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|Leaning on the Great Wall: China and the maritime sector’s recovery|
|Tuesday, 21 April 2009 11:06|
Page 1 of 2
The world is counting on China to record decent economic growth to fend off the lethargy in global trade in these trying times. Having contributed massively in boosting global economic growth and seaborne trade in the past decade, China is once again seen as the potential saviour to help bring the world out of its economic doldrums. Given the sheer size of its economy and its huge population, China has the clout to spark an economic revival that could kickstart global economic growth and reignite activities in the maritime sector.
Hope runs high for China’s banks to steer clear from financial turmoil and for its stimulus package and expansionary monetary policies to create employment and stimulate growth. It would also be in the interest of its trading partners and investors in the country that China stays socially and politically stable amid the global economic crisis. It is a fair bet that if China could attain this, the country would help catalyse the economic engines of its trading partners, who have benefited from the Chinese “economic miracle” of recent years.
Although China’s exports are expected to fall in 2009, its economy as a whole is projected to still register economic growth at around 6.1 percent, according to the World Bank. Despite the fact that this would be its slowest growth rate in nearly two decades, the World Bank has expressed its confidence that China’s economic performance would help east Asia and the Pacific region to secure their status as the world’s fastest growing economic region.
Should China manage to record such a growth level, it would be fair to expect maritime sector to enjoy the multiplier effects of China’s economic performance. Domestic demand in China and a recovery in the demand from its trading partners will boost world trade volumes and spur demand for shipping, ports and other maritime ancillary services.
Surviving the perfect storm
To be sure, these are hard times for maritime players, and analysts do not expect a recovery anytime soon. Freight rates are projected to suffer a steep 74 percent decline as demand for goods and commodities continue to decline. Combined with the impending entry of huge new tonnage in shipping trades such as container and bulk, rising unemployment, fall in the demand for many products and materials, cuts in trade facilities by banks, and uncertainty over the health of the financial markets and global economy, the situation makes grim reading. These have combined to deliver a significant blow to players in the maritime sector who have endured a dramatic turn of fortune in an industry that was flying high only a short few years ago
The forecast by the World Trade Organisation of a nine percent decline in world trade in 2009 suggests that demand for shipping services and port throughput volumes will continue to suffer in the short term. Such is the extent of the global economic crisis that even with the promise of stimulus packages announced by governments worldwide and a whopping US$7 trillion package to stimulate the world economy planned by the G-20, a recovery in global economy is still not seen as a given.
However, hope springs eternal. There are telltale signs of a recovery in the economy of China that many hope – and believe – will act as a tonic to spur a rally in the global economy and in trade, and hence the maritime sector.
China’s US$587 billion stimulus package is expected to help the country to record decent growth this year. The 6.1 percent GDP growth of China projected by the World Bank is far better than the growth of many other countries and even the world economy, which is expected to be in recession this year.
Prices of commodities are stabilising, albeit still declining, and this is largely attributed to demand recovery from China and its trading partners. Chinese businesses are restocking their inventories and committing to new orders to take advantage of low prices of goods and materials. Consumer spending in China is healthy, thanks to the stimulus package that encourages growth in aggregate demand and the freeing up of capital.Shanghai Port
These developments have had a positive impact on the maritime sector. China’s main ports, Shanghai and Shenzhen, through which half of the country’s trade passes, recorded the highest throughput volumes in March 2009 compared with previous months. In addition, the nation’s ports collectively recorded a two percent throughput growth in March 2009, a very encouraging sign of a rebound in trade volumes indeed. Such is the scale of China’s economy and trade volumes and the reach of its international trade that a Chinese rally would have a positive impact on its trading partners and the maritime sector as a whole.
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