CHINA: CONTAINERPORT ANALYSIS
CHINA: CORROSION COMING? A stop-start port industry and potentially faltering economy are raising questions about China’s reliability as the world’s leading trading partner, as AJ Keyes discovers
8 Ships are skipping Ningbo-Zhoushan for Shanghai due to COVID-19 outbreaks
Is China still the unstoppable economic force and manufacturing engine room for the world? Well, it is becoming apparent that a combination of economic challenges and Beijing’s hard-line COVID-19 approach to completely shut-down port cities are raising questions about the country’s future trading position. At the start of January 2022, the World Bank issued an economic prospects report that stated how a severe and prolonged downturn in the real estate sector in China would cause a significant economy-wide negative impact in the country due to the combined onshore and offshore liabilities of property developers, amounting to almost 30 per cent of total country GDP. The report concluds that years of regulatory curbs on borrowing is leading to a string of offshore debt defaults, credit-rating downgrades and sell-offs in developers’ shares and bonds. In short, Chinese developers are facing an unprecedented liquidity squeeze, as highlighted by China Evergrande Group’s main unit Hengda Real Estate Group seeking a six-month delay for redemption and coupon payments with its bondholders. STOP-START PORTS AND ZERO TOLERANCE Coupled with this increasingly uncertain economic backdrop is the ongoing, stop-start nature of port activities and manufacturing due to COVID-19 outbreaks, with central Government maintaining its strict zero tolerance approach. This is causing a negative impact on the supply-chain for goods out of China, with shipping lines, beneficial cargo owners and ports receiving the Chinese export loads being negatively impacted. At the same time, uncertainty in the construction sector and domestic economic growth are playing havoc with bulk imports. The recurring emergence of COVID-19 strains continued
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throughout 2021, culminating in a particularly difficult end to the year. In December 2021 over 300,000 people tested for coronavirus in a district in the port city of Ningbo following an outbreak of the illness, while the district of Zhenhai had a twoweek lockdown after five people tested positive for COVID-19, marking the third lockdown in less than six months in Ningbo. This trend has continued into 2022. In early January there was a breakout of the Omicron strain of COVID-19 in the port city of Tianjin, resulting in a partial lockdown, with mass testing of the 14 million inhabitants. While the port remained operational, there have been negative knock-on effects across the supply chain. For example, vehicle manufacturers, Toyota and Volkswagen, have suspended production at Tianjin factories and at port terminals the pick-up of import containers has been suspended, gate hours reduced and a restriction put in place on truck deliveries. The issue is spreading further afield, with other Chinese port cities including Dalian and Shanghai reporting positive COVID-19 cases and mass testing taking place in Shenzhen, after a “cluster” of cases was detected. Local reports in China indicate that Ningbo-Zhoushan, China’s second busiest container port is still open for business, but the efforts to contain the spread of COVID-19 is slowing trucking logistics activities. Likewise, road transport in Jinhua Yongkang, dubbed a “medium-high” risk area of Beilun and the area outside Zhejiang province, where Ningbo is located, was suspended at the time of writing (mid-January 2022) CARGO MOVEMENT BRAKE Global liner operator, Maersk Line, provided a synopsis of the challenges in Ningbo in its customer briefing on January 11, 2022: “Unfortunately, 2022,” Maersk says, “has not started off as we had hoped. The pandemic is still going strong and
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