The Bufferfly Effect of Subprime Mortgage Crisis
A butterfly bat wings on the bank of Amazon River in Brazil could result in a tornado in Texas one month later. The butterfly effect in meteorology is staging in economic life. The butterfly effect triggered by U.S. real estate bubble impact China's finance and trade through passing ring upon ring.
From last year the increase of China's exports to U.S. began to decline gradually, the year on year increase in the first quarter of last year is 20.4%, but in the second quarter it shrinked to 15.6%, after the subprime mortgage broke out last July, the increase in the third quarter is only 12.4%, and in the fourth quarter it was only 10.8%。And by this February, it took on the negative growth of 5.2%.
Encumbered by the U.S. market, China's export increased 21.4% in the first quarter of this year, which declined 6.4% compared with the same period of last year.
Shrinking North America Shipping Route
In past years, peak seasons of North America route usually started from April. This once prospective "Golden Route" suffers from cargo shortage now.
In the containerized traffic market's analysis by the Shanghai Shipping Exchange of China, space occupation rate in Western America route only maintains at 70%~80%, in Eastern America route, below 70%. Due to shrinking demand, carriers are very careful about shipping businesses in North America routes. Many international carriers cancelled sailings, reduced frequency or consolidated the space. MAERSK, MSC, CMA CGM have begun cooperation in the Pacific route, reduced frequency, shared marketing stress. Sailings of MSC Los Angeles liners has reduces from 4 sailings a week to 1 weekly. WANHAI has even retreated from the battle field.
Despite of the fact that the depreciation of the US dollar greatly stimulated exports of the United States, since what Asia imports from the United States is mainly waste paper, scrap steel and other low-value commodities, it is difficult to offset weakness on the reverse route.
In the first season of this year, crude oil price rises, COSCO and Maersk slow down their vessels. Deceleration has reduced the fuel consumption but delayed the lead time, caused exchange rate loss to consignor. With appreciation of RMB, more consignors are willing to choose the shipping line who maintains their vessel speed.
" For China's shipping industry, 2008 will be a difficult year." A senior industry insider said. Raise of labor force cost, appreciation of RMB, export tax rebate and other uncertain reasons, as well as the recessionary purchasing power of the United States has all contributed to the cargo quantity reduction in US shipping route. In the first season of this year, the number of containers exported from China to the U.S. decreases by almost a quarter compared to last year. At present, almost this whole route is losing money.
Crisis Spread to Large companies and big orders
Owing payment and financial difficulties are occurred among a large number of customers in the United States this year, with the spread of the crisis, Chinese enterprises may encounter the same trouble in the series market of Europe and Latin America. The Sinosure indicates, at present, the credit risk of many industries and the relative buyers in the surrounding areas of the U.S. including European Union continues to rise.
The Sinosure provides a series of advice to their customers against the severe situation, including strengthening contact with overseas customers, making full use of credit investigation, Intra-industry exchange of information, participating in the exhibition, visiting customers, tracking the trends of the customers' credit and strengthening the dunning of the payment.
We must intervene and solve it as soon as possible but not sit on the fence with lucky when the abnormality occurs, suggested by the Sinosure. Chinese enterprises should strengthen their internal management of the contract documents, and note to collect e-mails, phone calls between the two sides, particularly the written information for later use.