China Has Caught the US's Cold
The first and most important factor in China's decline is that the global economy is in full meltdown. In the United States and elsewhere, the consumer spending that drives demand for Chinese products has ground to a halt. As a result, China's once vast network of suppliers has been decimated. A recent article in the Financial Times reports that in China's largest export center, Shenzhen, 682 factories had stopped production or closed this year. Shenzhen has been China's leading export area since 1992.
Chinese consumer electronics manufacturers, which supply the guts of PCs, MP3 players, videogames and smartphones, are also struggling to remain profitable, according to market researcher iSuppli.
The apparel industry is suffering as well. The number of Chinese suppliers actively serving the US market dropped more than 70 percent in just three months-from 22,099 suppliers in July to 6,262 suppliers in October, according to the most recent supply chain data from Panjiva, which tracks the relative health of 400,000 suppliers in 140 countries.
"Those [Chinese manufacturers] that have a diversified customer base-including domestic Chinese customers and European customers-may be holding on by a thread," says Panjiva CEO Josh Green. "Those that are primarily dependent on business from U.S. importers are going under."
A China Backlash?
If there ever was a time to reevaluate a company's roster of suppliers, now is that time, say supply chain analysts, due to the economic uncertainty. Many companies are taking that advice, especially with their Chinese sourcing partners. The results of an AMR survey of 130 global companies, released in December, showed that those companies planned to move more of their manufacturing and sourcing activities closer to home, which is called nearshoring.
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