in China to make them economically viable.

Times of world upheaval, such as wars, pandemics and natural disasters always lead to periods of rapid change.   There will inevitably be winners and losers in this process.  We have of course seen many examples of companies struggling – in the travel industry, the entertainment industry and of course the high street.  What is often less well publicised are the winners – those new businesses emerging and those who have been able to adapt and are now flourishing.  We have seen increasing number of such businesses contact us for help over the past few months.

There have been some challenges over the past year – particularly in the area of logistics.  At the beginning of the year we saw soaring air freight charges with prices rising 10-20 fold which was accompanied by often lengthy delays.  This was driven by the duel effect of a huge reduction in passenger flights coupled by an urgent demand for PPE much of which couldn’t wait for the 2 months it would take by sea.    Then we saw the problem of congestion in UK ports, particularly our three major ports Felixstowe, London Gateway and Southampton.  This led to vessels arriving late, others leaving early having only partly unloaded and others simply avoiding the UK altogether and offloading containers elsewhere.  We have written more about this here .  More recently we have seen severe shortages of equipment in manufacturing countries and in China and particular.  As a result the price of shipping a container from China to the UK has risen 4-5 fold.  In many cases it became a question of can you get a container at all! This has had a significant effect on trade with some customers chosing to postpone shipping or cancel orders altogether.   The effect on LCL loads has been less due to the higher margins build into that trade.   Those that have shipped have had to swallow the increased costs and this will inevitable be passed onto consumers over the coming months.

So what does the future hold in the year of the Ox?   Firstly the new businesses are likely to continue to flourish and prosper.  There are already signs of trade starting to return to normal.   The problem of a shortage of containers is likely to be resolved over the coming months although we expect it will take a little time before prices return to near normal levels.  There is a lot of political interest, mainly in Asian exporting countries and in China in particular in getting this problem resolved before it hurts trade too much.  At present visiting China is virtually impossible and this will hamper trade and new orders but there is no sign on the Chinese government lifting these restrictions any time soon given their very strong and understandable resolve to keep Covid out of China.  Our office and staff in China have proved invaluable to our customers who have been unable to visit and we will continue over the coming year to support our customers visiting facilities in china on their behalf.  Vaccine passports may lead to a way out of this later in the year.   Inflation in the UK is inevitable given the increased costs of shipping, but this may in part be offset by reduced manufacturing costs in China caused in part by factories keen to re fil their order books and a strong pound.

Finally we would like to wish all our customers, old and new a very Happy and prosperous new year.  新年快乐